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

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  • Rutkowski, Jan

    () (World Bank)

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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3202
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    References listed on IDEAS

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    1. Boone, Jan & van Ours, Jan C, 2004. "Effective Active Labour Market Policies," CEPR Discussion Papers 4707, C.E.P.R. Discussion Papers.
    2. Boone, J. & van Ours, J.C., 2004. "Effective Labor Market Policies," Discussion Paper 2004-87, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Anzelika Zaiceva, 2014. "Post-enlargement emigration and new EU members' labor markets," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-40, August.
    2. World Bank Group & Royal Government of Bhutan Ministry of Labor and Human Resources, 2016. "Bhutan’s Labor Market," World Bank Other Operational Studies 25703, The World Bank.
    3. World Bank, 2011. "Challenges to Enterprise Performance in the Face of the Financial Crisis : Eastern Europe and Central Asia," World Bank Publications, The World Bank, number 2316.

    More about this item

    Keywords

    transition economies; labor market; unemployment; skill shortages;

    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 - Economic Systems - - Socialist Systems 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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