Romania’s workforce crisis eases despite strong official GDP growth rate

Sorin Melenciuc 20/05/2019 | 12:03

Romania’s job vacancy rate declined by 0.07 percentage point year-on-year in the first quarter of this year, to 1.18 percent despite workforce crisis claims and strong GDP growth rate, National Institute of Statistics (INS) data show.

Compared with the previous quarter, the job vacancy rate declined by 0.02 percentage point. The number of unoccupied jobs decreased by around 200 year-on-year, to 58,200 in the first quarter of 2019.

The impressive economic growth Romania has been experiencing during the last few years has put increasing pressure on employers to find skilled workers in order to expand their businesses but the latest official data show that Romania is far from being considered to be in a severe “workforce crisis” situation.

Moreover, the economic growth has slowed down last year to 4.1 percent, from 7 percent in 2017. In the first quarter of this year, Romania’s GDP growth rate accelerated again to 5 percent year-on-year, according to official first estimates, but it is not clear which were the main drivers of growth.

Official data show that workforce shortage is concentrated in some areas like services (2.8 percent job vacancy rate in Q1 2019), transport (1.9 percent) and IT (1.3 percent), a consequence of the fact that much of the economic growth in Romania is the product of a consumer bonanza, stimulated by years of wage-led growth government policy.

But the real labor shortage is currently experienced in EU by the advanced economies, with sophisticated structures and high wages.

Among the EU member states, the highest job vacancy rates in the last quarter of 2018 were recorded in the Czech Republic (6 percent), Belgium and Germany (both 3.4 percent), and Austria (3.1 percent), according to Eurostat.

In fact, Romania ranks among the EU member states with low job vacancy rates despite claims of widespread workforce crisis.

Recently, seaside business owners in Romania said that they are having an increasingly harder time finding seasonal workers to provide the essential services of the tourism industry.

They urged the government to make it easier for them to hire people from other countries.

But few foreign workers are currently working in Romania, official data show. Last year, Romania issued work permits for around 9,500 non-EU foreign employees.

Official data show the total number of non-EU foreign employees in Romania was 17,089 in July 2018, an all-time high, but a negligible figure compared with the numbers seen in western European countries.

However, the situation might change this year as the government has approved a decree that increases the number of new work permits for non-EU foreign workers up to 20,000 this year.

Hidden workforce

Despite claims of workforce crisis, experts suggest that Romania has millions of people who are not working and are disconnected from economic growth.

“Romania’s prosperity is not equally shared, as the bottom 40 is largely disconnected from the drivers of growth. Close to half of the people at the bottom 40 percent of the income distribution do not work, and another 28 percent remain engaged in subsistence agriculture,” World Bank experts said in a recent report called “From Uneven Growth to Inclusive Development: Romania’s Path to Shared Prosperity”.

Experts also say that unemployment in Romania is highly concentrated in rural areas, where the labor force is highly unskilled and where there are few opportunities.

But this lack of opportunities is not compensated by labor force mobility.

“Low internal mobility further reinforces Romania’s dual development challenge – less than 2 percent of the population reports having moved in the past five years, implying that structural constraints inhibit internal mobility toward economic opportunities,” World Bank experts point out.

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