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Decent Work Policy options for the Romanian economy Working Paper No. 105 Ciprian Domnisoru* Policy Integration Department International Labour Office Geneva July 2012 Working papers are preliminary documents circulated to stimulate discussion and obtain comments * The author is a doctoral student at the Heinz College, Carnegie Mellon University. I would like to thank Robert Kyloh and Susan Hayter for their comments. A first draft of this report was presented at the 53rd Decent Work Forum of the Policy Integration Department of the International Labour Organization, held in Geneva on 27 July 2011. I thank its participants for their valuable comments and questions. I remain responsible for any error or omission. Copyright © International Labour Organization 2012 First published 2012 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country. Domnisoru, Ciprian ISBN: 978-92- (print); 978-92-2- (web pdf) International Labour Office; Policy Integration Dept 13.01.3 ILO Cataloguing in Publication Data The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications and electronic products can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by email: [email protected] Visit our website: www.ilo.org/publns Printed in Switzerland Abstract : This paper analyses the determinants of the low employment rate in Romania and current policies and legislative changes aiming to increase employment, as they relate to the poverty reduction targets in the Europe 2020 agenda. I argue that the current policy option followed by Romanian authorities - increasing labour market flexibility - is based on a misdiagnosis of low employment, particularly of the effects of the tax wedge on labour, workforce migration, overtime use and employer preference for standard forms of employment on the overall employment rate. Considering that workforce migration will continue to put pressure on domestic employment, business-friendly policies and even high GDP growth may not be sufficient to achieve an increase in employment. An alternative path for Romanian authorities is to adopt a series of policies inspired from the ILO's Decent Work Agenda. These policies target an increase in quality employment that would combine job growth goals with poverty reduction targets. The analysis follows the four core objectives of the Decent Work Agenda: creating jobs, guaranteeing rights at work, extending social protection and promoting dialogue and conflict resolution. Recommendations include increasing compensation in case of lost income, increasing spending for active labour market policies, rural education, public childcare and healthcare, strengthening the capacity of labour inspectorates and reviewing the recent legislative changes that hinder union activity and social dialogue. JEL classification : E24; J88; O15. Resumé : Cet article analyse les déterminants du faible taux d'emploi observé en Roumanie ainsi que les politiques et modifications législatives actuelles visant à améliorer la situation de l'emploi, dans la mesure où celles-ci ont un rapport avec les objectifs de réduction de la pauvreté contenus dans la stratégie Europe 2020. Je soutiens que l'option politique actuellement adoptée par les autorités roumaines, à savoir accroître la flexibilité du marché du travail, s'appuie sur un diagnostic erroné de la faiblesse du taux d'emploi, notamment en ce qui concerne les effets sur le taux d'emploi global de la fiscalité sur le travail, de la migration de la main-d'œuvre, du recours aux heures supplémentaires et de la préférence des employeurs pour les formes typiques d'emploi. Compte tenu du fait que la migration de la main d'œuvre va continuer d'exercer une pression sur l'emploi intérieur, il est possible que des politiques favorables aux entreprises et même une forte croissance du PIB ne suffisent pas pour faire augmenter le taux d'emploi. Une alternative s'offre toutefois aux autorités roumaines, qui consiste à adopter une série de politiques inspirées de l'Agenda du travail décent de l'OIT. Ces politiques, qui ont pour but d'augmenter le nombre d'emplois de qualité, permettent de combiner des objectifs de croissance de l'emploi avec des objectifs de réduction de la pauvreté. L'analyse suit les quatre objectifs principaux de l'Agenda du travail décent, à savoir : créer des emplois, garantir les droits au travail, étendre la protection sociale et promouvoir le dialogue et la résolution des conflits. Les recommandations émises sont les suivantes : augmenter les indemnités en cas de perte de revenus ; augmenter les dépenses consacrées aux politiques actives du marché du travail, à l'éducation en milieu rural, aux structures publiques de garde d'enfants et aux soins de santé ; renforcer les capacités des inspections du travail ; réexaminer les récentes modifications législatives qui entravent l'activité syndicale et le dialogue social. Classification JEL : E24; J88; O15. Resumen : Este documento analiza los determinantes de la baja tasa de empleo en Rumanía y los cambios actuales en las políticas y la legislación dirigidos a aumentar el empleo, según se relacionan con las metas de reducción de la pobreza de la agenda Europa 2020. Argumento que la opción de política actual que siguen las autoridades Rumanas – aumentar la flexibilidad del mercado de trabajo- está basada en un diagnóstico equivocado del bajo empleo, particularmente respecto a los efectos sobre la tasa de empleo total de la presión fiscal en el trabajo, la migración de la mano de obra, el uso de horas extra y la preferencia del empleador por formas estándar de empleo. Teniendo en cuenta que la migración de la mano de obra continuará ejerciendo presión sobre el empleo nacional, las políticas favorables a las empresas e incluso un alto crecimiento del PIB pueden no ser suficientes para lograr un incremento en el empleo. Una vía alternativa para las autoridades Rumanas es la adopción de una serie de políticas inspiradas en la Agenda de Trabajo Decente de la OIT. Estas políticas se dirigen a un aumento en la calidad del empleo que combinaría los objetivos de crecimiento del empleo con metas de reducción de la pobreza. El análisis sigue los cuatro objetivos centrales de la Agenda de Trabajo Decente: crear trabajo, garantizar los derechos de los trabajadores, extender la protección social y promover el diálogo social y la resolución de conflictos. Las recomendaciones incluyen aumentar la compensación en caso de pérdida de ingreso, aumentar el gasto en políticas activas del mercado de trabajo, educación en las áreas rurales, sistemas públicos de salud y de atención a la infancia, fortalecer la capacidad de las inspecciones de trabajo y revisar los recientes cambios legislativos que dificultan la actividad de los sindicatos y el diálogo social. Clasificación JEL : E24; J88; O15. Working Paper No. 105 iii The Policy Integration Department The Policy Integration Department pursues the ILO's decent work and fair globalization agenda from an integrated perspective. The central objective of the Policy Integration Department is to further greater policy coherence and the integration of social and economic policies at both the international and national level. To this end, it works closely with other multilateral agencies and national actors such as Governments, trade unions, employers' federations, NGOs and universities. Through its policy-oriented research agenda, it explores complementarities and interdependencies between employment, working conditions, social protection, social dialogue and labour standards. Current work is organized around four thematic areas that call for greater policy coherence: Fair globalization, the global poor and informality, macro-economic policies for decent work, and emerging issues. Director of the Policy Integration Department: Stephen Pursey iv Working Paper No. 105 Decent
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