Employment, Wages, and Dynamism: Other Faces of the Private Sector for a Prosperous Cuba
The Cuban private sector has had a positive impact in terms of both the quantity and quality of employment it generates. However, only through structural reforms, a stable legal framework, and long-term policy outlook that inspires confidence will it be possible for this sector to reach its full potential and contribute sustainably to the economic well-being of society as a whole.
Over the past thirty years, Cuba has undergone a fundamental change in its economic structure, shifting from a state-controlled, centralized model to one in which the private sector—though still restricted—has begun to take on unprecedented prominence.
Since the gradual opening to self-employment in the early 1990s and the creation of micro, small, and medium-sized enterprises (MSMEs) in 2021, the Cuban private sector has grown exponentially. Yet this growth has not been without challenges. Its achievements must be evaluated against the backdrop of political restrictions, runaway inflation, and the structural obstacles the country still faces.
Throughout the years, the private sector has served as a safety valve in the face of economic crises and the shortage of jobs in the state sector. However, despite its progress, it remains constrained by a restrictive regulatory framework that has slowed both its expansion and sustainability.
The development of private entrepreneurship in Cuba reflects the inconsistencies of the country’s economic strategies over at least the past two decades. While the private sector has improved the quality of life for many Cubans, created new jobs, and provided income alternatives, it has survived—unevenly—in an environment of media, legislative, financial, and political persecution by the authorities.
The Historical Context: From Self-Employment to MSMES
The Cuban private sector began to take shape in the 1990s, following the economic crisis brought about by the collapse of the Soviet Union and the end of subsidies Cuba had received from the Socialist Bloc.
The fall of the USSR (1989–1991) forced the Cuban government to reconsider its economic model at a time when the state economy could no longer sustain the population. In response to this crisis, the government authorized certain types of private employment under the category of self-employed workers (trabajadores por cuenta propia).
In 1993, for the first time, the government allowed self-employment[1] in a limited number of activities, such as shoemakers, room rentals, cafés, and restaurants—around 117 activities in total - pursuant to Decree-Law 141 of 1993. This change was intended as a temporary measure to confront the emergency, but over time self-employment became a key source of jobs on the island. Nonetheless, the expansion of the private sector was curbed by heavy regulation that restricted both the areas of activity and the number of workers each business could employ. For example, hiring outside the family nucleus was expressly prohibited.
Beginning in 2011, with the implementation of the “Update of the Cuban Economic Model” (announced at the VI Congress of the Communist Party of Cuba, April 16–19, 2011), self-employment expanded to more than 180 activities. This led to significant growth in small businesses which, though still limited, sparked a wave of entrepreneurs who would eventually be the seed of a private business culture in the national landscape.
This expansion was the first sign of flexibility the government showed in response to Cuban society’s demands and the need for a more plural and decentralized economic model. Even so, it reflected a specific political moment and the government’s acknowledgement of the inefficiencies and structural problems of a socio-economic system in visible collapse.
In 2021, after the largest citizen protests in recent Cuban history, the government approved the creation of MSMEs (micro, small, and medium-sized enterprises)—a crucial step in giving entrepreneurs the ability to develop businesses on a larger scale with independent legal personality.
Although their approval represented a significant advance, restrictions persisted: they could not operate in strategic sectors or in professional activities. Overall, 179 activities remained prohibited for the private sector out of the 2,110 listed in the National Classification of Economic Activities (CNAE). The new businesses could now operate as formal enterprises, but their growth was limited by capping their employees at 100, and owners were allowed to participate in only one MSME. Nonetheless, this represented a substantial advance in the economic autonomy of Cuban entrepreneurs.
Although MSMEs have grown steadily in recent years, they remain subject to limiting state regulation, and their capacity to expand is also hindered by lack of access to credit, a burdensome tax structure, and the frequent shifts in Cuban economic policy.
During 2024, private MSMEs faced a particularly adverse economic environment marked by inflation, shortages of foreign currency, and new operating restrictions. The introduction of stricter regulations on importing and selling products, alongside reinforced controls on pricing and profits—such as a 30% profit margin cap on basic goods (chicken, oil, powdered milk)—led to shortages, uncertainty, and directly affected the viability of many enterprises.
Resolution 56/2024 (Ministry of Domestic Trade), in particular, led to the closure of many businesses. The legislation forced MSMEs and cooperatives to sell wholesale only to state entities, which caused many entrepreneurs to project rising costs and the likely failure of their projects. Although the measure was later suspended indefinitely, the negative impact had already been felt.
Other measures—such as the requirement of “effective residency” [2] for owners, mandatory banking of all operations [3], and the obligation to trade exclusively in Cuban pesos (Decree-Law 88/2024)—further undermined private businesses.
As a result, for the first time since their legalization in 2021, the number of active MSMEs fell by the end of 2024. This decline highlighted the structural limitations facing these enterprises in a still heavily centralized economic model.
In July 2025, at the Economic Commission of the Cuban Parliament, during the lead-up to the fifth ordinary session of the Tenth Legislature of the National Assembly of People’s Power, the president of the National Institute of Non-State Economic Actors (INAENE), Mercedes López Acea, emphasized the need to decentralize MSME approval process by delegating it to the municipalities, as an essential step for this form of economic activity to thrive. As a result, following the adoption of Decreto Ley 88 in September, 2024, 231 new economic actors were created
In her presentation, the minister reported that 496,535 Cubans were working as self-employed (TCP) and that since September 2021, 11,369 private MSMEs, 71 non-agricultural cooperatives (NACs), and 305 state-owned MSMEs had been approved. This figure, however, does not reflect the number of enterprises that remain in operation following approval.
The Impact of the Private Sector on Cuban Employment: Growth and Challenges
One of the most significant contributions of the Cuban private sector has been its ability to generate employment. Faced with a state sector that for years has been overstaffed, unproductive, and unable to absorb the labor force efficiently, private enterprises have offered an alternative that, although limited, has helped mitigate unemployment and underemployment.
The most recent data from the National Employment Survey (ENO), published by the National Office of Statistics and Information (ONEI) in 2024, provides an important perspective on the Cuban labor market, particularly within the non-state sector. At least 1,303,017 Cubans are employed outside the state sector, representing 31.5% of the country’s total employed population (4,136,560). The majority of these jobs are concentrated in self-employment and MSMEs (micro, small, and medium-sized enterprises), which together account for 66% of non-state employment and 21% of total national employment.
If business owners are excluded from the previous analysis, partners in MSMEs and self-employed workers who hire employees, the share of private-sector employees would amount to 19% of the country’s total employed population.
These figures underscore the importance of the private sector, not only in terms of job creation, but also in its ability to absorb a significant share of the labor force that the state sector is unable to employ.
Even prior to the introduction of MSMEs in 2021, employment statistics for self-employment in 2019 show that the Cuban private sector generated 617,964 jobs under the the TCP modality, accounting for 41% of non-state employment and approximately 13% of total national employment.
Employment Generation and Workers’ Perception of Economic Improvement in the Private Sector
As early as or before 2019, while the environment for state enterprises and institutions was more favorable than it is today, the impact of the private sector on employment and wages was already becoming significant. That year, a survey conducted by the CubaEmprende Project on labor mobility, covering 241 employees of the state sector, revealed that: 52 chose to transition to self-employment and after six months 46.2% of those reported having experienced economic improvement, while 30.2% of those who remained did so.
In a similar research exercise, this time involving 137 unemployed individuals, a six-month follow-up found that 28 obtained jobs in private businesses and 20 in the state sector. Those employed by private businesses experienced 14% greater economic improvement compared to those who secured jobs in the state sector.
Wages and Living Standards: Between Expectations and Reality[4]
In 2019, private businesses (acting as TCP) were already paying wages well above those of the state sector, in many cases significantly exceeding the average state salary, set at 848 CUP (approximately 18 USD). Interviews conducted with a group of 50 entrepreneurs revealed that 41.5% of workers employed by private businesses earned a monthly wage of over 200 USD, while 46.3% earned between 100 and 200 USD, and only 12.2% earned below 100 USD. It is worth noting that, at that time, the cost of living in the country—according to official figures—was estimated at 2,000 CUP, equivalent to roughly 80 USD at the then prevailing exchange rate.
In 2024, net wages in Cuban pesos had increased significantly in both the state sector (average salary of 5,839 CUP = 16 USD) [5] and the private sector, following the Tarea Ordenamiento[6] in 2021 and the inflationary surge it triggered. As a result, the real value of wages in both sectors declined sharply.
The cost of living in Cuba has risen dramatically, to the point that even those earning more than 100 USD per month are unable to cover the basic consumption needs. According to recent studies by economist Omar Everleny Pérez Villanueva, at the beginning of 2025, a two-person household required approximately 45,000 CUP—equivalent to 128 USD at the then prevailing informal exchange rate—just to meet essential expenses.
Private-sector wages, although raised incrementally year after year, did not keep pace with inflation or with the generalized rise in prices. While this wage-adjustment process continued within the private sector, its scope and magnitude fell short of inflation, ultimately eroding the purchasing power of its workers. Nonetheless, when compared with the wages of state-sector employees, the situation of the latter can only be described as disastrous, facing inescapable poverty.
In 2024, a study of more than 130 private entrepreneurs found that 63% of private-sector employees were earning less than 100 USD per month (35,000 CUP at the then average informal exchange rate)—a stark contrast with 2019, when 87.8% of private-sector workers earned more than 100 USD per month (2,400 CUP at that year’s rate). Although real wages in the private sector have declined since 2019, their relative value compared to the state sector remains exponentially higher, consolidating the private sector’s role as a key economic actor in Cuba.
Structural Challenges and Normative Barriers
Despite its growth and undeniable importance, the Cuban private sector continues to face profound structural challenges and normative barriers that limit its potential to generate quality jobs. Despite the MSMEs creating more employment their size and ability to scale up is restricted.
The Cuban government limits the number of employees to 100, which prevents businesses from expanding and integrating into broader markets. In addition, tax rates for MSMEs are high and not differentiated by firm size. This disproportionately affects small and medium-sized enterprises, which require fiscal incentives to sustain growth.
Access to financing remains one of the greatest challenges for the private sector. Most MSMEs rely on personal capital or informal sources to finance their operations, constraining their expansion capacity. Remittances received by some entrepreneurs have become a key source of funding, but this model is unsustainable in the long term.
The Path Toward a More Prosperous Future: Necessary Reforms
For the Cuban private sector to become a true engine of economic growth, the government must implement structural reforms that enable greater access to financing, more flexible tax regulations, and the expansion of firm size for MSMEs.
Equally essential is the adoption of policies that guarantee fair wages and promote labor conditions that improve employee well-being. Enhancing labor standards will be key to preventing precarity and ensuring that the Cuban private sector can make a meaningful contribution to national economic development.
Fiscal incentives for small businesses, the removal of size restrictions, and the provision of accessible credit mechanisms are fundamental needs. A stable legislative framework and a long-term policy outlook are also imperative to foster the credibility and trust necessary to undertake economic projects in Cuba.
Final Considerations
The Cuban private sector has proven that during the last three decades - from the emergence of first self-employed workers until the authorization of the MSMEs in 2021- its potential as a job generator and an escape valve from an unproductive state.
Its resilience is evidence of the creative capacity and determination of Cuban entrepreneurs, who have managed to thrive despite political hostility, regulatory obstacles, chronic shortages, and hostile public messaging.
The drop in the number of MSMEs at the close of 2024 exemplifies the tension between private initiative within a centralized command economy. So the private enterprises may consolidate as motors of sustainable economic development, it is vital that the state eliminates the onerous fiscal and operational barriers it has erected, widening the possibilities for workers to enter the private sector and expanding the scope of permitted private activities.
Only with a stable legal framework and long-term policy commitments by the state will the Cuban private sector have the confidence to attain its full potential and contribute to the economic good of all the society.
- Self-employment was defined in 1993 as a form of individual work through which Cuban citizens were allowed to engage in certain authorized economic activities outside the state sector, with the aim of complementing the supply of goods and services in the country in the context of an economic crisis.
- Note on Cuban migration law: Six months outside the country can be sufficient for a notary, tribunal, or state institution to deny that someone has effective residence, even if they have not lost permanent residence on the records of the immigration authorities.
- The banking reform (bancarización), designed to reduce the use of cash and centralize economic operations through the banking system, has not worked effectively. The lack of infrastructure (ATMs, banks, exchange houses, and stable internet access), the limited liquidity in banks, and the widespread distrust in the system have led many businesses to partially bypass this policy. Private economic actors are forced to operate partly outside the formal banking circuit, resorting to the informal market to obtain foreign currency, remain operational, and ensure their survival.
- Cuba Emprende Project. “Follow-up Survey of Emprende Workshop Graduates Six Months After Completion.” January 2019.
- The report Selected Indicators of the State and Budgeted Enterprise System, at the close of April 2025, was recently published by the National Office of Statistics and Information (ONEI). The average monthly salary in the state and state-budgeted sector was set at 6,506.5 CUP (Cuban pesos), equivalent to about 17 USD at the informal exchange rate.
- The “Tarea Ordenamiento” (Economic Reorganization Task) was an economic reform implemented in Cuba beginning on January 1, 2021 and whose main objective was to unify the two currencies that coexisted in the country: Cuban Convertible Pesos (CUC) and Cuban Pesos (CUP). The reform further restructured the wage, price, and subsidy system. It included a general increase in wages and pensions, the elimination of the CUC, and the partial liberalization of prices and tariffs, promising greater efficiency and economic rationality. However, its implementation in a context of economic crisis, low supply, and limited productivity triggered strong inflation and social tensions, failing to achieve the intended balance and fiscal control.
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