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LABOUR MARKET STRUCTURE IN ROMANIA

LABOUR MARKET STRUCTURE IN ROMANIA. CRISTINA MOCANU, senior researcher Knowledge Sharing Program (KSP) between the Republic of Korea and Romania 28 th of January – 2 nd of February 2013. Evolutions of the main labor market indicators. Structure of employment.

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LABOUR MARKET STRUCTURE IN ROMANIA

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  1. LABOUR MARKET STRUCTURE IN ROMANIA CRISTINA MOCANU, senior researcher Knowledge Sharing Program (KSP) between the Republic of Korea and Romania 28th of January – 2nd of February 2013

  2. Evolutions of the main labor market indicators

  3. Structure of employment The share of agriculture is still high, up to 30% of employed population, while the EU average is up to 5,8% Increasing trend of employment in agriculture and decreasing for industry and constructions in 2011 as against 2008, The share of employment in services is still low compared with EU average, Only 55,7% of the employment is represented by employees, while self-employed and unpaid family workers represent almost 43% of total employment, Changes in the structure of national economy points to a substitution of the labor factor with the capital factor, changes that lead to increases of productivity, but not to increases in employment (Ghinararu).

  4. Unemployment trends

  5. Unemployment trends UR follows the economic cycle, increasing during economic downturn, and decreasing during economic growth, Administrative UR is usually under the BIM UR, due to the toughness of the eligibility criteria for those entitled to receive the UB, The UR for men is constantly above the UR for women starting with 1999, The UR in urban area was constantly above that in rural areas.

  6. Long-term Unemployment trends Long term UR reached its lowest level in 2008 and 2009, and then sharply increased, long term UR being usually higher for men than for women.

  7. Job vacancy rate At the end of 2011 Romania had one of the lowest vacancy rates among European countries, Latvia, Poland and Portugal having lower performances than the Romanian economy. The main explanation for the low vacancy rate has to be found in the structure of the Romanian economy that does not foster job generation. Romanian economy has a too short history of economic growth and capitalizing foreign direct investments that lead to changes in the employment structure but also not to job generation.

  8. Part-time and temporary employment Part time picks in 2003 (Labor Law) and 2010 (new Labor Law) Temporary employment picks in 2004 (law is enacted) Participation to LLL is constantly under 2%, being one of the lowest in EU

  9. How flexible are the Romanian companies? Flexibility profiles of European companies (2009) – Romania and Hungary are the countries displaying the highest share of companies with a low flexibility profile, National Labor Research Institute (2010) - Romanian companies usually access the so-called external flexibility, consisting mainly in the use of fixed term contracts and subcontracting activities; higher the size of the company, higher the probability to use flexibility and internal flexibility; starting with 2008 the incidence of all forms of flexibility and security decreased until 2010.

  10. Employment protective legislation Ciuca& all. (2009) – EPL in 2009 was up to 2,8, value that places Romania among countries with the highest rigidity of the employment legislation among the EU countries, Source: *Ciuca, Pasnicu, Mladen, Dragoiu, 2009 ** author’s calculations based on OECD methodology, version 2, in order to be comparable with the calculus run by the team mentioned above Ciuca & all. (2009) – PCA – Romania is placed in the Easter European Cluster along with Greece, Poland, Czech Republic, Bulgaria, Lithuania, Slovenia and Estonia. The EE Cluster is characterized medium flexibility and low security (low internal flexibility, medium external flexibility and higher functional flexibility, low security).

  11. Main changes of the Labor Law • In 2011 several changes are made to the Labor Law, in order to increase the flexibility of the labor market. As we can see, the objective is met, but as all the components of the EPL register under the new Labor Law decreases. Mainly affected is the component for regulation of the temporary contracts. • Among the main changes introduced by the new Labor Law in order to increase the flexibility of the labor market are: • The trial period is longer, for workers it has been extended from 30 days to 90 days, while for executive positions has been extended from 90 to 120 days; the trial period may be terminated without notice, at any time and without a reason, • Maximum length of fixed-term contracts has been increased from 24 to 36 months, only three successive fixed-term contracts can be concluded (previously only three successive contracts could be concluded, but not exceeding 24 months), • For temporary agency work, the maximum period was set up to 24 months, but with possibility to be extended to 36 months. Also, there are only some minor limitations for users to apply for an agency workers (only if they want to replace an existing worker, or to substitute workers on strike); also premises are created for equal treatment of temporary workers with permanent workers, the sole exception regarding the wage, that has to be equal at least with the minimum wage for that specific position under the specific user of temporary work, • Also, some changes where done to the maximum length of the working time that can surpass 48 hours and future overtime can be compensate with free days. Also, two contracts with the same employer can be concluded, • In case of collective redundancies, now employers are able to give priority to performance criteria, while under the previous regulations, social criteria were the priority.

  12. SOCIAL PROTECTION SYSTEM FOR THE UNEMPLOYED IN ROMANIA CRISTINA MOCANU, senior researcher Knowledge Sharing Program (KSP) between the Republic of Korea and Romania 28th of January – 2nd of February 2013

  13. Several indicators of the unemployment system

  14. Design of the Unemployment benefit system Both employees and employers finance through their contributions the unemployment system, the contribution rate being up to 1% and is combined employer and employee, The contribution rate decreased from 4% in 2005 during economic growth within the Government endeavors to enact some fiscal relation measures, It finances both passive and active measures.

  15. Strictness of eligibility criteria In case of resignation from the previous job (voluntary unemployment), the unemployed are not eligible for unemployment benefit. Also, those being fired for reasons imputable to the unemployed are not eligible to apply/receive the unemployment benefit. The unemployed has to remain available for work and only few reasons are accepted in order to refuse a job offer made by the PES, for instance if that job do not fit his/her vocational training, level of education or level of skills and competences; also another reason to refuse a job offer is if the health status doesn’t allow them to activate in that kind of job/occupation/economic sector. The unemployed also have to be available for geographical mobility. The employed has to be willing to move to take a job offer, and some subsidies are provided for mobility or commuting to a distance more than 50 km. The unemployed receiving the unemployment benefit is subject to sanctions if he/she refuses to take a suitable job offer or to take part to active labor market policies, the sanction consisting in complete suspension of the benefit from the first refusal. There are some monitoring aspects of the job search behavior: on a monthly basis they have to ask for a job from the public employment services.

  16. Active measures targeted on jobseekers TARGETED ON JOBSEEKERS • Vocational information and counseling, • Job-matching, the jobseekers receiving information on those jobs still unfilled at local, regional and national level that are suitable for their level of education and skills, • Vocational training, • Consultancy and assistance for starting an independent activity, • Supplements to the employee’s wage if the job is found before the termination of the period for which the unemployed is entitled to receive the benefit, • Measures and subsidies aiming at stimulating the geographic mobility of the workforce, • Bonuses for graduates receiving a job and not asking for the unemployment benefit. TARGETED ON COMPANIES • Job subsidies (for graduates in their first years of working experience, for unemployed aged over 45, for single parents unemployed, for unemployed that will retire in the next 3 years, as well as for persons with disabilities), • Co-financing vocational training programs up to 50% of the training costs for up to 20% of the workforce, • Tax incentives for companies hiring persons belonging to some disadvantaged groups, • Loans with low-interests rates for creating new jobs.

  17. Public expenditures on labor market policies as % of GDP the share of public expenditures on labor market policies in GDP remains the lowest in the EU, the share of public expenditures with active labor market policies in public expenditures with labor market policies decrease sharply from 22,3% in 2008 to only 4,6% in 2010.

  18. Social protection for the unempl. during crises • Scope of the measures targeted on the unemployment benefit system after the beginning of 2009: • to contribute to the financial sustainability of the unemployment system (the decreasing in financing coupled with a sharp increase of the number of registered unemployed), • avoid as much as possible to increase the burden on business environment by increasing the contributions and • create the premises for a rapid return to work and avoid as much as possible the incentives to dependence and inactivity. • Firstly, at the beginning of 2009, the Government decides to extend the period for which unemployment benefit is granted with three months for each category of stage of contribution. The effect of the measure was the sudden increase in the number of beneficiary. At the beginning of 2010, this measure was removed. • In order to balance the unemployment system and its financing, during the mid-2010, the unemployment benefit was cut with 15%. Thus, the threshold of a minimum unemployment benefit if 75% of the minimum wage was affected, • Starting with 2011 the unemployment benefit was calculated as a base of 75% of the so called reference social indicator (cca. 75% of the minimum wage). • By the end of 2010 the eligibility criteria for the unemployment benefit became tougher, and the condition of contributing at least 12 months during the last 24 was enacted. • This measures were mainly designated in order to maintain the financial sustainability of the system, while disadvantaged categories on the labor market, such as workers in temporary jobs, with part time schedules, at the beginning of their career, etc. were disadvantaged more with respect to their right social protection.

  19. SOCIAL DIALOGUE AND FLEXICURITY CRISTINA MOCANU, senior researcher Knowledge Sharing Program (KSP) between the Republic of Korea and Romania 28th of January – 2nd of February 2013

  20. Social dialogue evolution during the crises • The social dialogue wakened during transition, is even more wakened by the crises (Barbuceanu, 2011). • The coverage rate of trade unions decreased from cca. 40% in 2004 to 33% in 2007, trade unions constantly failing to increase their number of members, as well as to attract as members youth or employees working in micro and small enterprises. • The social partners were surpassed by the Government in the first years of the crises usually by enacting the so-called Emergency Ordinance. • Social Dialogue Code enacted in 2011 abolished the collective bargaining at national level and change the representativeness criteria for trade unions and employers’ organization. • Trade unions confederations are still in process of meeting the representativeness criteria, and to re-organize themselves in order to move the focus of collective bargaining from national level to sectoral level. • Main changes introduces by the new law are as follows: • Unions must be set up by a minimum of 15 employees from the same company, while the former low asker for a minimum of 15 employees from the same industry or profession. • Under the new law, the understanding of “employer” is reduced to all legal entities that may employ workforce, so the self-employed are excluded. • Economic and Social Council can include representatives from civil society, while government representatives were withdrawn. • The “national collective bargaining” is abolished. • Also criteria of representation become tougher: in order to be representative, an union has to comprise at least 50% plus one employees of a certain company, while the former law asked for only one third of employees of a certain companies. • “… more flexibility was introduced on the market, negotiations have been decentralized, a new role has been given to social dialogue bodies (…)” (Ghinararu, 2011).

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