BR Analysis. Workforce crisis? Romania ranks among the EU states with low job vacancy rates, despite claims that it needs foreign workers

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 recent official data show Romania is far from being considered to be in a “workforce crisis” situation.

The job vacancy rate in Romania fell 0.1 percentage point in the first quarter of 2018 compared with the first quarter of 2017, to 1.2 percent, the seventh lowest rate among the 28 EU member states, Eurostat data showed on Monday.

“Compared with the same quarter of the previous year, the job vacancy rate in the first quarter of 2018 rose in sixteen Member States, remained stable in Bulgaria, Denmark, Ireland, Croatia, Lithuania, Luxembourg, Portugal and Finland, but fell in Greece (-0.3 percentage points – pp), Estonia (-0.2 pp), Malta and Romania (both -0.1 pp),” Eurostat notes.

This evolution is in sharp contrast with the impressive economic growth Romania experienced last year, posting a 6.9 percent GDP increase, the highest in the EU.

But experts warn that economic growth in Romania is slowing down and limiting job creation despite higher wages.

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“With job creation slowing and limited fiscal space to maintain the pace of wage rises, we expect wage growth to ease a bit. While the economy is likely to be cooling off, wage pressures are likely to remain elevated and might be exacerbated by the electoral calendar,” ING analysts said in a recent report.

Economists point out that workforce shortage is concentrated in some areas like retail, 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 EU member states, the highest job vacancy rates in the first quarter of 2018 were recorded in the Czech Republic (4.8 percent), Belgium (3.5 percent), Germany and Sweden (both 2.9 percent), the Netherlands and Austria (both 2.8 percent), according to Eurostat.

Foreign workers

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.

“We’re in a free, open market – we see that other countries are bringing in foreign workers and that those workers are able to obtain citizenship much more easily and quickly than they can in Romania. Romania allows only 10,000 work permits per year for foreigners, but we need around 300,000,” Muhammad Murad, a leading investor in the Romanian seaside and the president of the Romanian Tourism Business Owners’ Federation, told Business Review.

Few foreign workers are currently working in Romania, official data show. During the first two months of this year, Romania issued work permits for 1,174 foreign employees who came mainly from Vietnam, Turkey, Nepal, China and Serbia, according to General Inspectorate for Immigration data sent to Business Review.

Official data show the total number of work permits for foreign employees issued by Romanian authorities and still in use was 7,249 on March 1, 2018, up from 6,709 in December 2017 and 5,594 at the end of 2016.

Hidden workforce

Experts say 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.