Structural reforms and macro-economic policy - ETUC

Structural reforms and macro-economic policy
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2. What happened on the labour markets
of CEE countries over the last years?
Positive trends, persisting problems
During the period of 2000 – 2004, all CEE countries
finally embarked on solid economic growth (see
table 1); however, until 2004 only the Czech Republic,
Hungary, Poland, Slovakia and Slovenia, the five most
advanced economies, managed to exceed their 1989
GDP level, albeit in the new structure of GDP.While the
other countries had not yet reached their pre-transition
levels, they recorded in general higher growth
rates in the period under investigation, strengthening
their catching up process. In 2005, increasing exports
contributed to accelerating GDP growth for the eight
new EU members (EU8) indicating positive impact of
accession on these economies.
However, economic recovery did not translate into
significant labour market improvement in the
region. Indeed, in the Czech Republic, Lithuania,
Poland and Romania, employment even declined
during the period 2000-2004, while the other countries
achieved a positive, although very modest, net
employment growth (see table 1). Participation rates
did not perform too well either: only four countries -
Bulgaria, Hungary, Latvia and Slovenia – recorded
increasing participation rates between 2000 and
2004. Moreover, while in 2000 still four of these
countries exceeded the average participation rate of
the EU15, four years later none of them did and even
the two countries with the highest activity rates -
Czech Republic and Estonia - remained 0.6
percentage points below the EU15 average 2 (Graph 1).
As for the employment rates, comparisons with the
EU15 average reveal that in 2004 only Slovenia had
its rate slightly above the EU15 average while all
other countries had lower employment rates,
including the Czech Republic and Romania, which
four years before had been above or close to the EU15
average. Thus economic growth can still be characterized
as nearly jobless for the region, despite huge
employment losses in particular during the transition
crisis in the early 1990s.
In comparison with employment and labour force
participation rates, unemployment rates evolved
generally more favourably in the region: they
declined in the majority of the CEE countries, in
particular Bulgaria and the Baltic States (see
Table 2). However, a drop in unemployment may
Table 1 GDP and employment average annual growth
rates in per cent, 2000-2004
Country GDP Employment
Bulgaria 4.9 +1.11
Croatia 4.1 +0.67
Czech Republic 3.1 -0.24
Estonia 7.2 +0.58
Hungary 3.9 +0.46
Latvia 7.5 +1.01
Lithuania 6.7 -0.28
Poland 3.1 -1.14
Romania 5.3 -1.66
Slovakia 4.1 +0.35
Slovenia 3.4 +0.63
Source: UNECE database, authors’ calculations.
reflect different type of dynamics across the subregion:
in Lithuania for example, the steep decline
in unemployment can be explained by the combination
of continuous withdrawals from the labour
market and rising employment on the one hand,
and a rather large emigration of people after the
country’s accession to the EU in May 2004 on the
other. Most of the labour migrants have been
young people seeking better employment opportunities
mainly in the United Kingdom and Ireland as
could be deduced from sharply declining youth
unemployment presented below 3 . In the other
Baltic States, Slovenia and Bulgaria, decreasing
unemployment rates are mainly linked with
growing employment rates. In the Czech Republic,
Hungary and Slovakia unemployment decreased
only slightly. In contrast, the situation deteriorated
in Romania and Poland. However, in the first
country, the sharp fall in employment was fully
translated into the declining participation rate
limiting an increase in unemployment. Changes in
Poland have been more dramatic and worrying as
this particularly high unemployment rate is
combined with low economic activity as already
pointed. Labour market developments in this
country contrasted with other CEE countries, with
the exception of Romania.
Despite some converging trends in total unemployment
during the 2000-2004 period (significant
decline in the new EU members together with a
slight increase in the EU15), unemployment rates
have remained still high and well above the EU15
average. As noted earlier, differences among countries
2 The difference being more profound for male than for female workers (see forthcoming Cazes, Nesporova 2006)
3 This also seems to be the case of Slovakia and Bulgaria , despite so far the candidate status of the latter,as some anecdotal evidence confirms.