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From the Shortage of Jobs to the Shortage of Skilled Workers: Labor Markets in the EU New Member States

Author

Listed:
  • Rutkowski, Jan

    (Institute for Structural Research (IBS))

Abstract
Labor markets in the transition economies of Central and Eastern Europe underwent a dramatic transformation. Notably, this transformation took place within just a few years. Until the mid-2000s job opportunities were scarce and unemployment was high. But since then labor demand has picked up and unemployment has dropped substantially. In contrast to the earlier period of weak labor demand, it is now the supply side of the labor market that constrains job creation. These spectacular improvements can hardly be attributed to the greater labor market flexibility or to the more efficient matching of workers with jobs because no major reforms to labor market institutions were recently implemented in the region. Instead, the main cause was a strong increase in labor demand, as evidenced by the increase in the job vacancy rates and real wages. The surge in labor demand is likely to reflect successful enterprise restructuring supported by the improvements in the investment climate and access to global markets associated with the EU accession. For a long time enterprises in transition economies were improving competitiveness by shedding of redundant labor. Now they use productivity gains to invest, expand output and hire more workers. However, the emerging skills shortages may constrain firm growth. Thus the transition economies face a challenge of mobilizing effective labor supply. This requires improving labor supply incentives and investing in education. This paper documents the recent changes in labor market conditions in the transition economies, suggests tentative explanations, and finally suggests policies to address the emerging challenges.

Suggested Citation

  • Rutkowski, Jan, 2007. "From the Shortage of Jobs to the Shortage of Skilled Workers: Labor Markets in the EU New Member States," IZA Discussion Papers 3202, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3202
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    References listed on IDEAS

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    1. Boone, J. & van Ours, J.C., 2004. "Effective Labor Market Policies," Other publications TiSEM 9b8aece5-8c99-4420-b98f-6, Tilburg University, School of Economics and Management.
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    3. Boone, Jan & van Ours, Jan C., 2004. "Effective Active Labor Market Policies," IZA Discussion Papers 1335, Institute of Labor Economics (IZA).
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    Cited by:

    1. World Bank Group & Royal Government of Bhutan Ministry of Labor and Human Resources, 2016. "Bhutan’s Labor Market," World Bank Publications - Reports 25703, The World Bank Group.
    2. Lehmann, Hartmut & Muravyev, Alexander, 2009. "How Important Are Labor Market Institutions for Labor Market Performance in Transition Countries?," IZA Discussion Papers 4673, Institute of Labor Economics (IZA).
    3. Vladimir Gimpelson & Rostislav Kapeliushnikov & Anna Lukiyanova, 2012. "Stuck Between Surplus and Shortage: Demand for Skills in Russian Industry," Studies in Economic Transition, in: Tilman Brück & Hartmut Lehmann (ed.), In the Grip of Transition: Economic and Social Consequences of Restructuring in Russia and Ukraine, chapter 2, pages 47-75, Palgrave Macmillan.
    4. H. Lehmann & T. Razzolini & A. Zaiceva, 2017. "Internal Devaluation and Labor Market Outcomes: Evidence from Latvia," Working Papers wp1095, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Lehmann, Hartmut & Razzolini, Tiziano & Zaiceva, Anzelika, 2015. "Worker Flows and Labour Market Adjustment during the Great Recession: Evidence from a Large Shock," IZA Discussion Papers 9588, Institute of Labor Economics (IZA).
    6. Patrik Gustavsson Tingvall & Josefin Videnord, 2020. "Regional differences in effects of publicly sponsored R&D grants on SME performance," Small Business Economics, Springer, vol. 54(4), pages 951-969, April.
    7. Tinh Doan & Quan Le & Tuyen Quang Tran, 2018. "Lost in Transition? Declining Returns to Education in Vietnam," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(2), pages 195-216, April.
    8. Anzelika Zaiceva, 2014. "Post-enlargement emigration and new EU members' labor markets," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-40, August.
    9. World Bank, 2011. "Challenges to Enterprise Performance in the Face of the Financial Crisis : Eastern Europe and Central Asia," World Bank Publications - Books, The World Bank Group, number 2316.
    10. Hartmut Lehmann & Tiziano Razzolini & Anzelika Zaiceva, 2016. "Worker flows and Labour Market Adjustment during the Great Recession: Evidence from a Large Shock," Department of Economics 0083, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    11. Hazans, Mihails, 2018. "An in-depth analysis of the emigration of skilled labour. Latvia," MPRA Paper 118493, University Library of Munich, Germany.
    12. Martina Mysikova & Jiri Vecernik, 2015. "Returns to education in transition and advanced European countries: The role of an expansion of higher education," Investigaciones de Economía de la Educación volume 10, in: Marta Rahona López & Jennifer Graves (ed.), Investigaciones de Economía de la Educación 10, edition 1, volume 10, chapter 44, pages 865-886, Asociación de Economía de la Educación.
    13. Vasyl Kvartiuk & Martin Petrick & Miroslava Bavorova & Zuzana Bednaříková & Elena Ponkina, 2020. "A Brain Drain in Russian Agriculture? Migration Sentiments among Skilled Russian Rural Youth," Europe-Asia Studies, Taylor & Francis Journals, vol. 72(8), pages 1352-1377, September.
    14. H. Lehmann & A. Muravyev, 2010. "Labor market institutions and labor market performance: what can we learn from transition countries?," Working Papers 714, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. Ana Ostrovidov Jaksic & Ivan Jaksic, 2019. "How to prolong labour market participation in the Republic of Croatia?," Public Sector Economics, Institute of Public Finance, vol. 43(1), pages 79-108.
    16. Lehmann, Hartmut, 2012. "The Polish Growth Miracle: Outcome of Persistent Reform Efforts," IZA Policy Papers 40, Institute of Labor Economics (IZA).
    17. Hazans, Mihails, 2013. "Emigration from Latvia: Recent trends and economic impact," MPRA Paper 118479, University Library of Munich, Germany.

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    More about this item

    Keywords

    transition economies; labor market; unemployment; skill shortages;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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