Romania - Labor

More about the Economy of Romania.

Demographics

Romania had a population of more than 23 million in 1987, but the active work force numbered about 10.7 million--an increase of only 550,000 workers since 1975. Women accounted for only about 40 percent of the labor force in 1988 and therefore represented the largest reserve of underused talent. After the mid-1970s, the rate of growth of the industrial labor force dropped significantly compared with the previous quarter century, falling from 5.1 percent in 1976 to 2.3 percent in 1980. Moreover, demographers forecast a growth of only 2.5 to 3.6 percent for the entire Eighth Five-Year Plan (1986-90).

Three major trends precipitated the slowdown in the growth of the labor force. First, the reserve of underused rural labor that could be transferred to the industrial sector was nearing depletion; the countryside had lost nearly half a million men in the four years between 1976 and 1979 alone. Second, Romania's birthrate--after Poland's, the highest in Eastern Europe--declined as urbanization proceeded, and despite the government's pronatalist policy, this trend was not reversed. And finally, large numbers of skilled workers were emigrating.

As in all of Eastern Europe and the Soviet Union, Romania's fertility level dropped significantly as urbanization brought more women into the work force and abortion became available on demand. In 1958 112,000 abortions were performed, but by 1965, the figure had skyrocketed to 1,115,000 annually, or approximately 4 abortions for every live birth. Realizing that a lower birthrate would inhibit economic growth, the government began instituting a pronatalist policy and in 1966 declared an end to abortion on demand. But abortions--legal and illegal--continued to be performed at a worrisome rate, reaching 421,386 in 1983. A relatively ungenerous incentive program to promote childbearing, instituted in the 1960s, had little positive effect. As a result, the birthrate declined steadily after 1967 and by the early 1980s had become a serious concern for Romania's economic planners.

Compared with the other communist regimes of Eastern Europe, Romania appeared to have a rather liberal emigration policy, but in the 1980s applicants for emigration increasingly were subjected to harassment and persecution. Most of the once-thriving Jewish community had been allowed to emigrate to Israel. In the late 1970s and throughout the 1980s, nearly 1,000 ethnic Germans were permitted to depart each month for the Federal Republic of Germany (West Germany). Large numbers of ethnic Hungarians illegally crossed into Hungary to escape economic and cultural oppression. Western diplomats in Belgrade claimed that as many as 5,000 refugees crossed into Yugoslavia each year, and that in 1988 some 400 persons were shot to death and many others drowned trying to swim across the Danube. Those seeking permission to leave legally often lost their jobs, housing, and health benefits and were forced to wait long periods for their exit papers. These harsh policies reflected the seriousness with which the regime regarded the loss of the country's skilled workers and its concern for the overall deterioration of the labor pool.

Unpaid Labor

The rapid realignment of the work force created difficulties for agriculture, particularly during planting and harvest seasons. To compensate for the loss of farm workers, the government followed the Stalinist practice of mobilizing soldiers, young people, and even factory workers to "donate" their labor. Throughout the communist era, these groups have supplied unpaid labor that made possible the massive civil engineering projects launched after World War II. In 1988 more than 720,000 high school and college students and 30,000 teachers were detailed to agricultural work sites, and another 50,000 students and 2,000 teachers "donated" labor at construction projects.

Throughout the 1980s, the government appeared to be growing more reliant on compulsory labor, issuing a decree in August 1985 requiring all citizens to make labor and financial contributions to public works projects. At the same time, the military's role in the economy was also becoming more prominent. Soldiers worked on such important national projects as the Danube-Black Sea Canal, the Iron Gate hydroelectric project, and the Bucharest subway, as well as on more mundane details such as repairing streets and bringing in the harvest. After 1985, when Ceausescu militarized the electric power industry, army officers even became involved in the management of the civilian economy.

Productivity

Romania traditionally had one of the lowest levels of labor productivity in Europe. Agricultural units before World War II were small-scale and inefficient. Because of the high density of the rural population, much of the farmland had been subdivided into small parcels, making mechanization impractical. As a result, per capita farm output was low. Industrial labor productivity was somewhat higher. Employing less than 10 percent of the labor force in 1938, industry then produced 31 percent of total national income. The classic extensive development strategy pursued after the war accomplished gains in industrial output as a result of massive capital and labor inputs, not because of improved labor productivity and efficiency. But beginning in the late 1970s, as labor reserves dwindled, continued economic growth required substantially improved productivity. The government's inability to make significant gains in this area and to make the transition to an intensive development strategy was a primary cause of the economic crisis of the 1980s.

The postwar modernization process inevitably brought improvements in labor productivity in most sectors. Agriculture, however, because of the rapid loss of many of its most productive workers, underinvestment and neglect by the central planners, and peasant demoralization in the aftermath of forced collectivization, remained one of the least efficient sectors of the economy. Although agriculture still employed some 28 percent of the labor force in the mid-1980s, it accounted for only 14 percent of national income. And in 1980, Romania ranked no better than twentieth of twenty-three European countries in terms of output per hectare of farmland. Industrial labor productivity, on the other hand, improved steadily through the first three decades of communist rule, growing an average 7.9 percent per year between 1950 and 1977--primarily because of the acquisition of modern machinery and technology. These improvements notwithstanding, in 1985 Romania ranked last among the East European Comecon countries in terms of per capita gross national product (GNP).

Labor productivity growth rates slowed noticeably toward the end of the 1970s. The annual target of 9.2 percent for the Sixth Five-Year Plan (1976-80) proved unattainable. Instead, the government claimed to have achieved an annual growth of 7.2 percent--still a respectable accomplishment. The reliability of that figure, however, was questioned by Western analysts, who were becoming increasingly distrustful of official Romanian statistics. During the decade of the 1980s, the government set the unrealistic goal of doubling labor productivity by 1990. But this target would not be met, as the economy took a severe downturn. Western sources estimated, for example, that 1988 gross industrial output was no higher than and possibly lower than that of 1987, which in turn might have been lower than output in 1986. Because the government had predicated most of its ambitious economic growth targets on improved labor productivity, the poor results in gross industrial output indicated that the labor situation had not improved.

A number of factors underlay the chronically low productivity of Romanian labor. Foremost among these were the extreme degree of economic centralization, which gave workers little input in decisions that affected their working conditions and incomes, and the absence of rewards for personal initiative. The labor force endured low wages, few bonuses, ungenerous pensions, long workweeks, poor living conditions, and a general sense of powerlessness.

With an average per capita annual income of approximately US$1,000 in 1987, Romanian workers remained among the most poorly paid in Europe. Low labor remuneration, along with high taxes, and neglect of the consumer goods sector were deliberate government policies designed to accumulate funds for investment in the economy. Thus, while national income rose an impressive 9.2 percent per annum between 1951 and 1982, wages during the same period grew by only 4.9 percent. In 1983 Ceausescu, frustrated by persistent worker apathy, abolished fixed wages in favor of a policy that tied a worker's income directly to plan fulfillment by the enterprise. Previously every worker had been assured of receiving 80 percent of his or her nominal salary regardless of performance, with the remaining 20 percent dependent on the individual's productivity.

Rather than spurring the worker to produce more, the new remuneration policy in fact caused further demoralization because it invariably lowered wages. For example incomes fell by an average 40 percent at the Heavy Machinery Plant in Cluj-Napoca after the new policy went into effect. Workers were now being penalized for factors beyond their control, such as parts shortages and power failures. Their reaction was predictable. Passive resistance in the form of sloppy workmanship, excessive absenteeism, and drinking on the job became commonplace. More alarming to the government, however, were the scattered but sizable strikes and demonstrations that were occurring with greater frequency in the late 1980s. Across the country there were reports of work stoppages in protest of the new wage law. Following the November 1987 outbreak of riots at the Red Flag Truck and Tractor Plant in Brasov--precipitated by low wages, food shortages, and poor working conditions--Ceausescu announced that pay raises for all industrial workers and larger pensions would be phased in by the end of 1990. After the raises, the average worker theoretically would be earning 3,285 lei per month, and average monthly pensions would pay some 2,000 lei.

The Ceausescu regime's approach to the problem of labor apathy in the late 1980s ran counter to the wave of reforms that were being tested in other Comecon nations at that time. Rather than encouraging workers with monetary incentives that recognized differences in skills and productivity, in 1988 and 1989 Ceausescu offered modest wages that were graduated so that wage differentials between the highest- and lowest-paid workers were actually reduced. Wage hikes for the latter, averaging 33 percent, went into effect in August 1988, whereas increases of less than 10 percent for workers in the higher wage brackets were not scheduled to take effect until 1989. Instead of offering concessions that would improve their standard of living, Ceausescu continued to exhort the workers to sacrifice for the building of socialism and a better life for future generations. But these traditional motivational appeals were becoming less effective as life grew harder for most citizens.

Workers increasingly felt alienated from the institutions that were supposed to be defending their interests, particularly the PCR and its labor organ, the General Union of Trade Unions of Romania (Uniunea Generala a Sindicatelor din Rom�nia--UGSR), which they viewed as merely another control mechanism, a conduit for the downward flow of directives from the central planners. A survey taken shortly before the economic downturn of the late 1970s revealed that more than 63 percent of a sampling of 6,200 young Romanian workers felt their union was not representing their interests.

Because of the late emergence of a working class, Romania had little experience with grass-roots labor movements. In 1979, however, Paul Goma, a prominent exiled dissident, and three compatriots inside Romania -- Vasile Paraschiv, Theorghe Brasoveneau, and Ionel Cana--led an ill-fated attempt to organize an independent union. The PCR would not tolerate such a threat to its control of labor, and within a month, the three principal leaders had been arrested and the nascent union movement had been, at least temporarily, crushed.

In addition to low wages and nonrepresentation of the workers' interests, several other developments contributed to the growing disaffection of labor. For years the government had promised a shortening of the workweek, which was supposed to have been cut to forty-five hours by 1985. Although a forty-six-hour week was proclaimed in 1982, in practice most Romanians continued to work forty-eight hours or more. Adding to their misery, average workers wasted hours each day waiting in line for basic foodstuffs, gasoline, and other consumer items that were becoming ever more difficult to obtain.

Poor placement practices created immediate job dissatisfaction and were a primary cause of the high labor turnover rate. A survey of some 6,000 workers aged fourteen to thirty, taken in the relatively prosperous 1970s, revealed that more than half wanted to leave their jobs, and about one-quarter had already done so at least once. The problem of high turnover was most acute in the construction industry, where more than 28 percent of the work force quit their jobs during the 1982-86 period, and in the mining industry, which reportedly was hit even harder. To discourage turnover, the new wage system announced in September 1983 contained a provision that required newly hired workers to remain with an enterprise for at least five years. Failing that provision, they would forfeit a large share of their salaries, which had been withheld in compulsory savings accounts, and they would have to repay the enterprise for training expenses. But punitive monetary measures of this type proved ineffective in an economy that offered workers few consumer goods on which to spend their money.

Labor

A prerequisite for rapid economic growth after World War II was the wholesale transfer of labor from agriculture, which had employed 80 percent of the population before the war, to other sectors--primarily to heavy industry. The industrial work force grew by an average of 5 percent per year during the 1950-77 period, as Romania was accomplishing its most dramatic economic development, and industrial output was rising by an average 12.9 percent annually. As late as 1960, 65 percent of the labor force was still engaged in agriculture, with only some 15 percent working in industry and 20 percent in other sectors. But in the course of the following two decades, the labor force would be transformed, as peasants left the land in the wake of agricultural collectivization to take better-paid jobs in the cities. Between 1971 and 1978, the outflow of rural labor accelerated to 11 percent per year--more than twice the rate of the 1950s and 1960s.

By 1980 agriculture employed no more than 29 percent of the labor force, while industry occupied 36 percent and other sectors the remaining 35 percent. By this time the rural exodus had slowed, and although half the population continued to reside in rural areas, the reserves of able-bodied young men in agriculture had been reduced drastically. As a result, targets for expansion of the industrial labor force were unattainable, and agriculture was becoming the domain of the elderly and women.

Labour Law and Employment in Romania - 2018 Guide | Accace
Labor costs in Romania increase much faster than EU
Romania Labor Force Participation Rate | 1996-2018 | Data
Romania Labor Stats: NationMaster.com
Romania Labor Force - Moody's Analytics Economy.com