Without significant changes in education and macroeconomic policy, Romania faces an extreme workforce crisis, KeysFin analysis finds

According to a KeysFin analysis, Romanian companies are having difficulty finding employees who are skilled and have communication and teamwork abilities. After competing for good employees with high salaries and the best facilities, companies have developed a new strategy – growing their own future employees.

Romania is going through the most severe workforce crisis in its recent history. Companies want to expand, and the economy is priming its engines but risks failure, in the context of more and more expensive access to money – “economic fuel” and a significant labour crisis.

According to the analysis, recruitment in Romania has become a real challenge. The growing interest of employers has made the HR market grow significantly in recent years, from RON 2.06 billion in 2012 to RON 3.6 billion in 2017.

The number of recruitment companies has steadily grown, by almost 20 between 2012 and 2016, and their net profits have almost doubled in the same period. The increased interest in this economic segment has also led to a 40 percent increase of the number of employees in recruitment companies.

The KeysFin analysis shows that the main players in the Romanian HR market are Adecco, Lugera & Makler, Manpower, Barnet McCall Recruitment, IHM Total Consult. It also found that most HR companies are located in the main areas of economic growth, like Bucharest-Ilfov (1,073 companies), Cluj-Sibiu (415), North-East (399), Constanta-Dobrogea (390) and Timisoara-Banat (340).

“The regional representation of HR businesses follows the country’s economic development. Investments have been focused in Bucharest, Cluj, Sibiu, Constanta and Timisoara, so the workforce has also followed the same trend. The evolution of this sector supports the alarm signal regarding the discrepancy in the regional economic development, in other words, the fact that Romania is growing at different speeds, and this can lead to extremely serious consequences from a social point of view,” the study shows.

It is no coincidence that the areas with the least HR companies are the ones with the highest levels of emigration – Moldova, Oltenia and Muntenia.

Salaries: the big issue

Among European states, Romania had the largest percentage growth of the minimum wage in the last 10 years, of 195 percent.

KeysFin specialists believe that while salaries are growing significantly at the moment, they are reflecting economic realities and the growth comes mainly from consumption, meaning that it is not solid or sustainable in the long term.

Productivity is still low in Romania, and companies avoid investing a lot in their employees. By growing salaries in the public sector, the state is trying to boost the market, but due to the unstable economic framework, few investors followed the trend. In the absence of proper investment conditions, such as infrastructure or a good fiscal system, Romania is still attractive for investors especially due to the low costs of labour.

In order for this trend to change, the country needs macroeconomic policies and to support horizontal investments. Only when the economy won’t be so fragile will we see a real growth in the incomes of Romanian employees, the study concludes.

Recruitment strategies

Many companies have changed their recruitment strategy from promising high salaries and benefits to investing in training professionals themselves. According to a recent survey, over 70 percent of business owners have identified internship policy as the main trend in the workforce market.

Investors have turned to recruiting young people from universities and offering training programmes, the majority of which are paid. And the companies that need qualified workers have chosen to create their own vocational schools, and learning on the job has become an essential component of current business, according to the analysis.

Another trend, identified based on discussions with HR companies, indicates a stronger focus on flexible employees, with entrepreneurial spirit.

“The idea of project-based collaboration has become a significant practice on the market. Companies prefer to externalise projects to independent specialists, either sole traders or micro-enterprises, as this brings multiple benefits – from reducing labour costs to logistics (office, transport, etc.). Beyond the lower cost, companies also get a guarantee that their projects are completed on time, as the payment of the bill depends on it. It is also beneficial for specialists, who can access several projects simultaneously,” KeysFin analysts found.

Signal for the future

Beyond the reality of 2018, the future of the labour market looks quite bleak. Lower birth rates and the retirement of a whole generation in the following years, as well as the exodus of workforce towards the West will make Romania deal with an even deeper crisis in the near future.

Experts find that the current education system is “completely useless” in dealing with the challenges in the workforce. It is still rolling out generations of unemployable diploma-holders who are not connected to the economic realities.

According to the analysis, the Romanian state has to make significant investments in reorienting the educational system towards the economy’s needs, by creating vocational schools in all sectors, as well as developing a system for fiscal and financial support for companies that hire young people.

Without such measures, the crisis will deepen, and the alternative will be to bring workforce from poorer countries in Africa and Asia, with the inherent social consequences.

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