www.peer-review-social-inclusion.eu
Romania In-work poverty and labour market segmentation
A Study of National Policies
Marieta Radu
Disclaimer: This report reflects the views of its May 2010 author(s) and these are not necessarily those of either the European Commission or the Member States. The original language of the report is English.
On behalf of the European Commission DG Employment, Social Affairs and Equal Opportunities
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Contents
1. Presentation of the current situation – statistical overview ...... 5
1.1. In-work at-risk-of-poverty rate by gender, age, educational level and household type .. 5 1.2. The minimum wage ...... 7 1.3. The tax rate on low wage workers: low wage trap ...... 9 1.4. Gender pay gap...... 10 1.5. Gender segregation...... 11 1.6. Inactivity and part-time work due to lack of care services...... 12 1.7. Transitions by type of contract...... 13 1.8. Diversity and reasons for contractual and working arrangements ...... 14 1.9. Undeclared work...... 15 1.10. Overtime work and hours of overtime...... 16 1.11. Access to flexitime...... 16 1.12. National indicators and data ...... 17
2. Main causes of in-work poverty and labour market segmentation...... 18
3. Presentation and analysis of policies...... 23
3.1. In-work poverty...... 25 3.1.1. The low net wage...... 25 3.1.2. Low work intensity ...... 28
3.2. Labour market segmentation...... 30 3.2.1. Job retention and advancement...... 30 3.2.3. Working conditions and employees friendly flexibility ...... 31 3.2.2. Life-long learning ...... 32 3.2.3. Non-discrimination policies and inclusive work environments...... 33 3.2.4. The role of social partners ...... 34 3.2.5. Other forms of in-work support, including health and safety...... 35 3.2.6. Social security rights...... 36
4. Final remarks...... 38
References ...... 39
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Summary
In 2008, in Romania, about 18% of people in employment were considered as working poor, meaning that 18% of the working age population was working yet living below the poverty threshold. Nevertheless, full-time employment gives better protection against poverty as in 2007, the at-risk-of-poverty rate for employees was 3.3%, while the risk for self-employed people (including those in the agricultural sector) was about 39.9%.
The characteristics of in-work poverty view both individual and household level. Individual features such as age, education and gender are demonstrated as having an influence on the risk of being poor. Low pay, under-employment and family structures join together to explain working poverty. The factors that contribute to working poverty such as working part-time (58%), having low education (43% working poor), being self-employed (39.9% working poor), or a lone parent (26% working poor), having a temporary contract (22% working poor), appear to be important risk factors with data registering the number of working poor in Romania generally higher than EU 27 averages.
Among certain sectors of the economy, the dominance of the working poor, in subsistence agriculture is specific for Romania. Estimates show that over two million persons in Romania are working in and living on subsistence agriculture mostly as self-employed or unpaid family workers (they receive no earnings and could be described as ‘working poor’). Informal employment on its own or in combination with other activities appears to be an important living strategy for numerous households, as it helps to supplement income from other sources, even if it involves potential risks related to the lack of health and pension coverage, unemployment and insecurity.
The national statistics do not include studies on the extent and characteristics of the working poor though some analysis / impact studies are planned for the period 2009-2011. The correlation between poverty and in-work poverty is strong in Romania and, in-work poverty is dealt with as part of fighting overall poverty through various institutional approaches to poverty, as well as policies, programmes and legislation to tackle the related issues.
The main challenges identified by the 2008-2010 National Strategy Report on Social Protection and Social Inclusion for the labour market view the effects of the economic restructuring process, low participation of the youth and of vulnerable groups on the labour market, the significant number of women and men occupied in agriculture and the quality of human resources. The national priorities in the employment field include: promoting labour force adaptability, continuous learning and developing process, fighting against structural unemployment, promoting social cohesion. Promoting an integrated approach to flexibility and security on the labour market is a national priority that includes measures to further increase the job quality and job security by improved health and safety conditions while creating opportunities for lifelong learning and providing people with varied choices.
Romania’s policies are targeted at improving the labour supply incentives of identified vulnerable groups including the long term unemployed and the unskilled, the older workers, the youth and women that are particularly affected by high unemployment and/or low participation on the labour market. These measures include more flexible work arrangements (such as part-time and temporary contracts), improved job search support and counselling, and targeted programs, including job subsidies.
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Minimum wage policies play an important part in lifting workers in Romania out of poverty. The earnings from work make up the volume of a family's income, but minimum wages (second lowest in EU27) offer little support as many people on low wages are still dependent on (means tested) social assistance benefits in particular, those working poor who cannot find a full-time job.
Complementary to the social protection systems and labour market regulations, people in employment may benefit from several types of social assistance allowances (for children, single parent families, families with many children, persons with disabilities etc.), in-kind transfers and services. Other existing support services include social canteens, protected accommodation, job placement centres with the local authorities and non-governmental organizations being the main providers. Most of these services function in the urban areas thus denying access to this type of assistance for people living in remote/ isolated villages. The World Bank’s 2009-2013 Country Partnership Strategy for Romania stressed that the current social protection scheme targeting poverty were not effective and social protection spending per capita in Romania were the lowest in the European Union. The amounts allocated to schemes targeting poverty are very low, when reporting them to Gross Domestic Product, or to the actual needs.
Despite a range of policy approaches low mobility, high long-term unemployment rate and low employment rates among the youth and older workers are still issues to be dealt with on the labour market; also, low participation in education and training programmes, including life-long learning. In addition, the effects of the economic slowdown add to the already existing problems on the labour market and need to be considered, appropriate measures being necessary as the in-work poverty risk is expected to increase when companies introduce measures to try to diminish wage costs while maintaining jobs/keeping people in employment by reduction in wages and/or working time, or asking staff to take extended leave. The recession makes it more difficult for many employed people to live above the poverty line if worked less hours, even if that meant keeping their jobs.
The long-term consequences of in-work poverty do not only affect the adults, but have an influence on children and elderly living in working poor families as they depend on their parents/children incomes. Therefore, the four policy components - active labour market policies, flexibility of the labour market, lifelong learning policies, and social protection system need to be brought together in an integrated approach. The interaction and mutual support between institutions and actors involved in the design and implementation of economic policies and social assistance programs also need to effectively correlate activation measures (as a means for social integration and economic independency) and means-tested benefits in order to successfully address not only in-work poverty, but poverty in itself and the risks of social exclusion. Each ministry has its own programs and objectives related to social inclusion and these are consistent with the National Strategy on Social Inclusion; improved collaboration would increase effectiveness in the implementation process of various programs undertaken by different institutions and also, regular data collection and analysis would allow for rigorous impact evaluation and making the necessary policy adjustments for developing suitable solutions and prevention measures.
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1. Presentation of the current situation – statistical overview
After 2000, the economic growth has been the main means of poverty reduction in Romania. In 2008, for the eighth successive year Romania’s economy registered a 7.1% growth rate. The developments and reforms within the national social protection system increasingly targeted the poor yet, benefits of the economic growth failed to reach all sections of the population including many people in employment that are still to be found among those affected by poverty.
Moreover, since the fall of 2008, the effects of the economic downturn reflected in increasing number of people being left without the earnings from their lost jobs which came to add to already existing problems related to poverty and social exclusion.
1.1. In-work at-risk-of-poverty rate by gender, age, educational level and household type
According to Eurostat estimates in 2007 and 2008, 19% and 18% respectively, of the employed persons in Romania were working poor (with an equivalent disposable income below the risk-of- poverty threshold, which is set at 60% of the national median equivalised disposable income after social transfers). This is one of the highest rates compared to other European countries and the EU27 average of 8% for both 2007 and 2008. During the same period, the number of male working poor is higher than female working poor (20% / 19% for men as against 16% /16% for women in 2007 / 2008 respectively, whilst 2007-2008 EU27 averages were 9% for men and 8% for women).
In-work at risk of poverty rate (%)
Total Men Women UE27 RO UE27 RO UE27 RO 2007 8 19b 9 20b 8 16b 2008 8 18 9 19 8 16 Source: Eurostat; EU SILC
The distribution of the working poor according to their age follows an U shape, in-work poverty risk being generally lower for middle age workers (15% among workers aged 25 to 54 years in 2008). Younger workers (aged 18 to 24 years) show higher in-work poverty risk (23% in 2008) and the highest risk stays among older workers (24% for those aged 55 to 64 years and 43% among those aged over 65 years, also in 2008).
In-work at risk of poverty rate by age (%)
Total 18-24 years 18-64 years 25-54 years 55-64 years 65 years and > UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO 2007 8 18b 10 23b 8 17b 8 16b 8 26b 14 49b 2008 8 17 10 23 8 17 8 15 8 24 17 43 Source: Eurostat, b-break in series
As it could be expected, the level of education is an essential determinant of in-work poverty as working poverty risk is higher for low educated individuals and goes down with the increase of the educational attainment (43% of the low educated people having a job are at risk of being poor compared to 1% for highly educated individuals in Romania as against the EU27 average of 17% and 3% respectively, in 2008). Medium-educated workers show a 12% in-work poverty risk compared to the EU27 average of 8% in 2008.
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In-work at risk of poverty rates by education level1
Pre-primary and lower Upper secondary and post- Tertiary education – secondary education -levels 0-2 secondary non-tertiary education – levels 5-6 (ISCED 1997) (ISCED 1997) levels 3-4 (ISCED 1997) EU27 RO EU27 RO EU27 RO 2007 16 44b 8 12b 3 1b 2008 17 43 8 12 3 1 Source: Eurostat; b-break in series
Further than individual characteristics, the incidence of in-work poverty is related to household characteristics (i.e. the economic status of other members of the household).
In Romania, single parents with dependent children confront with the highest in-work risk of poverty (26% in 2008 compared to the EU average of 20%).
Households with dependent children show an in-work poverty risk of 20% in 2008 whilst, households without children have a lower risk of in-work poverty (14% also in 2008).
The in-work poverty risk for single people without children is equal to the poverty risk of working lone parents (26%), but shows a higher value when compared to those living in households formed of two adults or more without children (26% as against 13%, in 2008). This may be attributed to the changes in family structures along with a deterioration of the protective nature of families (i.e. more young people leaving home to live on their own at earlier ages without family support).
In-work at risk of poverty rate by household type
Single Single parent 2 or more adults 2 or more adults Households Households person with dependent with dependent without with dependent without children children dependent children dependent children children UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO 2007 10 26b 19 27b 10 19b 6 16b 10 19b 7 17b 2008 11 26 20 26 10 20 5 13 11 20 6 14 Source: Eurostat; b - break in series
Households are categorised by their composition (existence of dependent children or not) and also, by their ‘work intensity’ (based on the number of months per year for which household members of working age were in employment).
Households with dependent children and work intensity between 0 and 0.5 show higher risk of poverty (30%), compared to households without children (in-work poverty risk of 9%); this
1 http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database In-work poverty (ilc_iw) In-work at risk of poverty rates by age and gender (ilc_iw01) In-work at risk of poverty rates by household type (ilc_iw02) In-work at risk of poverty rates by work intensity of the household (ilc_iw03) In-work at risk of poverty rates by education level (ilc_iw04) In-work at risk of poverty rates by type of contract (ilc_iw05) In-work at risk of poverty rates by months worked (ilc_iw06) In-work at risk of poverty rates by full-/part-time work (ilc_iw07)
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contrasts with the poverty risk of 17% in households where there are children and where all of the working-age adults are working for the full year.
In-work at risk of poverty rate by work intensity of the household
Households with dependent children Household with work Household with Household with work Household with work Household with work intensity=1 work intensity=0 intensity=0.5-1 intensity=0-0.5 intensity=0-1 UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO 2007 6 17b 38 u 16 23b 37 32b 18 24b 2008 7 17 27 u 17 25 37 30 19 25
Households without dependent children Household with Household with Household with work Household with Household with work intensity=1 work intensity=0 intensity=0.5-1 work intensity=0-0.5 work intensity=0-1 UE27 RO UE27 RO UE27 RO UE27 RO UE27 RO 2007 6 18b 18 u 8 12b 18 14b 9 12b 2008 5 15 13 u 8 9 16 9 9 9 Source: Eurostat; b break in series; u unreliable/uncertain data
1.2. The minimum wage
The minimum wage in Romania of €153 was second-lowest in the European Union in January 2009, after Bulgaria (with a minimum wage of €123), according to the Statistical Office of the European Commission, Eurostat.
Romania is part of the first group of nine European states which pay minimum wages below €400; i.e. Bulgaria, Romania, Lithuania (€232), Latvia (€254), Hungary (€270), Estonia (€278), Poland (€281), Slovakia (€296) and the Czech Republic (€306).
Monthly minimum wages2 in Romania – bi-annual data Euro/month
2005S01 2005S02 2006S01 2006S02 2007S01 2007S02 2008S01 2008S02 2009S01 2009S02 Euro 72.4 85.8 90.2 93.0 114.2 121.0 141.4 136.8 153.0 142.4 Lei 280.0 310.0 330.0 330.0 390.0 390.0 500.0 500.0 600.0 600.0 PPP 142.1 157.3 163.9 163.9 190.3 190.3 218.9 218.9 262.6 262.6 Source: Eurostat
The evolution of the monthly minimum wage as proportion of the average monthly earnings followed a decreasing curve with the figures registered for Romania (30.5% in 2008) being the lowest in EU, comparable to those for Latvia (34.65%) or Bulgaria (34.98%).
The monthly minimum wage as a proportion of the average monthly earnings in industry and services, excluding public administration (%)
Year 2002 2003 2004 2005 2006 2007 2008 RO 31.30 37.30 34.40 32.60 35.70 29.10 30.50(p) Source: Eurostat
2 http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-07-071/EN/KS-SF-07-071-EN.PDF
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When looking at the average gross earnings per hour3, Romania (€1.87) registers some of the lowest hourly wages (much below the EU27 average of €13.38 per hour). Low gross hourly earnings are also found in Bulgaria (€1.11) or Latvia (€2.64) with the highest figures being recorded in Denmark (€22.38), Ireland (€20.83) and the United Kingdom (€19.47) in 2006.
Romania registered the lowest hourly rates (€2.99) for employees with a high level of education close to Lithuania (€3.61 EUR) and Bulgaria (€1.66), while this type of employees were paid the most in Luxembourg (€28.01), Denmark (€26.93) and the United Kingdom (€26.77 EUR). In EU27 average hourly earnings of employees having completed tertiary education were at least twice as high (at €18.92) as wages of employees with a low level of education (€9.07).
Low wages are defined in relative terms for each country and measured against the national median gross earnings. Eurostat data show 27% of the full-time employees in Romania, were low wage earners (annual gross earnings less than two thirds of the annual full-time median gross earnings) in 2006 (17.2% in the EU-27)4. High percentages of full-time employees earning low wages were also registered in Latvia (31%), Lithuania (28%), Bulgaria (27%), Hungary (23%), Poland and the United Kingdom (22%) and in Estonia, Ireland and Cyprus (21%).
Proportion of low-wage earners among full-time employees having the same sex or the same contract duration Men Women Indefinite duration contract (1) Fixed term contract (1) EU27 13.5 23.1 15.6 30.5 RO 25.7 27.8 26.7 29.5 Source: Eurostat, SES 2006 Notes: Data refer to enterprises with 10 employees or more and to NACE Rev. 1.1 sections C to O excluding L. (1) excluding apprentices, EU-27 without SE.
The country's earnings spread represented by the 90/10 ratio, which corresponds to the ratio of the earnings of the 90th percentile earner to those of the 10th percentile earner show, in Romania, the 90th percentile worker earned over five times more (5.6) than the 10th percentile worker according to Eurostat, SES 2006 (earn_ses_adeci); similar figures were registered in Latvia and Portugal the corresponding 90/10 ratios being 6.0 and 5.3, as opposed to Denmark (2.3), Finland (2.4), and Belgium, Malta and Sweden (2.5), where the lowest spread between these two categories of workers was recorded.
Distribution of annual earnings of full-time employees, 2006
Full-time 10th Median 90th Ratio Low wage: (< 2/3 of median) employees percentile percentile 90th/10th Number EUR percentile 2/3 of Low wage earners median Number Proportion (%) EUR of all full-time employees EU27 88172118 - - - - - 15183229 17.2 RO 3829185 1378 3101 7763 5.6 2067 1021826 26.7 Source: Eurostat, SES 2006
3 Source: Eurostat, SES 2006 (earn_ses06_16) 4 3/2010 – Statistics in focus Eurostat – Population and social conditions http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-10-003/EN/KS-SF-10-003-EN.PDF
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According to the 2007 ‘EU Labour Force Survey’, the proportion of low qualified workers in total employment, by age group, places Romania in an average position among the 27 European Union Member States: 18.3% for workers aged 25-49, versus 24.5% in the EU 27; 38.8% for workers aged 50-64, versus 38.5% in the EU 27.
Among women aged 50-64, low qualified workers account for a higher proportion than the EU 27 average, respectively for 49.0% versus 43.0%, while among men of the same age group, the proportion is reversed: 27.6% in Romania, versus 33.8% in the EU 27.
1.3. The tax rate on low wage workers: low wage trap
The tax rate on low wage earners/low wage trap in Romania, was 29% for single persons without children and 36% for one earner married couple with two children, which is bellow the EU27 averages of 49.54% and 64.61% respectively, in 2008. The low wage trap measures what percentage of the gross earnings is ‘taxed away' by the combined effects of higher taxes and reduced or lost benefits when moving from 33% to 67% of the average earnings. The 'trap' indicates that the change in disposable income is small and, conversely, the work-disincentive effect of tax and benefit systems is large. Integrating and co-ordinating the functioning of different parts of the tax-benefit system can prevent situations where taxes in combination with the withdrawal of a number of benefits generate marginal effective tax rates close to or in excess of 100%.
Tax rate on low wage earners by marginal effective tax rates on employment incomes - Low wage trap (%) 2004 2005 2006 2007 2008 RO UE27 RO UE27 RO UE27 RO UE27 RO UE27 Single person without children, 33% of AW (%) 31.50 46.68 30.30 47.00 30.30 49.27 30.30 49.68 29.00 49.54 One-earner married couple, at 33% of AW, with two children (%) 17.00 58.66 17.00 61.38 19.40 63.91 23.90 63.08 36.00 64.61 Source: Eurostat
Average effective tax wedge has been relatively high in Romania. In particular, effective tax rates for people eligible for unemployment benefits and likely to find low-wage employment are above 60 per cent.
Tax rate on low wage earners by marginal effective tax rates on employment incomes - Unemployment trap (%) 2004 2005 2006 2007 2008 RO UE27 RO UE27 RO UE27 RO UE27 RO UE27 Single person without children 62.80 74.26 60.50 75.52 70.50 76.12 70.90 74.90 : : Source: Eurostat
The tax wedge on the labour cost measures the relative tax burden for an employed person with low earnings. It is defined as the ratio of income tax plus employee and employer social contributions including payroll taxes less cash benefits divided by the labour costs for a single earner earning 67% of the average wage/average worker. The tax wedge measures both incentives to work (labour supply side) and to hire persons (labour demand side).
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Tax wedge on labour cost % 2005 2006 2007 2008 Romania 42.4 42.2 41.8 : UE 27 40.4 41.1 40.9 : Source: Eurostat
In Romania, the income tax is 16% on any gross salary and does not differ for lower wages. Employees and employers pay social security, unemployment and health contributions. Employers also pay contributions for the public maintenance of employment record books, workers’ compensation insurance etc. Until 1997 payroll taxes were at around 35 percent, but they increased to 43 percent in 1998 and to almost 60 percent in 1999. After that date payroll taxes gradually decreased to 55 percent in 2002 and to a still a high percentage of 45.5 in 2007.
The due contributions5 are as follows (2010):
Employees’ contributions (% of the gross salary) Employers’ contributions (% of the gross salary) Social security Fund Social security Fund Contribution for medical leaves 10.5%6 20,8%/25,8%/30,8% 0.85% (capped) Health fund7 Health fund Insurance for work accidents 5,5% 5,2% 0.15%-0.85%8 Unemployment fund Unemployment fund Labour Chamber Commission 0,5% 0,5% 0.25%-0.75% Guarantee fund for salary debts 0.25% Disabled person contribution9 4%*No. of employees*MSE x 50% Total: 16,5% Total: Approx 25,75%
1.4. Gender pay gap
Gender and level of education play a significant role in average gross hourly earnings. Generally, in Romania the wages are equal for women and men for similar working conditions. The differences in payment are determined by different qualification levels and position.
On average, gross hourly earnings of women in the EU were 18% lower than for men in 2008 (unadjusted Gender Pay Gap defined as the relative difference, in percent, between the average gross hourly earnings of women and men). This indicator used to monitor the inequality in pay between men and women shows the earnings gap for females in Romania is 9% that is similar or even lower when compared to other countries in the region (13.6% in Bulgaria, 26.2% in the Czech Republic or 22% in Greece) in 2008. As importantly, the earnings gap is larger in the public sector than it is in the private sector. In Romania, public sector jobs with comparable educational requirements and grading have substantial differences in pay and it seems females are disproportionately affected by these pay differences.
5 Law 11 / 26.01.2010 on the State Budget for 2010 published in the Official Bulletin of January 27, 2010 6 2% will be redistributed to private pension plans 7 Law no. 95/2006 8 Depending on the classification of the activities from the national economy (Law nr. 346/2002) 9 Payable by companies with more than 50 employees that do not hire disabled persons. Alternatively, the contribution equivalent can be used by companies to purchase goods from institutions where disabled people work.
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Gender pay gap in unadjusted form - in %
Year 2002 2006 2007 2008 RO 16.0 7.8 12.7 9.0 EU27 : 17.7 17.6 18 (p) Source Eurostat (Structure of Earnings Survey source - 2002 and 2006 onwards)
Average gross monthly wage for women as percentage of the average monthly gross wage for men in October (%)
Year 2005 2006 2007 2008 RO total economy 87.0 90.1 88.9 92.2 Source: Eurostat
The employment figures recorded for Romania in 2008 show the employment rate for women is 52.5% (for the age range 15-64 years), lower than the 2010 Lisbon objective of 60% and much bellow the employment rate recorded for men, that is 65.7%. In 2008 the gender gap in Romania calculated as the difference between the employment rate for men and the employment rate for women reached 13.2%, a figure below the EU27 average of 13.7%.
2005 2006 2007 2008 EU 14.5 14.4 14.2 13.7 RO 12.2 11.6 12.0 13.2 Source: Eurostat; Quarterly Labour Force Data (QLFD) - Annual averages
In 2008, the proportion of women that were self-employed (7.6 %) in the EU27 was well below the corresponding percentage for men (12.5 %). This aspect was reflected in the majority of Member States, but particularly in Romania (12.7% for women compared with 24.9 % for men10).
1.5. Gender segregation
Gender segregation in occupations/sectors is calculated as the average national share of employment for women and men applied to each occupation/sector; differences are added up to produce a total amount of gender imbalance presented as a proportion of total employment (ISCO classification/NACE classification)
Gender segregation in occupations 2005 2006 2007 2008 EU27 25.9 26.0 26.0 26.0 RO 22.3 22.8 23.2 22.9 Gender segregation in sectors EU27 18.5 18.7 18.9 19.4 RO 15.0 15.5 16.1 16.9 Source: Eurostat; EU LFS - Spring data
Employment patterns for women are different from men. Females are more likely than males to work in the services sector, which is notably growing over time (43.2% compared to 34.9% men in 2006) and there are more women working in agriculture (31.3% compared to 29.9% men in
10 http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-EP-09-001/EN/KS-EP-09-001-EN.PDF
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2006), but they are less likely to work in industry/manufacturing sectors (25.4% compared to 35.2% men, also, in 2006).
Employment by sector of activity
2004 2005 2006 2007 2008 Employment in Services (% total employment) 36.3 36.9 38.7 : : Male 32.5 33.0 34.9 : : Female 40.9 41.6 43.2 : : Employment in Industry (% total employment) 30.4 29.8 30.7 : : Male 34.7 34.4 35.2 : : Female 25.3 24.3 25.4 : : Employment in Agriculture (% total employment) 33.3 33.3 30.6 : : Male 32.8 32.6 29.9 : : Female 33.8 34.1 31.3 : : Source: Eurostat; EU LFS indicators
1.6. Inactivity and part-time work due to lack of care services
Many women are held back from working full time by the work that they carry out raising children, looking after other persons, or housework; during 2006 – 2008, about 90% of women in Romania would like to work but are not searching for a job/who work part-time due to their care responsibilities and lack of suitable care services.
Inactivity and part-time work due to lack of care services (age groups 15-64) 2006 2007 2008 Inactivity and Inactive Inactivity and Inactive Inactivity and Inactive part-time work persons and part-time work persons and part-time work persons and due to lack of part-time due to lack of part-time due to lack of part-time care services (% workers with care services (% workers with care services (% workers with of pers with care care resp.(% of pers with care care resp. (% of pers with care care resp. (% resp.) of total pop) resp.) of total pop) resp.) of total pop) Total RO 90.1 1.1 90.1 1.1 90.2 1.1 EU27 26.7 4.4 27.9 5.4 29.8 4.6 Women RO 90.2 2.3 90.0 2.2 90.2 2.1 EU27 26.7 8.6 27.9 9.6 29.9 8.9 Source: Eurostat; LFS 2006-Inactivity and part-time work due to lack of care services for children and other dependants.
The analysis contained in Romania’s 2008-2010 National Strategy Report on Social Protection and Social Inclusion based on the 2007 Quality of Life Survey shows that out of all the children in the household’s composition, children under the age of 13 represent two thirds. The main forms of care for children while parents are away to work include enrolment in the educational system, child care provided by family members (grandparents, siblings or other relatives, neighbours or friends). Approximately 40% of the children aged less than 13 years benefit from this type of care arrangements. Approximately one fifth of children aged less than 13 years go to nurseries or kindergartens. Only 0.1% of children are registered in day-care and after-school centres. According to EU-SILC data, in Romania, 91% of the children aged less than 3 years and 39% of the children between 3 years and compulsory school age do not benefit of any type of formal care being cared for by their parents only. On the average, 6% of the children aged less than 3 years, 44% of the children between 3 years and compulsory school age and 89% of the children between compulsory school age and 12 years benefit of 1-29 hours of formal care per week (2008 data).
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Formal child care by duration and age group - [tsisc100] Children cared for as a percentage of all children in the same age group
2007 2008 RO UE27 RO UE27 Less than 3 years - no formal childcare 94 72p 91 72 Less than 3 years - childcare from 1 to 29 hours weekly 3u 16p 6u 15 Less than 3 years - childcare 30 hours or more weekly 3u 12p 2u 13 Between 3 years and compulsory school age – no formal childcare 38 18p 39 17 Between 3 years and compulsory school age - childcare from 1 to 29 hours weekly 46 42p 44 41 Between 3 years and compulsory school age - childcare 30 hours or more weekly 16 40p 17 42 Compulsory school age - 12 years - childcare from 1 to 29 hours weekly 88 43 89 : Compulsory school age - 12 years - childcare 30 hours or more weekly 3 52 1 : Source: Eurostat; p=Provisional value u=Unreliable or uncertain data
In 2008, 46% of the children aged less than 3 years and 11% of the children aged between 3 and compulsory school age are cared only by their parents in Romania (as against 51% and 10% respectively, in EU27).
Children cared only by their parents by age group (% over the population of each age 2007 2008 group) - source: EU-SILC RO EU RO EU Less than 3 years 50 44 46 51 Between 3 years and minimum compulsory school age 13 12 11 10 Source: Eurostat
1.7. Transitions by type of contract
Eurostat data on this indicator are not available for Romania. However, with the effects of the economic crisis decreasing employment and increasing unemployment more and more people are loosing their jobs and change their employee status becoming unemployed. Data from the National Institute of Statistics show the employment in Romania started to decline from September 2008 going down to 4.692 million in February 2009, a decrease of 44,400 persons compared to January 2009 and 83,200 (1.7% down) from one year earlier.
As regards the transition between non-standard and standard forms of employment, data from the National Statistics Institute show that the number of individual employment contracts recorded with the local labour inspectorates went up from 4.9 million at the end of 2003 to 6.2 million at the end of 2007. This indicates a positive evolution in the direction of standard forms of employment.
In terms of transition between non-standard forms of employment and unemployment/inactivity, in 2007, 62,100 persons of the total number of 640,900 unemployed recorded by the Household Labour Force Survey belonged to the category of workers who had completed a temporary job, compared to the year 2003, when, out of some 691,800 unemployed, the number of those becoming unemployed after ending a temporary job was 59,400.
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1.8. Diversity and reasons for contractual and working arrangements
In 2008, the structure of the occupied population by professional status comprised 67.4% salaried workers, 19.4% self-employed, 11.9% unpaid family workers and 1.3% employers11. The prevalence of temporary contracts in Romania is low compared to the EU27 averages (1.3% as against 14%, in 2008) and part-time contracts represent only 9.9% of the total employment as against the EU27 average of 18.2% also, in 2008.
2004 2005 2006 2007 2008 Employment rate (% population aged 15-64) 57.7 57.6 58.8 58.8 59.0 Male 63.4 63.7 64.6 64.8 65.7 Female 52.1 51.5 53.0 52.8 52.5 Self-employed (% total employment) 31.9 33.5 31.3 31.2 30.3 Male 32.2 34.0 32.0 31.5 30.5 Female 31.5 33.0 30.4 30.9 30.1 Part-time employment (% total employment) 10.6 10.2 9.7 9.7 9.9 Male 10.2 10.0 9.5 9.2 9.1 Female 11.2 10.5 9.8 10.4 10.8 Fixed term contracts (% total employees) 2.5 2.4 1.8 1.6 1.3 Male 2.9 2.8 2.0 1.7 1.3 Female 2.0 1.9 1.6 1.5 1.2 Source: Eurostat; EU LFS
Individual job characteristics have a significant impact on the incidence of in-work poverty. Eurostat data show poverty is especially higher among workers with fixed term / temporary contract compared to those with permanent contract (20% as against 5% in 2007 and respectively, 22% as against 5% in 2008). Workers holding part-time contracts are also, more exposed to poverty (56% as against 15% for full-time workers in 2007 and respectively, 58% as against 14% in 2008) and the figures are the highest in the EU27.
The same pattern applies to employees not working the entire year prior to the survey (27% in- work at risk of poverty rate for those working less than full year as against 18% for those working full year in 2007 and respectively, 32% as against 17% in 2008).
Also in 2008, whilst 18% of the employed population had an income below the national poverty line, the in-work poverty risk for the unemployed was 43% (highest in the EU).
At-risk-of poverty rate by labour status (%), 200812
Employed Temporary contract Unemployed Other inactive Total Permanent contract EU27 7 5p 13p 44p 27p RO 18 5 22 43 32 Source: Eurostat p: provisional
The self-employed are also faced with a much higher risk of poverty compared to the salaried employees (39.3% as against 3.3% in 2007). In the case of the self-employed, a certain underestimation of income needs to be considered, especially when it is self assessed; in which case the higher in-work poverty rate could be attributed to data quality aspects. In Romania, it could be also related to the high number of self-employed working poor in the agricultural sector.
11 Romania in figures 2009; the National Statistics Institute 12 http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-10-009/EN/KS-SF-10-009-EN.PDF http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-EP-09-001/EN/KS-EP-09-001-EN.PDF
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At risk of poverty rate by employment status (%)
2000 2001 2002 2003 2004 2005 2006 2007 Employed 5,0 3,8 3,7 3,3 4,2 4,4 3,9 3,3 Self-employed 29,8 32,8 34,4 33,7 32,7 33,4 37,4 39,9 Source: Eurostat; EU LFS
According to occupational status, the unpaid family workers come to add to the usual categories of employee, employer and self-employed person. The incidence of unpaid work is most common in the area of subsistence agriculture in Romania. In 2006, agriculture accounted for about 30.6% of total employment with self-employed workers and unpaid family workers representing a large part of it. Considering the definition of the unpaid family worker13, the differentiation between self- employed workers and unpaid family workers in terms of remuneration is not very obvious in Romania’s subsistence agriculture; commonly, statistics include the agricultural workers under ‘population occupied in agriculture’ though, most of them are neither employers nor employees.
Whether working full- or part-time, a large proportion of those in employment work some kind of atypical or irregular hours (shift work, work at weekends, evenings or nights). More than a quarter of all persons in employment worked on a Saturday in the EU 27 in 2007, and a share of 36.8% of the working population in Romania (2008).
Population in employment, working during anti-social hours, 2008 (%) (1)
Working shifts Working on a Working on a Working at night Working in the Saturday Sunday evening EU27 17.7 27.7 13.5 7.6 20.1 RO 25.3 36.8 18.3 6.0 20.0 Source: Eurostat (1) EU 27, 2007
1.9. Undeclared work
Current estimates of undeclared work place it at 16-21% of GDP with no apparent change in the prevalence of undeclared work14.
Atypical forms of employment in Romania view persons working without employment contract or labour agreement; these accounted for over 33.7% of all employment in 2007, which stands for a number of 3,156,089 persons, down from the 3,462,288 persons 37.5% of total employment respectively, in 2003.
13 According to the definition used by the National Statistics Institute, the unpaid family worker works in a family economic unit managed by a member of the family and receives no remuneration either in the form of wage or in kind; if several people in a household work on the family farm, one of them – most often the head of the household – is considered to be self-employed, while the rest are unpaid family workers. 14 European Employment Observatory Review: Spring 2007 http://www.eu-employment-observatory.net/resources/reviews/EN-ReviewSpring07.pdf
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Employed persons, with employment with other types of without any labour total of which (%):* contract labour agreements contract or agreement 2003 2007 2003 2007 2003 2007 2003 2007 Total, of which: 9,222,508 9,353,326 61.7 65.8 0.8 0.5 37.5 33.7 Male 5,056,735 5,116,296 62.3 65.4 0.9 0.6 36.8 34.0 Female 4,165,773 4,237,030 60.8 66.2 0.7 0.3 38.5 33.4 Urban 4,661,597 5,072,543 90.8 91.5 0.8 0.4 8.4 8.1 Rural 4,560,911 4,280,783 31.8 35.4 0.8 0.6 67.3 64.1 Source: National Institute of Statistics, Bucharest, 2004 and 2008. Household labour force survey; Employment and unemployment
The gender distribution of employment without a formal contract or agreement is relatively balanced; in 2007, 34.6% of the working men, and 33.4% of the working women were not covered by an employment contract or other form of labour agreement.
The Household Labour Force Survey data show notable differences between urban and rural areas: only 8.1% of workers in urban areas had no employment contract or labour agreement, as against 64.1% in the rural area; approximately 80% of the employed persons without a formal contract or agreement are working in agriculture.
1.10. Overtime work and hours of overtime
The average effective annual working time per employed person was 1869.2 hours in 2006, going up from 1837.1 in 2003, 1846.0 in 2004 and 1853.0 in 2005 according to Eurostat (NewCronos).
Although the usual average length of the working week remained roughly the same in 2008 as in 2001 (41.3 hours), with slight fluctuations (41.8 hours in 2002), the overall trend of the working week shows a slight reduction.
In 2008, in Romania, 2.9% (3.3% men and 2.4% women) of the total number of employees give overtime as the main reason for working different actual hours from their usual working hours.
Overtime work and hours of overtime, % of total employees
2005 2006 2007 2008 Total Men Women Total Men Women Total Men Women Total Men Women RO 2.1 2.3 1.8 2.8 3.3 2.2 3.3 3.8 2.6 2.9 3.3 2.4 EU27 5.1 6.0 4.0 5.0 6.1 3.8 5.2 6.2 4.0 : : : Source: Eurostat; EU-LFS; annual averages
1.11. Access to flexitime
The figures for the ‘access to flexitime‘ indicator are low for Romania showing that only 8.7% (2004) of the total number of employees had other working time arrangements than fixed start and end of a working day and are bellow the EU27 average of 29.4% indicator (2004 data).
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Age group 15-64
Total Men Women 2001 2004 2001 2004 2001 2004 EU27 : 31.3 : 33.0 : 29.4 RO : 10.8 : 12.5 : 8.7 Source: Eurostat, EU LFS Ad hoc modules 2001 and 2004
1.12. National indicators and data
The National indicators produced by the Romanian Statistics Institute provide specific information on the working status of individuals and the wages they earn from employment, but these are not analysed in combination with the extent to which they have a poverty-level of income within the household context. Various institutional approaches to poverty, as well as policies, programmes and legal instruments cover the related issues including the working poor though, the extent and characteristics of in-work poverty are not distinctively determined.
The National Statistics Institute publishes the specific indicators for poverty and social exclusion in the sustainable development indicators section (available online). These data include the poverty rate, calculated as the weight of persons with a disposable income below the threshold of 60% of the median disposable income per equivalent adult in the total population. According to the National Statistics Institute latest15 data16, in 2007 the poverty rate in Romania was 18.5% – or 18.3% for men and 18.8% for women. The poverty rate was about five percentage points higher in households where there are dependent children (20.5%) than the poverty rate in households without dependent children (15.4%). The National Statistics Institute statistics do not elaborate on the occupational status of these individuals.
Each year in October, the National Institute of Statistics conducts a survey, based on samples from various industries; it determines the distribution of workers by wage-group in view of various criteria including the gender, social class and occupational category or economic sector17. The representative sample for the October 2006 survey (available in printed edition, Romanian language) included 17,881 companies hiring four or more workers. The analysis shows the proportion of Romanian employees who work at least 22 days a month and receive gross pay at / below the national minimum wage increased from 5.4% in 1999 to 8.4% in 2006. The proportion of employees in this category differs by economic activity sector, gender and company administration type – the highest proportion of employees earning the minimum wage or less were found in the sectors: hotels and restaurants (at 23.4% in 2006 compared with 21.4% in 1999); retail/trade (at 21.3% in 2006 compared with 18.6% in 1999); industry (at 12.4% in 2006 compared with 19.9% in 1999); real estate (at 12% in both 2006 and 1999); and public administration (at 10.2% in 2006 compared with 0.1% in 1999).
As regards the incidence of immigration, the Labour Inspection Office data indicate in 2006, there were 8,659 work permits on record, as against 1,920 in 2000; the share of foreign workers represented 0.1% of total employment, compared to 0.02% in 2000. Data are not available to allow comparison of the wage levels or salary growth tendency for migrant workers.
15 Webpage accessed April 2010. 16 http://www.insse.ro/cms/files/Web_IDD_BD/index.htm 17 Working poor in Europe – Romania; http://www.eurofound.europa.eu/ewco/2008/01/RO0801019I.htm
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2. Main causes of in-work poverty and labour market segmentation
Overall, national research on the working poor in Romania is limited and existing studies do not specifically address this topic although, the working poor are referred to in the framework of more general studies on poverty, employment, inequality or social exclusion. The research plan elaborated by the Ministry of Labour, Family and Social Protection for the period 2009-2011 (with a budget of 11,090 thousand Lei) views studies on various topics including:
Study on the implementation of measures for achieving the objectives established by the Lisbon strategy;
Study on the development of care facilities for dependent family members – an essential factor in reconciling work and family life;
Impact assessment of the legislation on heating allowances on the living conditions of the beneficiaries – Recommendations;
Study on the active inclusion of the youth – opportunities and risks;
Study on the active inclusion of people with mental health problems;
Impact assessment of the measures and programmes targeting the social inclusion of the elderly;
Impact assessment of family policies on the quality of life;
Study on the fight against discrimination and promoting equal opportunities – measures and programmes implemented in Romania.
The studies conducted together with the World Bank mainly look at poverty but also provide insights into the situation of the working poor.
The World Bank report, Romania: Poverty Assessment, published in November 200718 is a joint work prepared with the Ministry of Labour, Family and Social Protection, the National Statistics Institute and the International Bank for Reconstruction and Development (under the first phase - financial year 2007 - of the Analytical and Advisory Assistance Program on Poverty Monitoring in Romania) and contains detailed information concerning the geographical area of residence, social status, age and gender, level of training, occupation of the poor population. The report showed the at-risk-of-poverty rate, determined according to Eurostat methodology, varied significantly depending on the individual social and occupational status (i.e. in 2006, the at-risk-of- poverty rate for employed persons was 3.9%, while it stood at 37.5% for self-employed persons - including agriculture, going up to 36.9% for unemployed people, and totalling 15.1% for pensioners whilst the national average which includes all segments of the population was 18.6%). The report also showed that informal employment especially in the agricultural sector and poverty
18 Report No. 40120-RO - Romania: Poverty Assessment Analytical and Advisory Assistance Program: First Phase Report, Fiscal Year 2007 http://siteresources.worldbank.org/INTROMANIA/Resources/RO_Pov_AAA_Phase_1_November_2007.pdf
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are interconnected. The 2006 Household Budget Survey data suggest the incidence of poverty is higher among self-employed adults in agriculture with 32% of them being poor.
The 2008 World Bank Report19 on Labour Market Vulnerabilities discusses how (excessive) labour market regulations, aging and (inadequate) education outcomes jointly contribute to low labour force participation rates, long-term unemployment and limited movement of labour across different sectors. Since certain segments of the labour force are especially immobile (i.e. older workers and those with low levels of schooling), some households only benefit marginally from economic growth in Romania. The Report analyses documents and interprets employment and poverty trends over time, providing a basis for policy directions to improve labour market outcomes in Romania.
An accompanying working paper20 to this Report examines, by using data from the Family Budget Survey, how alternative definitions alter the size of the working poor population. The analysis is based on a broad definition of the working poor that counts a household as poor if its consumption/income falls below the total absolute/relative national poverty line and as working if it includes at least one employed member (self-asserted employed in the previous month/worked at least one hour in the previous week). At the individual level, it analyses the job characteristics of the working poor. At the household level, it examines the demographic characteristics of the working poor and compares those to the demographics of poor households that do not work and to those of non-poor household that do work. The use and impact of social protection benefits for working poor households are further analysed and the geographical distribution of working poor and working poor households are also examined. The study findings indicate in Romania, the majority of the poor are working poor. Thus, the work effort of the poor is comparable with that of the non-poor, but working poor hold less attractive and less predictable jobs, working for less money or in exchange of in-kind earnings, for less benefits (for one, without paid social contributions). The study concludes the employed mostly exposed to the risk of being working poor are in particular those cumulating:
flexible (atypical) forms of work: self-employed, no labour contract, short-tem contract etc., which are more insecure and precarious than the typical employment;
active in the economic sectors with the highest risk of informal economy: agriculture, construction, trade, tourism and catering;
unskilled and poorly educated;
location in the least developed areas of the country: villages and small towns from the Eastern and Southern regions.
When the ‘Romania Partnership Strategy for the Period 2009–2013’ was launched in mid July 2009, the World Bank stated that the groups most vulnerable to poverty were living in rural areas, where 75% of poor persons lived. Similarly, children face a higher risk of poverty (particularly those coming from large families), jobless households, young people, rural workers families or the Roma community.
19 Report No. 47487-RO Romania, Poverty Monitoring Analytical and Advisory Assistance Program, October 15, 2008, Labour Market Vulnerabilities. 20 Working Poor in Romania - “Are the most vulnerable protected?” by Manuela Sofia Stănculescu, Institute for the Study of the Quality of Life.
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In the main, Eurostat data come to confirm the findings of existing studies pointing out to the fact that in-work poverty combines individual and household characteristics with the important risk factors including: low education, having a temporary contract, working part-time, being a lone parent. Considering the definition of in-work poverty (a working individual in a poor household) when everything else is being equivalent, the risk of in-work poverty will increase function of the elements that make the household poorer (less work and pay, more dependents).
In general, the statistical data concerning the working poor in Romania show higher (for certain aspects the highest) figures compared to EU averages and other EU countries. 18% of the working people in Romania are at risk of poverty as against 8% the EU27 average in 2008. People in employment are less exposed to the risk of poverty compared to other groups, though they represent a large share of those at risk of poverty, since a large part of the adult population of working age (15-64 years) is at work (59%). Unemployed people face the highest risk of poverty with a rate of 43% in 2008, followed by others not in work, that are recorded as being economically inactive (32%).
Gender is an important factor. The statistics show that women in employment are less likely than men to be working poor. Gender differences regarding the incidence of working poor indicate 19% of the employed men and 16% of women employees were poor in 2008. However, the figures do not reflect the actual situation of women in the labour market (women in work tend to be in a more vulnerable situation compared to men) and may hide the fact that women in employment are more exposed to the risk of poverty than men when considering their household (i.e. single parent) and employment characteristics: higher exposure to part-time work (10.8% for women compared to 9.1% for men in 2008), low paid work, gender segregation in terms of occupations and wages, different career patterns. Also, women at risk of poverty are less likely to work (low qualification and high number of dependants in their care).
Despite existing legislation on equal pay for equal work, on the average, women earn less than men which is only in part due to directly unfair treatment. The gender pay gap (9% in 2008 down from 12.7% in 2007) is linked to a number of complex causes which are frequently interrelated: the undervaluing of women’s work, the labour market segregation (as women compared to men tend to work in different occupations and sectors such as agriculture, light industry, services and trade etc.), culture and education which maintain gender stereotypes (with women and men following traditional training or career models) and problems in balancing work and private life. The gender pay gap is the consequence of all these factors and inequalities in the labour market. In reality, the difference in wages still persists although the principle of equal pay for women and men applies to work of equal value, as it is difficult to identify direct / indirect gender wage discrimination or to interfere in internal pay formation in different companies.
When considering the structure of employed population by gender and employment status and, on the other hand, by gender and groups of occupations, it is more probable for a woman to be employed in a low-paid job and requiring lower skills. Thus, although the educational background of women is rather similar to that of men, the latter are better placed on the labour market in terms of well paid jobs and/or promotion opportunities.
In terms of age, younger workers are more vulnerable (with 23% at risk of poverty rate for the 18- 24 age group) than other workers (24% in-work at risk of poverty rate for the age group 55-64); yet, eldest workers are most at risk (43% at risk of poverty rate for those over 65 years in 2008).
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When looking at the educational level of workers, the in-work poverty risk decreases with the level of education. Education is important as the poverty risk is about 3.5 times higher among the workers with lower education as compared to those having post-secondary/tertiary education.
Further than individual characteristics, the incidence of in-work poverty is connected to household characteristics (i.e. the other household members’ economic status). In-work poverty does not refer to the total level of income that a single person obtains but to the overall income of a household –where at least one person works – in connection to the number of people dependent on that household income. Lone parents are particularly vulnerable to in-work poverty as 26% of lone parents who work are poor in Romania (2008). Having children makes singles and to some extent, couples more vulnerable to in-work poverty than the overall population in employment. If households without dependent children show lower in-work poverty risk (14%) when compared to households with children (20%), single people in employment are faced with an in-work poverty risk equal to lone parents (26%).
While both an individual and a household dimension combine to define the working poor, low wage is in essence individual so, the working poor concept differs from the low-wage concept. The proportion of working poor was 18% in 2008 and that of low pay employees was 26.7% of all full-time employees (in 2006).
Having a temporary employment contract (22%) increases the poverty risk compared with holding a permanent contract (5%). In Romania, as across the EU27, temporary and part-time workers were at higher risk of poverty than permanent and fulltime workers with four-fold increases in the risk of poverty between these two categories of workers in 2008. New poverty risks amongst the population in employment view the rise in atypical and insecure work patterns and growing polarity between low/unskilled and high-skilled work on the labour market. Part-time work is associated with a higher rate of poverty risk (58%) compared with full-time work (14%). In Romania, part-time employment is much lower than EU average so, even if employees working part-time are more vulnerable to in-work poverty, their share among the working poor is relatively low. Too strict regulations could explain the low prevalence of part-time work in Romania thus, driving individuals in the direction of informal work instead. On the other hand, non-standard / insecure types of employment may cause a higher number of persons being excluded from the labour market or lead to inactivity rather than facilitating the transition to standard forms of employment.
A large proportion of people in employment work some kind of uncommon / irregular hours (shift work, work at weekends, evenings or nights). In Romania 25.3% of those employed worked shifts, 36.8% worked on Saturdays and 18.3% worked on a Sunday during 2008. Atypical working hours, night or shift work may generate difficulties in maintaining social contacts and may as well lead to health disorders such as altered sleeping and eating routine (i.e. as in the case of many low wage workers that take a second job).
The in-work poverty risk is over ten times higher among self-employed persons in Romania when compared to employees: 39.9% as against only 3.3% (in 2007). However, the data on self- employed people are less reliable owing to underreporting and income variations.
There are insufficient data to quantify the prevalence of undeclared work in Romania or to assess the impact of measures proposed to reduce it. Current estimates21 on the prevalence of
21 European Employment Observatory Review: Spring 2007 http://www.eu-employment-observatory.net/resources/reviews/EN-ReviewSpring07.pdf
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undeclared work range from 16% to 21% share of Gross Domestic Product according to the European Employment Observatory Review: Spring 2007. The pattern has not changed since 2004.
The risk of being poor is considered to be much higher among people engaged in undeclared work although, the correspondence between undeclared work and the working poor is rather uncertain. People in the informal economy are more likely to be among the working poor as this employment circumstance usually implies poor working conditions and low pay. Improved data collection would allow for better understanding of the underlying links between informal employment and poverty.
Informal employment in Romania was prompted by the high payroll taxes which mounted at above 50% in 1999 and declined modestly to around 47% in 2007. When payroll taxes significantly increased in 1998 and 1999, informal employment also increased; this combination of high taxes and high informal-sector-employment has negative effects on living standards. For employers, the informal sector often means limited access to credit, markets, information and human capital with effects on productivity. For employees, informal work means exclusion from social / workplace benefits and risk prevention measures that are normally available with formal employment. Informal employment as such or in combination with other activities appears to be an important living strategy for many households, as it helps to supplement income from other sources, though it involves potential risks related to the lack of health and pension coverage, unemployment and insecurity.
Among certain sectors of the economy, the dominance of the working poor in subsistence agriculture is specific for Romania. It is estimated22 that about two million people in the Romanian economy are working in and living on subsistence agriculture, and can therefore be termed as ‘working poor’. According to data contained in the analysis of Social Risks and Inequities in Romania, September 2009 (Ministry of Labour, Family and Social Protection, the Presidential Commission for the Analysis of the Social and Demographic Risks), the at risk of poverty rate among self-employed was 39.9% and their weight in the total poor represented 28.8%; out of these, among agricultural workers the risk of poverty was 43.6% whilst they make up 22% of the total poor (2007 data).
In 2005, agriculture accounted for approximately 32% of total employment. Out of over 2.9 million people working in agriculture, 1.5 million were self-employed workers and 1.24 million were unpaid family workers. The prevalence of unpaid work is most common in the area of subsistence agriculture in Romania.
In relation to the occupational status, the employment structures include unpaid family workers in addition to the usual categories of employee, employer and self-employed person. This category of workers is defined by the Household Labour Force Survey, conducted annually by the National Statistics Institute as follows: ‘the unpaid family worker works in a household managed by a family member / relative and receives no remuneration either in the form of wage or in kind. When a number of people in a household work on the family farm, one of them – most often the head of the household – is considered to be self-employed, while the others are unpaid family workers’. In the context of the National Statistics Institute definition of the unpaid family worker, the boundary line between self-employed workers and unpaid family workers in terms of remuneration is not very apparent in Romanian subsistence agriculture. In other words, according to the data, 93.7%
22 Working poor in Europe – Romania http://www.eurofound.europa.eu/ewco/studies/tn0910026s/ro0910029q.htm
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of farmers had neither employee nor employer status and most probably, many of them were exposed to the risk of poverty.
Until July 2007, a number of 15,965 foreign persons requested asylum in Romania, of which 2,723 were granted a form of protection (75.6% males). The data from the Romanian Immigration Office show that among the foreign persons who obtained a type of protection in Romania, the men participate more actively in the economic, social and cultural life of the Romanian society. 69% of the women are housekeepers and never tried to find a job. (Source: 2008 Social Inclusion Progress Monitoring Report). Almost 60% of the refugees coming to Romania have no professional experience which decreases their chances to integrate on the labour market (Source: The Resources Centre for Ethnic and cultural Diversity, Unknown people by our side, Marian Chiriac, Monica Robotin, 2006)
The 2004 and subsequent 2007-2010 National Strategy on immigration were intended to bring in line the national legislation with the community standards, at a time when, as a new EU member state, Romania turned from a transit country to a country of destination for migrants. The Strategy sets selection criteria for migrants, encouraging investment and job creation in Romania and also establishes the selection criteria for applicants seeking education in Romania. The Strategy ensures the correspondence between the Romanian labour market legislation and the admission of migrants. Refugees benefit from legal protection in Romania and are granted free access on the Romanian labour market and entitlement to receive social insurance benefits (i.e. unemployment, health benefits).
3. Presentation and analysis of policies
The policies addressing the working poor are, to a certain extent, interlinked with policies aiming to combat poverty and social exclusion, including those related to the social welfare system. In the form of various transfer payments and social benefits, these policies also tackle in-work poverty being complemented by fiscal measures, such as in-work benefits or tax credits paid to those with earnings below a certain level, labour market policies such as minimum wages, unemployment benefits, unemployment assistance and start-up benefits, or a combination of all these measures. The main challenges for the labour market identified by the 2008-2010 National Strategy Report on Social Protection and Social Inclusion view the effects of the economic restructuring process, low participation of youth and other vulnerable groups on the labour market, the significant number of women and men occupied in agriculture and the human resources quality level. The national priorities in the employment field for the next period include: promoting labour force adaptability, continuous learning and developing process, fighting against structural unemployment, promoting social cohesion.
Reducing poverty is one of the main objectives of the Governing Program for the period 2009– 2012. The policies to eliminate and prevent poverty view: decreasing child poverty and ending the intergenerational transfer of poverty by preventive measures and by supporting families with children; increasing efforts to fight discrimination of vulnerable groups; improving access to the labour market and increasing the employment rates and employability of disabled jobseekers and groups at risk of social exclusion. Priorities also view access to employment support, education and integration in the labour market, access to public services and development of human capital.
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Several measures have already been put into practice aimed at fighting poverty and social exclusion. The set up, in 2006, of the Social Inspection, the National Agency for Social Benefits, the Social Observatory and the Social Inclusion Commission marked important steps on the way for the strategic planning on social inclusion issues. The Social Observatory elaborates reports on poverty and social exclusion developments including recommendations on ways to improve the situation of vulnerable groups.
The National Employment Agency continues the existing measures contained in the National Strategies for Employment and related Action Plans to stimulate employment (job mediation, professional training programmes, further developing labour legislation to encourage employers to recruit persons at risk of social exclusion, stimulating job creation in rural areas etc.).
The 2005-2010 Short and Medium-Term Strategy on Ongoing Professional Training sets the basis of a structured system for ongoing professional training that is transparent and flexible, adequately funded, promotes the involvement of the social partners and that is to ensure the development in terms of adaptability and mobility of the labour force, lifelong learning; in the same time it takes into account the economic restructuring and alignment with the European Union markets. The target groups include persons that are: socially excluded, in search of a job, living in the rural areas, at risk of becoming unemployed or at risk of losing the job because of lacking the adequate skills required on the labour market.
The 2008-2010 National Programme to promote youth employment is aimed at improving the administrative capacity of public and social partners in designing employment measures targeted at youth, increasing the effectiveness of measures to attract young people into work and raising public awareness of the challenges resulting from the difficulties faced by young people on the labour market.
For the programming period 2007-2013, the Sectoral Operational Program for the Development of Human Resources finances seven domains. Each Priority Axis includes sub- domains known as Major Areas of Intervention (MAI). The Priority Axis 6 on Promoting Social Inclusion finances projects aimed at promoting the social inclusion, preventing exclusion from the labour market and support for the labour market integration of vulnerable groups in terms of access to education and employment. The Main Areas of Intervention include: MAI 6.1 Development of the social economy; MAI 6.2 Improving the access and participation on the labour market for vulnerable groups; MAI 6.3 Promoting equal opportunities on the labour market; MAI 6.4 Transnational initiatives for an inclusive labour market.
Within the 2007-2013 Sectoral Operational Program on Human Resources Development, the Ministry of Labour, Family and Social Protection is currently implementing two strategic projects (ESF funding), with impact in the employment area. One of the projects, ‘The Social economy: an innovative model promoting the active social inclusion of persons in difficulty’ with the overall objective to develop a unitary, efficient and modern social economy system contributing to the improvement of the quality of life of the Romanian citizens by promoting the active inclusion of the vulnerable groups, both on the labour market and in the social life. Another project, ‘Equal opportunities on the labour market’ aims to promote the social inclusion of disabled persons by facilitating the access to education and vocational training services and improving their employment prospects.
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3.1. In-work poverty
The emphasis, at European level, on the objective to fight poverty and social exclusion and on the quality of employment contributed to bringing the working poor in a central position in the interface between the OMC on poverty and social exclusion and the growth and jobs strategy. It is generally acknowledged that employment not only decreases the risk of poverty, but also, that of social exclusion, as a job means social integration; though, the in-work poverty points out the fact that even if employment is a good way to avoid poverty it is, in some circumstances, insufficient. Various policy measures developed in Romania take into account the individual and the household dimensions of in-work poverty in agreement with the definitions of the working poor in the international literature which define poverty by considering the intensity and work status of an individual but also the household where the worker lives and its total income. Assistance programmes combine social protection transfers, protecting the income of the individual worker and the effect of the tax systems with provision of re-/training opportunities.
3.1.1. The low net wage
The minimum wage policy plays an essential role in fighting the risk of poverty among employed persons in Romania and is part of various policies, programmes and legislation to address poverty and to deal with the associated issues,.
3.1.1.1. The minimum wage
In Romania, there is a legal framework setting up the national minimum wage as well as options to establish / negotiate financial compensation for the loss of employment. The reference basis to calculate the national minimum wage is regularly resized, as a basis for negotiating the collective employment agreements. The legal minimum wage is annually set through government decision and in some cases is indexed according to the inflation rate, as was the case during the high inflation years of the early transition. The official threshold is considered a minimum reference level. Social partners agree on a negotiated threshold, usually higher than the government reference. The minimum wage is compulsory and a large number of people are working for it.
In some cases, employees that appear on records as minimum wage earners also receive “pocket” or “envelope” payments on top of it as a way to avoid high labour taxation and a common form of informal employment. A ladder of minimum compulsory wage thresholds was introduced in 2007; it was related to the educational attainment required for the respective position and, was expected to tackle the understatement of incomes in the case of better educated employees, prevailing among SMEs (educated employees were officially paid the minimum wage, plus an additional but undeclared wage). Information campaigns have also been initiated to tackle undeclared work (i.e. the campaign to warn against undeclared work run by the National Tax Collection Office).
The minimum wage is a means to prevent poverty and reduce income inequalities though, in Romania the minimum wage only provides a modest safety net against poverty and indebtedness as many workers earning the minimum salary are reliant on additional benefits (i.e. financial aid to cover the house heating costs during the winter, complementary family allowances). Furthermore, the difference in the standard of living between workers earning the minimum salary and those living on social / unemployment benefits is not significant with some preferring dependency on social aid to getting employment. Also, employers might see the introduction / increase of the
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minimum wage as a burden and decide to fire those low productive workers whose efficiency would not reach the minimum wage level.
The provisions on the minimum income guarantee, (Law No. 416/2001, with subsequent amendments and additions) are one of the Romanian government’s main measures to fight poverty and social exclusion thus, preventing severe deterioration of the standard of living and ensuring the social integration of people in difficulty. Romania’s 2008–2010 National Strategy Report on Social Protection and Social Inclusion integrates the Minimum Income Guarantee as one of the three strands of the active inclusion policies: income support, inclusive labour market and access to quality services. The guaranteed minimum income has been correlated with other types of income (i.e. the national minimum wage and the unemployment benefit) and is calculated in relation with the structure / members of each household.
One important challenge is to further develop the monitoring and assessment mechanisms for increasing the effectiveness of the guaranteed minimum income.
Compared to previous social assistance schemes, the Minimum Income Guarantee Law introduces provisions to support individual efforts in overcoming the socially assisted condition and accessing employment. An increase of 15% in the amount of family social aid is granted to single persons and families having a net monthly income bellow the minimum income guarantee level on the condition that, at least one family member provides evidence of being employed through an individual work contract, having a public employee status or carrying out an activity based on salaried income. Most recipients of this type of support would still live in poverty as the safety net it provides is barely adequate.
More recent policy actions include:
the increase of the guaranteed minimum income by 15% as of July 2009;
an extension of the unemployment benefit period by three months, as well as an exemption from taxes for technical unemployment benefit (when employers temporarily suspend workers);
50% co-funding towards continuing vocational training for the unemployed people and employees;
the increase in the pension point in October 2008 and legislation setting up the minimum welfare pension starting April 2009;
consultation with the social partners on matters related to pay increases and the law regarding standard principles of wage formation.
3.1.1.2. Tax credits for low-wage/income workers.
Taxes apply to all wages and other related income. Certain types of income are exempted from taxes. Taxable income is calculated after deducting allowable expenses, union duties and contributions towards private pensions. The Fiscal Code includes provisions on allowances for children and personal deductions for the taxable income of employees having dependents. The personal deductions are granted to individuals having a gross monthly income up to/including 1000 lei as follows:
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for tax payers with no dependents – 250 Lei; for tax payers with one dependent – 350 Lei; for tax payers with two dependents – 450 Lei; for tax payers with three dependents– 550 Lei; for tax payers with four or more dependents – 650 Lei.
In 2005 the government introduced the flat rate income tax (of 16%) for individual and corporate income. The social security contribution levels have been gradually decreasing since 2003. The flat rate income tax and reductions in the social security contribution levels are included in the national strategies and programming documents as key measures to tackle undeclared work. However, no evaluation on the impact of these measures has been undertaken; in the absence of accurate assessments, the impact of the flat rate income tax and the social security regime on the prevalence of undeclared work remains uncertain.
3.1.1.3. In-work (top-up) benefits
The Romanian social assistance system includes a number of cash and in-kind benefits, and services. The social assistance cash benefits system in Romania comprises five main pillars: children and family, disability and illness, housing utilities (heating allowances), minimum income schemes and “merit-based” benefits (allowances for war veterans, for heroes, etc.). Social benefits are made available through various programmes.
Employed persons may benefit from: allowance for newly born children, parental allowance, incentives for parents who opt to resume work while they are entitled to receive parental leave benefit, support allowance for single-parent family and foster-family allowance, gifts such as newborn clothing, nursery vouchers, or complementary family allowance. Also, a house heating allowance programme for the winter months and a support programme for newly married couples including a financial contribution of €200 upon the first marriage are available.
Access to social houses (Law 114/1996 on housing) views persons on low incomes (net monthly income per family member bellow 20% of the minimum income level). The social housing rent is subsidised from the local budgets. Certain groups benefit from general policies on preventing and fighting the housing exclusion that view the legal right to social assistance for:
young people - by encouraging banks to provide long-term special loans, or by supporting local authorities to build houses for young families with low/subsidised prices;
The local councils could support from special deposits the construction of housing units having the building areas provided for by the law, controlling the sale price, in order to facilitate the access to property for certain categories of persons, observing the following priority order:
married young people, each of whom are, at the date of contracting the housing, below 35 years of age;
skilled persons from agriculture, education, health, public administration and cults sectors, establishing their residence in the rural area;
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Despite various governmental programmes, housing remains a critical issue both in terms of availability and affordability.
Social expenses sustained by an employer for the benefit of employees (i.e., support for birth/death/incurable disease, expenses towards the proper functioning of certain units or activities of the taxpayers such as kindergartens, canteens, medical units / health care services, sports centres, sponsorship for schools, gifts in cash or in kind granted on Christmas/Easter holidays to the employees' underage children, gifts in cash or in kind granted to the female employees, the cost for treatment and respite of own employees) are deductible up to the limit of 2 percent of the employer’s salary fund (previously 1.5 percent of the salary fund). Other benefits include:
daily allowances for domestic and foreign travel expenses up to the level of 2.5 times the ceiling set for public institutions
voluntary health insurance premiums within the limit of the Lei equivalent of 250 Euro per participant during a fiscal year
meal vouchers (Law 142/1998), gift vouchers (granted according to Law 193/2006).
The World Bank’s 2009-2013 Country Partnership Strategy for Romania stressed that the current social protection scheme targeting poverty were not effective and social protection spending per capita in Romania were the lowest in European Union23.
The amounts allocated to schemes targeting poverty are very low, when reporting them to Gross Domestic Product, or to the actual needs. “The required budget to meet the financial assistance demand to battle chronic poverty and the financial aid offered by the government to unemployed people and to people at risk of falling into poverty will remain a difficult challenge, given the restricted room for fiscal manoeuvre”, said the World Bank24.
3.1.2. Low work intensity
For many people, finding a job that offers them career prospects and some stability means moving in and out of the labour market, between different labour force circumstances, or withdrawing from the labour market for a longer period of time. Even those who rapidly go from school to employment (as in the case of young people) the employment contract may only be of short period of time and/or with narrow career perspectives. While some of those in insecure/temporary jobs move fast to more secure jobs, others shift between unstable jobs and unemployment or inactivity. The short term perspectives for those in precarious employment are gloomy as, given the effects of the economic crisis they tend to be the first to lose their job and may find it particularly difficult to get another one.
23 International Bank for Reconstruction and Development (IBRD) and International Finance Corporation, Romania Country Partnership Strategy for the Period 2009–2013 (76Kb PDF), June 2009. 24 http://www.wall-street.ro/articol/English-Version/68316/Romania-faces-mounting-poverty-rates-in-2009-World- Bank-says.html
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3.1.2.1. Low work intensity at individual level
Measures to address low work intensity encourage access to vocational training without any form of discrimination – whether related to age, gender, race, ethnicity, or political / religious affiliation. Life-long vocational training is subsequent to the initial training and helps adults either develop the vocational competences they already have or acquire new competences. Free services provided through the employment agencies view:
Provision of information on the labour market and the evolution of occupations and professional counselling; assessment of abilities in view of professional orientation
Job mediation services including information on job vacancies and conditions to access these jobs; organising job fairs / electronic mediation with a view to coordinate job demand and job offer via PC
Training on job searching methods and techniques;
Professional training / re-training courses; pre-selection of candidates according to their training abilities, expertise and interests in accordance with the employers’ requirements; facilitating practical / speciality stages
Consultancy and assistance for starting an independent activity or initiating own business; efficient management techniques and methods
Consultancy services; legal / financial advice.
More outreach programmes would be necessary especially, while at-risk youth are still in education and these programmes need to be broadly promoted to ensure that support and effective safety nets are in place, for those that have difficulties in accessing the labour market and integrating into employment.
There is also a need to reinforce access to diplomas and to all professional certification through alternative ways, in particular, by validating the job experience (especially, in the case of older workers who are more reluctant to training for new occupations).
3.1.2.2. Low work intensity at household level
Programmes concerning the reconciliation of the professional and family life are developed with a view to support individual families and several measures are implemented in order to facilitate the reconciliation of parental and professional responsibilities for working mothers, specifically:
encouraging the equal sharing of responsibilities within the family by increasing men’s access to parental leave;
developing more flexible part-time programmes;
expanding child / elderly care services and developing public and private services providing domestic assistance.
Free vocational training and support services are aimed at facilitating the shift from inactivity to activity on the labour market, from house-wife to employee status. The labour legislation includes
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wage incentives to encourage parents to return to work before the end of the parental leave for child upbringing (2 to 3 years in case of a child with disability) and provision of crèche vouchers. Increased focus on developing community services for child and dependent care (elderly, people with disabilities) is a priority measure with a view to reconcile work and family life.
Availability of dependent care services remains a problem and generally, service provision as regards child and long-term care in Romania suffer from regional disparities particularly, from uneven coverage of services and care workers with significant differences between urban and rural. Further development of child and long-term care services is intended to ensure equity of access to care for various groups (age, gender, the socio-economic or geographically disadvantaged).
To ensure a high quality of service provision, the measures include uniform standards and quality assurance mechanisms coupled with legally enforced evaluation / certification methods.
3.2. Labour market segmentation
In line with the integrated guidelines for employment policies in the European Union, the national programming documents in the field of employment (National Employment Strategies, the 2005- 2010 Continuous Vocational Training Strategy) view the improvement in the quality of work and productivity, strengthening the social cohesion, promoting labour market flexibility and employment security, investing in human capital and adjustment of education and vocational training systems.
3.2.1. Job retention and advancement
The existing active labour market policies concentrate on persons in difficult situations and facing labour market exclusion in order to help them re-/integrate on the labour market; these include: professional counselling, job mediation, job fairs, job placement on basis of a solidarity contract (through the employment agency) for a period of up to two years and no less than one year.
Various financial incentives are in place including: incentives to stimulate labour force mobility, financial measures for the graduates (at least 16 years old) of the education institutions and special schools, who are in employment, financial measures for the unemployed finding a job prior to finishing the unemployment stage, job subsidies for people over 45 years.
Short- and medium-term actions to promote youth participation on the labour market include: facilitating the transition from school to work by reorganising/re-adapting and extending information and advisory centres for youth on career guidance (i.e. opportunities and risks on the job market); promoting apprenticeships as an alternative for young people with poor education and no qualification; strengthening links between education and professional training by encouraging mixed partnerships; developing non-formal education/training alternatives to support individual initiatives; implementing existing legal provisions to boost employment of young people (i.e. lower unemployment insurance contributions, wage subsidies, recruitment premiums, vocational retraining schemes, start-up loan facilities for students); focusing on the situation of young people with former special protection through special socio-occupational integration programmes, concluding solidarity agreements and identifying insertion employers.
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Developing the monitoring/impact assessment process would be useful for measuring/increasing the effectiveness of these policy measures in addressing the working poor.
3.2.2. Working conditions and employees friendly flexibility
The small share of part-time workers in Romania constitutes a contrast with EU-27, where part- time employment is prevalent especially among females.
Flexicurity and security measures are meant to support both workers and employers interests by facilitating the worker safe movements inside the labour market, while continuing and improving competitiveness.
With the amendments to the Labour Code (in 2005), the flexibility of the labour market improved as result of reducing the limitations related to the duration and possibility of concluding individual employment contracts; fixed-term employment contracts were rarely used before that. The duration of a fixed-term employment contract was extended from 18 to 24 months in accordance with the new regulations and the option for 3 successive fixed-term employment contracts to be completed in the course of the 24-month interval was introduced.
Among policy measures, the National Reform Program refers to the reconciliation of work and family life without particular emphasis on the issue. However, in order to address instances of precarious employment, including involuntary part-time work and intermittent careers the new Labour Code introduces regulations for atypical forms of work. The new forms of employment contract regulated by the Code include temporary agency work, individual part-time employment contracts (minimum 2 hours per day), employment on fixed-term contracts, regulations on establishing personalised work programmes and home-based work.
Nonetheless, increased action is necessary to effectively address the reduced occurrence of part- time work contracts and still existing rigidity on the Romanian labour market including minimizing the resistance of employers to provide work for women as the most likely leave takers. The four policy components - active labour market, lifelong learning, flexibility and the social security system – need to be combined in a more integrated manner.
Gender equality policies at the place of work are elaborated at national level through the collective work agreement, which specifies aspects related to the women’ protection at the workplace including:
Working time: after the official parental leave (2-3 years) employees are entitled to continue with their previous job. Women who decide not take a parental leave may benefit from reduced working time / flexible working hours with no consequence on their basic salary. Where no child care centres are available, mothers with children aged less than six may work half time, that being equivalent to full-time work for seniority calculation.
Payment system / other pecuniary rights: the principle equal pay for equal work applies to all employees with corresponding educational background and position.
Working conditions: legal provisions exist for women entering the fifth month of pregnancy not to work nightshifts / overtime, travel for business, nor have the workplace changed without their prior consent. In the case of companies employing more than 50 people, if 20% are women, the health and safety committee is to include at least one female representative.
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Work environment: provisions are made for discouraging sexual harassment at the place of work.
Employment policies: in case of personnel reduction, women with children or having less than three years until retirement are to be laid off only as an ultimate option.
Other policies view people with disabilities that may be employed in protected workplaces, specially equipped to ensure safety and making the necessary adjustments so as to eliminate eventual barriers of access. People with disabilities may also work from home, in which case the individual or legal entity employing them must provide transportation to and from the employee’s home of the necessary raw materials and finished products. People with severe or medium disability holding an individual employment contract benefit from special protection rights. The National Authority for People with Disabilities is the responsible institution for the protection of people with disabilities. Nevertheless, people with disabilities are still faced with general accessibility issues which need to be given further attention.
3.2.3. Life-long learning
Lifelong learning and career guidance and counselling, as support services have been a priority in Romania ever since 1991; starting with 2002 (when a new law on unemployment insurance has been enacted to replace the outdated 1991 budgets for active labour market policies) a constant progress has been registered, with vocational training and lifelong learning and accompanying services becoming centre-stage. The Joint Assessment Paper on Employment policies brought increased emphasis on vocational training and lifelong learning as national priorities.
Progress was registered in terms of increased participation in training courses though, the number of persons participating in life long learning is quite low in Romania (1.6% for women and 1.3% for men in 2008 compared to EU27 averages of 10.4% for women and 8.7% for men in the same year).
The active measures implemented by the county and local employment agencies with a view to increase the employment opportunities for job seekers include the provision of free of charge vocational training to the unemployed, those having a refugee status, stateless persons, persons who could not get a job after being repatriated or those released from custody, persons developing activities in the rural area or having an income below the value of the social reference indicator in force; these courses are also open to employees in which case, the trainee or his/her employer shall bear the related costs. The vocational training is ensured for various jobs demanded on the local/county labour market still, options remain limited.
On the duration of the training, the job seekers benefit from theoretical and practical training, teaching materials, safety equipment for the practical stage, free subscription for the public transport (from home to the training unit) for a maximum of 4 trips per month.
Regarding on-the-job qualification courses, a research made by the Corporate Dynamics revealed that in 500 companies with over 20 employees and an active human resources department, the method is considered to be the most efficient in terms of learning according to the Human Resources manager. The study results indicate as the most implemented methods: on-the-job qualification (48.1%), followed by various training courses (21.6%), long term courses and job rotation (6.6% each), project management (2.9%) and e-learning (0.6%). The Corporate
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Dynamics research also showed the way the Romanian companies evaluate their learning needs: 10.2% analyse the training requirements on basis of the firm’s development needs, 18.2% based on staff proposals and 15.4% declare they make no evaluation of the training needs. The study also indicates that in Romania, in 2007, the training budget per employee per year is estimated to be €87. (Source: Romania – National Report on the Development and State of the Art of Adult Learning and Education, 2008).
The data provided by the National Statistics Institute show, between 1996 and 2006, the share of low skilled workers in the total workforce gradually decreased both in terms of number and fraction of total employment (13.5% to 8.0% and 58.7% to 45.4% for urban and rural areas, respectively) in all economic sectors. The main contributing factors include: the economic restructuring, increased competition on the labour market, the development of the educational and vocational training. In general, more female employees compared to men are low skilled (27.6% of all women in employment were low qualified workers as against 22.6% men in 2006); also, in 2006, women represented 50.5% of the low skilled workers and 45.5% of the total employed.
Detailed data on specific training opportunities for the low qualified workers are not available. For total employment, Eurostat data on Continuous vocational training indicate the share of Romanian employees participating in continuous vocational training increased from 8% in 1999 to 17% in 2005 versus 39% to 33% in the EU 25 and EU27 respectively, during the same years.
In the main, the spending for active labour market policies stayed approximately ten times higher compared to the reference base (0.03% of the GDP in 2000) with 0.1% in 2002, 0.13% in 2004, 0.09% in 2006 and 0.05% in 2008. The slightly downward trend registered by the weight of the active labour market policies expenditure in the GDP was caused by the increased GDP growth pace. By contrast, the passive labour market policy spending went from 0.96% of the GDP in 2000 to 0.47% in 2005 (with 0.64%, 0.59%, 0.55% and 0.53% between 2001 and 2004).
On the whole, the weight of active labour market policies in the unemployment insurance budget total expenditure followed an increasing trend (from 2.26% in 2000 to 20.3% in 200825).
3.2.4. Non-discrimination policies and inclusive work environments
In Romania, access to fundamental rights is guaranteed and also provisions are made for setting up measures to prevent and combat social marginalization and to mobilise institutions with duties in the area.
The new Labour Code (2003) prohibits both direct and indirect discrimination. It also, contains essential provisions on equal opportunities, equal treatment of women and men on the labour market (employment, vocational training, career building and working environment). In Romania the principle of equal pay for work of equal value has been a part of the Labour Code since 1972. The Labour Code also includes provisions on positive discrimination for women – i.e. special protection at the workplace for women in special condition (pregnancy etc.).
Law nr.116/2002 on the prevention and fighting the social marginalization contains provisions on guaranteeing the effective access of women and men, especially for youth, to elementary and fundamental rights such as the right to employment, housing, medical assistance,
25 National Employment Agency - 2008 Activity Report.
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education. There are also provisions for setting up measures to prevent and fight social marginalization and to mobilise institutions with duties in the area.
The Romanian National Council for Combating Discrimination is an agency of the Romanian government, established in 2001 (on basis of the Anti-discrimination Law nr. 137/2000 subsequently amended in 2006) and responsible for applying the Romanian and European Union anti-discrimination legislation. The anti-discrimination law covers discrimination based on: race, nationality, ethnicity, language, religion, social category, beliefs, sex, sexual orientation, age, disability, HIV/AIDS status, and any other criteria which restrict human rights, equalities and fundamental liberties. The Council investigates the reported cases of discrimination and rule on whether anti-discrimination laws were breached.
Actions under the priority objective 3 in the National Strategy Report on Social Protection and Social Inclusion to improve the quality of life for the Roma in the 2008-2010 view the development of national programmes targeting the Roma inclusion in the formal economy including through national awareness campaigns promoting anti-discriminating policies.
3.2.5. The role of social partners
Improving the legal and institutional framework concerning the working relations and social dialogue constitutes a priority and the common objective on the 2008-2009 Decent Work Agenda26. This is to be achieved through tripartite consensus and implementing the international labour regulations and European social dialogue best practices including at sectoral level.
The trade unions are autonomous non-profit legal entities active in the area of protecting and promoting collective and individual rights, as well as the social, economic, professional, cultural and sport-related interests of their affiliates. The representatives of the trade unions participate in the negotiation and elaboration of collective labour agreements, principles and criteria, with the public authorities or employers’ associations, as well as in specific social dialogue structures. The employers recognise the workers’ right of to join a trade union, as part of the constitutional rights.
The Ministry of Labour, Family and Social Protection and the national representatives of the social partners signed a Memorandum on the following principles:
Improving the legal and institutional framework concerning working relations and social dialogue in Romania;
Requesting technical assistance from the International Labour Office on amending the legislative package comprising Law 130/1996 on collective work agreements, Law 168/1999 on the management of the work conflicts, Law 54/2003 concerning trade unions and the law concerning employers;
Up to now, the main concern of the trade unions has been to sustain jobs and to negotiate the minimum salary. Another aspect viewed ensuring the collective agreements made provisions for job loss payments in the event of collective dismissals.
26 http://www.mmuncii.ro/ro/articole/0000-00-00/agenda-de-cooperare-privind-munca-decenta-dintre-romania-si- biroul-international-al-muncii-2008--2009-844-articol.html
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In 2008 (July 25), the Romanian government and the social partners signed a tripartite agreement on the increase of the national gross minimum salary over the period 2008–2014. The current economic and financial crisis prevented the observance of the agreed provisions concerning the growth of the minimum wage and the correlation of the national minimum wage and the average salary.
On various occasions the National Trade Unions call rallies / organise strikes with main demands stated by the trade union leaders including the safety of jobs, economic programmes focused on creating new jobs, maintaining the current purchasing power of earnings, increasing the minimum wage (i.e. from Lei 600 or €147 to Lei 800 or €196), an equitable social security system, more affordable prices for basic products and services.
In 2007, the National Trade Union Bloc published the paper ‘Strategies for employment and policies to increase employment for persons with poor or incomplete qualification aged 45 years and over’, within the international project the ‘Labour market inclusion of seniors’ addressing the aged low skilled workers.
The representatives of the National Trade Union Coalition brought into discussion with the authorities (February 2008) the issue of low skilled foreign employees working in Romania, raising awareness on the lack of information for job seekers coming from Moldova Republic, China, or Turkey.
The public-private partnership in the field of social inclusion (authorities, NGOs and economic agents) is constantly developing in Romania; partnership projects are a necessary proviso for the structural funds financing and promoted this practice at national level. A positive aspect in the area of reinforcing equal opportunities views the partnerships set up between various local public authorities with the involvement of the civil society on basis of unitary intervention protocols and common work methodology.
The project “Promotion of dialogue in the field of social inclusion” (Phare 2006) implemented by the Ministry of Labour, Family and Social Protection (in 2009), through regional and national conferences, provided the opportunity for a vast consultation process and dialog on innovative ideas, best practices, exchange of experience. One of the identified challenges was the need to correlate the educational system to the requirements of the labour market and also, to better correlate the activity and duties of different public institutions active in the field of social inclusion. At the same time, the need to focus on developing a more varied range of active inclusion measures on the labour market for persons belonging to vulnerable groups, rather than strictly financial measures was agreed upon by the participants in the debates.
3.2.6. Other forms of in-work support, including health and safety.
Promoting an integrated approach to flexibility and security on the labour market views actions intended to keep the unemployment down whilst continuing the industrial reform and includes measures to further increase the quality of employment and job security by improved health and safety conditions whilst creating opportunities for lifelong learning and providing people with diverse choices.
The progress in the field of labour market regulation, promoting workers’ rights, guaranteeing health and safety at work, marks important steps towards convergence with the European employment framework. The Labour Health and Safety Law (no. 319/2006), applies to all
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workers, except for persons engaged in their own household work although, the implementation of appropriate mechanisms to guarantee labour safety and health on the job needs to be strengthen.
The local labour related institutions are authorised to inspect the working conditions in companies that are registered as tax payers and ensure the legal guidelines are duly incorporated.
Health and safety at work continue to be a national priority. Following consultations between the representatives of the International Labour Office, the Ministry of Labour, Family and Social Protection and the social partners (in 2008), technical assistance from the International Labour Office was requested in view of:
Improving the legal framework concerning health and safety at work and the labour inspection
Increasing the efficiency of the health and safety at work committees
Ratifying the ILO Convention no. 155/1981 concerning the workers health and safety.
3.2.7. Social security rights
The national social security legislation covers the following benefits for employees and the self- employed: maternity and sickness, family benefits, workplace accidents, old-age and invalidity pensions, survivor benefits, unemployment benefits.
Several institutions are involved in the enforcement of social security laws and regulations in Romania:
The Ministry of Labour, Family and Social Protection plays a central role in policy elaboration and adopting legislation; also, in coordinating the institutions responsible for the social security system: the National House of Pensions and Other Social Insurance Rights and the National Employment Agency operate under its jurisdiction.
The National Employment Agency coordinates activities in the field of employment and the social protection and administers the implementation of employment policies. Its main responsibilities view: unemployment prevention and employment stimulation services; provide, professional training courses; job counselling and mediation; drafting the unemployment budget; and administering the unemployment insurance budget.
The National House of Pensions and Other Social Insurance Rights manages the social security benefits distribution including: old age / early retirement pension, work incapacity pension, survivor pension, indemnities for temporary work incapacity, occupational illnesses and work accidents, benefits for illness prevention and work capacity recovery, bereavement benefit.
The Ministry of Public Health and the National Health Insurance House are responsible for the administration of the disability benefits and child-birth related benefits.
The Ministry of Education and Research administers the payment of certain social security benefits (i.e. child allowances);
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Employed persons in Romania may benefit of several types of paid leave as per the Labour Code provisions:
annual paid leave granted to all employees with the minimum length of 20 or 21 working days according to the provisions of the Labour Code and the National Collective Labour Agreement respectively. According to the Labour Code, paid non-working days – not included in the duration of the paid annual leave – are granted in case of special family events as established by law, the collective labour agreement or the internal regulations;
public holidays, established under the labour law and the collective labour agreement that are not included in the duration of the annual paid leave (i.e. January 1, 2; Easter Day and Easter Monday; May 1; December 1; Christmas Day and Boxing Day etc.);
employees are entitled, upon request, to a paid or non-paid vocational training leave;
employees are legally entitled to sick leave and health insurance allowances including: sick leave for temporary work disability; maternity leave, child care leave, maternal risk-related leave, sick leave for illness prevention and recovery.
Eurostat news release 10/2010 - 18 January 2010 on living conditions in 2008 shows 76% of the Romanians can’t afford to pay for one week of holiday.
The low income level of many Romanian workers makes them frequently seek for alternative income sources by working overtime at the main job, or finding a second job; for many, the issue of spare time is low on the priority list. These are widespread characteristics of working time patterns in Romania and involve a specific perspective in terms of balancing work and family life. Furthermore, the low household income level in Romania often, prevents access to specialised care services for dependent people, with effects on the balance between time dedicated to one’s work and family life. Paid personal care and household cleaning/maintenance services, or care for dependent members are inaccessible for many people/families because of inadequate financial resources. Unpaid work is essential to ensure an adequate living standard and, by providing services that would otherwise have to be paid for, represents a significant contribution towards the household well-being.
The availability of free time is important as lack of leisure and recreational activities results in individual’s health deterioration with adverse impact on the social wellbeing. The quality of leisure time is important and existing data show men and women use leisure time in different ways. The policy directives to address in-work/poverty reduction, job generation and welfare promotion need to also take into account the information on the amount of time spent on interconnecting the economic work of the poor (men and women), formal / informal and household work, who does this work and how it is integrated with other activities and commitments (i.e. paid work or caring for children/elderly/dependent family members). Monitoring paid work is important in addressing the work and life reconciliation issues (i.e. time spent at work as opposed to leisure time); and also, for obtaining useful information on the time-pattern of different activities related to work, household/personal needs and leisure, the impact of shift-work on the time spent within the family, or the amount of paid work that is taken home.
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4. Final remarks
Despite several policy approaches the labour market is still characterised by low employment rates among youth and older workers, low geographical and occupational mobility, high long-term unemployment rate. Also, there is a low participation in education and training programmes, including life-long learning. In addition, the effects of the economic slowdown, that come to add to the already existing problems on the labour market, need to be considered and appropriate measures are necessary as the in-work poverty risk is likely to increase on the background of the current financial and economic crisis when businesses initiate different measures to reduce wage costs while maintaining jobs by reducing the working hours, giving extended leave or simply cutting wages. In this recession, it would be difficult for many employees to stay above the poverty line if worked fewer hours, even if it meant holding onto their jobs.
As concluded in the working paper The Working Poor in Romania (accompanying the 2008 World Bank Report on Labour Market Vulnerabilities), despite several years of economic growth and the implementation of active labour market policies, increasing segmentation of the labour market between low / unskilled workers and high-skilled workers and the rising gap between regions interconnect, resulting in a structural pattern that creates social exclusion. The long-term consequences of in-work poverty and social exclusion have to be addressed, as it does not only affect the adults, but also the children and elderly living in the working poor families and being reliant on their parents / children incomes. The research shows 2.7 million children live in working poor households, out of which 2.16 million belong to households of self-employed in agriculture located in the rural areas. Some of these inequities can be counterbalanced, through social protection programs. In recent years, the national social protection system has made progress in providing assistance, though its capacity to efficiently / specifically protect the most vulnerable groups of population needs to be further strengthened. The research includes some policy recommendations in view of:
preventing in-work poverty in association with fighting the child poverty;
continuously improving the system of vocational education and training - it would be important to make sure school drop-out receives individual attention from the education authorities to ensure they remain in the system, or re-connect with education by completing an upper secondary diploma or corresponding degree, if possible with an on-the-job training element;
increasing effectiveness of the life-long learning programs, particularly in the areas and for the groups most exposed to the risk of in-work poverty. The necessary framework and resources are made available through the Sectoral Operational Program for Human Resources Development;
improving operation of labour market organisations (temporary work agencies, regulations on atypical forms of work etc.) related to increasing flexibility, from the flexicurity perspective in connection with institutions and actors involved in running the education / social programs.
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