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The Effects of the Coronavirus on the Labor Markets in the EU

The Effects of the Coronavirus on the Labor Markets in the EU Romania among the least affected countries in Q2, 2020

Romania was among the least affected EU Member States in Q2 2020 in terms of temporary layoffs, reduced working hours or job losses, according to the analysis published by Eurostat. The consequences of Covid19 pandemic varied significantly from one country to another, the most affected being Spain, Italy, Cyprus, Ireland and Greece. 

The highest job related risks were in the hotel and catering industry. The most affected were temporary workers, young people between 16 and 24 years old and people with low skills. The latter, also found below the relative poverty threshold in each EU state, were affected by a higher percentage than the national average. 

Romania ranked third in the top of the lowest probabilities of job loss (by less than 3% in all income categories), after the Czech Republic and Slovakia and slightly better than Denmark, Bulgaria and Poland. Also, the gap between those with high incomes and those with low incomes was at a relatively low level and countries where this phenomenon was sharp include Spain, Ireland, Italy, Portugal and Finland.

What are the possible reasons for this good performance? Firstly, Romania has had a good track record at maintaining low unemployment through its high labor mobility. Like other EU countries, it has basically exported its unemployment over time and the presence of diaspora-specific infrastructure in key nations makes it easier, over time, for Romanians to arbitrage differences in development at EU level in order to maximize gains. This means that the disruptions caused by the Coronavirus found a lot of the Romanian migrant workforce already abroad, where it will not show up in statistics. Even the seasonal workers, who had initially returned, were allowed to leave again (during the national lockdown) to support the agricultural sectors of countries like Germany, in a politically contested move which has spawned numerous stories of ill treatment and total disregard for protection against the pandemic on the part of the employers.

At the same time, the measures adopted to fight against the pandemic disrupt longer value chains that generally produce higher added value, especially in services, but also in durable goods. Countries like Romania, with comparatively lower economic complexity than other Member States, and with shorter national value chains, are less vulnerable to these economic shocks. At the same time, the structure of the economy also matters, even within the same sector but in different countries. For instance, Romania had around 13.2 million tourists in 2019, of which only 2.6 million are foreign. Compared to other countries, which rely more on foreign arrivals (including Western countries like Italy and France, but also Bulgaria, with 12 million foreign tourists in 2017), Romania’s less developed international tourism insulates it more from disruptions in international travel patterns.

Ultimately, if restrictions worsen or continue, both in Romania and with its main trading partners, the shorter value chains shall also begin to unravel or fragment, leading to worsening performance in the labor markets, compounded by the innate fiscal limitations of the Romanian Government in ensuring support for the economy.

 

 
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OEconomica No. 1, 2016