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Formerly communist EU states face labor shortages

The EU's 10 former communist states, which were hit by massive unemployment after they shifted to a market economy almost two decades ago, are now facing a labor shortage, the World Bank said.

The EU newcomers need to enact new reforms to boost their workforces, single out measures to discourage early retirement and open their labor markets to foreigners, the bank said.

The region has undergone a "major shift," said economist Jan Rutkowski, the lead author of the World Bank report released in Warsaw on Thursday.

"Two years ago, there were a lot of people looking for jobs, but there were no jobs," he said.

In the early part of this decade, unemployment rates across much of the region remained higher than 10 percent.

Robust growth did little to bite into the figures, because the region's companies continued to slash their workforces in order to compete with their counterparts in leading industrialized nations.

By the middle of the decade, however, the balance began to tip as job creation outpaced losses.

The shift coincided with the 2004 EU entry of eight former communist countries: the Baltic states of Estonia, Latvia and Lithuania, plus Poland, the Czech Republic, Slovakia, Hungary and Slovenia.

Romania and Bulgaria joined the EU at the beginning of this year, bringing the bloc's total membership to 27.

Companies across the region, and particularly in the 2004 entrants, have now largely completed their often painful restructuring process, and their ability to compete on the world stage has helped boost production and demand for employees.

In the past two years, the rate of vacant jobs has more than tripled in Lithuania, doubled in Poland and almost doubled in the Czech Republic and Latvia.

Emigration to other EU member states, notably from Poland and the Baltic states to the open labor markets of Britain and Ireland, has amplified the domestic shortfall in skilled workers.

The World Bank said the region is still doing too little to tap its labor market potential.

In Poland, for example, only 54.5 percent of the population aged 15 to 64 worked last year, compared to the 66 percent in the EU's 15 more established member states.

Only Estonia has come close to meeting the EU's overall target of 70 percent participation in the labor force in that age group.

The bank recommended that governments place more restrictions on early retirement, as in the case of Poland, where the median retirement age is 57, eight years less than the official age.

"The abuse of disability schemes should be eliminated by improving governance, curbing corruption and enforcing eligibility conditions," the report said.

The bank also urged governments to increase investment in education, as well as in-service training for workers, in order to help tackle the skill shortages which are hitting hardest in Latvia, Lithuania, the Czech Republic, Poland, Hungary and Romania.

The bank also said that the region's labor markets should be opened to foreign workers, as in the case of Poland, which eased rules for citizens of neighboring Belarus, Russia and Ukraine.

But it also pointed to pitfalls.

"Opening the domestic labor market to foreign workers is politically highly sensitive," it said.
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