Economic and Social Involvments of Labor Market in Romania and European Union in the Crisis Context

Romanian, European and world economy were affected by a devastating economic crisis which turned into a financial, social and moral crisis. This phenomenon started in 2007 in America as a mortgage crisis changing in a real economy crisis affecting the financial system and evolving in a social crisis – on labor market – characterized by low employment rates and high unemployment. Global economic crisis effects began to become visible in Romania only in 2009 through a large current account deficit and through a quite strong depreciation of the Romanian currency. On labor market, the crisis had a negative effect on the private system which has adapted to the market contractions and, also, on the budgetary system which it was strongly affected especially because of severe measures taken by the Government. These measures proved to be ineffective because of their short time possibility of application. Although in 2010 it was adopted the first measure that made wages fall by 25% and increased slightly unemployment rate, now the main purpose is to drastically reduce the public sector because of the agreement made with IMF after lending us 13.5 billion of euro. Another measure taken also in 2010 it was the VAT rise by 5% which has reduced purchasing power, currently being considered by all analysts as a big political mistake. These two measures combined had a synergistic effect which caused disorders on labor market because they affected young people, workers earning a minimum wage and state employees where there is the uncertainty of existing job. The disorder produced a long term unemployed persons risking exclusion from the labor market, especially for the persons over 45 years. Therefore, Romania needs a public sector efficiency, which can be performed through partial replacement of human resources with new technologies and continuous vocational training for actual employees aiming to obtain medium and long term results. The efficiency can be rise by increasing the minimum wages in order to reduce social inequalities.