SAR Report 2011: The Labor Market Crisis

The labor market of the past 20 years has been heavily influenced by the social and economic transformation of Romania. It was also hindered by uninspired policies, such as rigid regulations or early retirement incentives.

Today, the outcome is a shrinking employment rate, combined with structural informality problems, high self-employment  in agriculture, low mobility among economic sectors and geographic areas, access issues for vulnerable groups and lots of stimuli for early retirement. The demographics are merciless: either Romania stops wasting its labor resources and tackles the deep structural problems, or the entire socio-economic development is under threat.

Romania has seen a steady decrease of the activity rate. From 80% in 1990, it dropped to 65.7% in 2009, below the EU27 average of 71.3%. The lowest activity rate was registered in 2004 (64.2%), with a decrease of 2 million people in the active population compared to 1990. The employment rate had a similar trend. By 2004, only 57.6% of the working age population was engaged in a form of employment. Since then, the situation has slowly improved, going up to 60.1% in 2010 (2nd quarter) with a slight drop in 2009 attributable to the crisis. However, the employment rate is still lower than the EU27 average of 64.6%.

Paradoxically, Romania scores better on unemployment than most European countries.  This is due to the high informality of the labor market, widespread underemployment and early retirement. These are structural problems that hinder current development and place significant risks on Romania’s future.

Read more about the state of the labour market here.

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