engleski

Comparative analysis of unemployment and restructuring in Central and Eastern Europe

As transition process has started in Eastern Europe and in Russia, it was clear that unemployment would emerge and that the job losses were likely to be large. It has been widely accepted that unemployment was a necessary result of the resource reallocation that would occur as former state-owned enterprises privatised, restructured, and shed labour. The earlier regime of full employment was unsustainable. How large that unemployment amount would be, and for how long it would persist was and to some extent remains, an unknown. Therefore the main purposes of this paper are examining the phenomenon and providing framework about changes to employment in the countries that are undergoing substantial transition. The analysis would compare employment in state firms in Eastern Europe and Russia. State firms in almost all countries reduced employment and sought to rationalize production. Because of a restructuring and impressive growth of the private sector in most of the countries, many of those who have lost their former state sector jobs are either unemployed or have left the labour force. Most new employment has been generated by private firms engaged in trade and services, for which the skills acquired in the state-owned sector are not appropriate. Therefore, contrary to some expectations, private sector growth has only partially offset the decline in state employment. As a result, a long-term unemployment has emerged as a major phenomenon. For workers who find themselves unemployed, the chances of getting back into paid employment are low. The share of long-term unemployment already exceeds 40 percent of the current unemployed. Today, some of the most pressing issues facing the economies in transition revolve around slowing the growth of unemployment and bringing the long-term jobless back into the active labour force. The evident challenge is to try and raise the exit rate to jobs and to avoid undesirable duration effects. Reintegrating a larger share of the long-term unemployed in work is similarly a major policy challenge in the East. The main conclusion is that the steps to a more efficient allocation of labour resources in the transitional economies and to a well-functioning labour market depend very powerfully on a sound macroeconomic policy. Resolving of that complex problem could be found in the use of active labour market programs, such as training and other skill-forming programs, and the selective use of marginal wage subsidies targeted at the long-run unemployed that hold more promise than simply providing unemployment benefits or social assistance.

unemployment; restructuring; state sector; and active labour market policies

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