Journal of International Business Research and Marketing
Volume 6, Issue 3, March 2021, pages 27-32
How Effective Was the Romanian Labour Market After 2008?
“Babeș-Bolyai” University of Cluj-Napoca, Romania
Abstract: The efficient operation of the labour market is a matter of high stake for every state, considering that it reflects the balance between supply and demand. The extent to which such balance is achieved is highlighted by the Beveridge curve. This paper examines the efficient operation of the Romanian labour market, as measured by the relevant indicators of labour demand and supply. In order to capture the evolution of these indicators across the three target sub-periods (the crisis, the rebound and the resumption of an upward trend), the timeline subject to survey was 2008Q2-2016Q3. The survey conducted for this purpose revealed fluctuations in the number and rate of job vacancies, respectively in the unemployment rate. However, in the last part of the surveyed period, the trend of such indicators was downward for the unemployment rate and upward for the number and rate of job vacancies. Even so, these indicators failed to match the levels recorded before the outbreak of the economic crisis. Due to such evolutions, the Beveridge curve presented shifts of direction specific to the three sub-periods. Throughout the last part of the surveyed period, the curve seemed to recover slightly towards the top-left direction at national level. However, regionally, the evolutions of labour supply and demand varied, and the Beveridge curves varied accordingly. Surprisingly, it was not Bucharest-Ilfov, considered the best economically developed area in Romania, which reported the best correlation between labour supply and demand, but the Central region.
Keywords: Labour market, Job vacancies, Unemployment, Correlation between labour supply and demand, Efficiency
The main indicators used in the analysis of the labour market efficient operation are the unemployment rate and the job vacancy rate. These two indicators are in inverse ratio to one another, as highlighted by the so-called Beveridge curve (BC), fathered by the British economist William Beveridge. This paper is intended to assess the efficient operation of the Romanian labour force market. Its structure covers three main parts: 1) analysis of the labour market demand according to the number and rate of job vacancies; 2) analysis of the labour market supply according to the unemployment rate; 3) analysis of the correlation between labour market supply and demand, by means of the Beveridge curve. Labour demand was surveyed across the entire economic activity and the main sectors of economy, at national and regional level (the eight development areas in Romania). Labour supply was approached in general, by genders, by residence environments, by age groups, at national and regional level. The data used for the purposes of this research was collected from INSSE and EUROSTAT.
The Romanian devoted literature features a series of papers which tackle the national and regional issue of the number and rate of job vacancies, as well as the unemployment rate, without special focus on whether labour demand and supply are in balance. Romanian experts have only started to examine the efficient operation of the labour market fairly recently (Dimian & Korka, 2010; Dimian, 2011; Tatu & Tăbîrțoiu, 2015), due to little availability of quarterly statistical data required to study this balance. This paper aims to bring to the attention of specialists the quarterly status of the above indicators, in terms of the balance between labour demand and supply. The subject was approached both at national and regional level.
2. Analysis of Labour Market Supply and Demand
The level of labour force demand is highlighted by the number and rate of job vacancies. The job vacancy rate reflects the capacity of an economy to absorb in the market the labour force available at a certain point in time. Depending on the stage of the economic cycles, job vacancy numbers and rates are higher or lower. Economic decline entails lower levels, while economic growth generates higher levels. The labour supply can be measured by the number of unemployed workers or by the unemployment rate, and reveals the labour force available and fit for work. Similarly to labour demand, the stage of an economic cycle can dictate the status of labour supply: unemployment will be on the rise in times of economic activity downturn, or, conversely, unemployment will decrease in times of economic boom. In the following paragraphs we will analyze separately the labour force demand and supply in Romania, after 2008.
2.1 Labour Force Demand – Number and Rate of Job Vacancies
The downturn of the economic activity in Romania, felt in particular from the 3rd quarter of 2008 onwards, is outlined by the decreasing number and rate of job vacancies. The evolution of this indicator across the period subject to survey is typical to economic recession. Starting from the 3rd quarter of 2008 until the 4th quarter of 2009, the number and rate of job vacancies followed a descending trend. Later, until the 2nd quarter of 2014, their evolution wavered, while lately they moved on an ascending path (except for 2016Q2). The highest decrease in the total number of job vacancies compared to the value attained in 2008Q2 is reported in 2010Q4, by 78.93%. After the 1st quarter of 2015, such rates return to values equal or greater than 1%. However, they are still lagging behind the rates recorded in the 3rd quarter of 2008.
The total number of job vacancies in 2016Q3 accounted only for 65% of the total number of vacancies in 2008Q2, and respectively 63.87% of the total number of vacancies in 2008Q3.
Figure 1: Job vacancies/Total economic activities – number, rate (Chart drawn up by the author based on INSSE data)
Chart no. 2 outlines the evolution of job vacancy rates by the main economic activities in Romania: 1) agriculture, forestry, fishing; 2) industry; 3) constructions; 4) services. While in the first half of the surveyed period higher values were reported in agriculture, forestry and fishing, and lower values in services, in the second half of the period the analysed indicator showed higher values for industry and services, and lower values for agriculture and constructions. The construction sector comes last, with a significant lag behind the industry sector, recording the lowest demand of labour force. In 2016, only one of the four sectors, i.e. services, managed to recover to the values of 2008 – 1%. It is followed suit by the industry, where the vacancy rate recovered strongly to the level attained in the beginning of the surveyed period (1.4% în 2016Q3 compared to 1.7% in 2008Q2).
The most spectacular evolution can be noted in the agricultural sector, where vacancy rates dropped considerably (to 0.5% in 2016Q3 compared to 1.8% in 2008Q2).
Figure 2: Job vacancy rate/Main economic activities (2008Q2-2016Q3) (Chart drawn up by the author based on INSSE data)
As it results from the above chart, in the first half of the surveyed period, agriculture still ranks first in terms of the job vacancy rate. However, at national level, the hierarchy of the four sectors is completely different if we consider the labour force demand in relation to the job vacancy ratios reported in these activity sectors (see fig. 3). According to this chart, services are on top with the highest ratio, with values above 52% in general, at times as high as 73% (2009Q1) – see table 1. The industry comes second in terms of ratio from the total, with values ranging from 18.37% to 39.31%, followed by constructions and agriculture, forestry and fishing respectively. We should also note that although services have recorded the highest ratio from the total, the evolution of the job vacancy rate ratio in services reveals a relative decrease in favour of industry. As regards the constructions sector, it revealed a general downward trend of the ratio in the total number of job vacancies. 2009Q1 and 2010Q3 are key moments, when both the minimum and maximum levels were attained for two important economic sectors: industry and services. In 2009Q1, the industry records the lowest ratio in the total (16.37%), while services are on the high end (73.73%). In 2010Q3, there was a turn of events. Industry reached the upper limit in the surveyed time period, while services hit the lower limit (52.66%).
Figure 3: Job vacancies by activities – % in total (Calculation and chart drawn up by the author based on INSSE data)
Table 1: Variation range – job vacancy ratios (%/points in time) (Own calculations based on INSSE data)
Note: ASP – agriculture, forestry & fishing; I – industry; C – constructions; S – services
The distribution of the total number of job vacancies by regions is outlined in figure 4.
Figure 4: Number of job vacancies by region (Chart drawn up by the author based on INSSE data)
According to fig. no 4, the regional poles are the Bucharest-Ilfov and South-West regions. Bucharest-Ilfov is far ahead the rest of the regions in terms of total number of job vacancies. The ratio of this region in the total number of vacancies ranges from minimally 20.38% (in the 2nd quarter of 2010) to maximally 31.82% (in the 1st quarter of 2009). However, the level of vacancies in the 3rd quarter of 2016 only accounts for 69.49% of the respective level in the 2nd quarter of 2008. The average ratio of vacancies available in Bucharest-Ilfov during the entire surveyed period is around 25%. The South-West region lies at the opposite end, with the lowest number of job vacancies, and ratios ranging from minimally 2.88% (2016Q2) to maximally 8.17% (2008Q4). In this region, in the 3rd quarter of 2016, the number of job vacancies accounted only for 34.60% of the level reported in the 2nd quarter of 2008, while also on the lowest end compared to the other regions (see also fig. 8). In the same train of thought, in the second half of the surveyed period compared to the starting point of the analysis (2016Q2 vs 2008Q2), the West manages to rank first as regards the ratio of job vacancies, with 92.43%. It is followed, in the same order, by the North-West (88.42%) and the South (69.49%).
2.2 Labour Market Supply – Unemployment Rate
The quarterly evolution of unemployment rate in Romania was rather oscillating, with upswings followed by sudden downswings. The maximum level, i.e. 7.8%, was attained in 2010Q1, higher by 2.3% than in the beginning of the surveyed period (2008Q2). The minimum rate, of 5.1%, was recorded in 2008Q3, lower by 0.4% than in 2008Q2. 2016Q3 was also a key moment, when unemployment rate came very close to the initial values, higher only by 0.2% than in 2008Q2 (see fig. 5). At regional level, the unemployment rate status is very different. The regional poles change throughout the surveyed period, as unemployment rates suffer significant changes. As such, according to INSSE data and figure no. 5:
- In the first half of the surveyed period, the regional poles were the Centre, with the highest levels (12.3% in 2011Q4), and Bucharest-Ilfov, with the lowest levels (3.3% in 2008Q3);
- In the second half, the regional poles were South-Muntenia (12.8% in 2015Q1) and the South- East (13% in 2014Q1) for the highest values, respectively the North East (2.9% in 2016Q2) and, from time to time, the North-West, for the lowest unemployment rates.
Figure 5: Unemployment rate – total and by regions (15-64 years of age) (Charts drawn up by the author based on INSSE data)
According to the residence environment, for the most part of the surveyed period, unemployment rate is higher in the urban than in the rural environment. Nevertheless, as of 2015Q3, in the context of a steep decrease in the urban unemployment rate and also an increase in the rural unemployment rate, there is a shift in the two rates (the rural unemployment rate exceeds the urban unemployment rate) – figure no. 6.
Figure 6: Unemployment rate – total by residence environments (15-64 years old) (Chart drawn up by the author based on INSSE data)
The unemployment rate by regions and residence environments, as it also results from fig. 7, followed different paths. As such, in the rural environment and in certain regions (North-East, North-West, West and even South-West) and during certain points in the surveyed period, rates tend to gather towards the inside of the circle, while the other regions are placed, more or less visibly, towards the outside. Bucharest-Ilfov is interesting to observe as regards unemployment rate differences. Chart no. 7 is relevant, from this point of view, considering the extreme points of the unemployment rate in the rural environment. We refer to 2009Q1 and 2013Q2, which reveal rates of 13% and 13.5% respectively. Such high levels are followed suit by lower values. The evolution of the unemployment rate in the South-West is also remarkable, since it is focused inwards for an extensive period of time, and draws away eventually. The lowest value reported in the South-West was 3.6% in 2008Q4 and the highest value was 12.4% in 2016T3. The results from the North-East are the most inwardly located, which means this region recorded, most of the time, the lowest unemployment rates in the rural environment.
At the opposite end there are several regions, which maintain a certain alternation (South-West, Bucharest-Ilfov, Centre, South-East). Similarly to the rural environment, unemployment rates in the urban environment also tend to be focused in certain regions (fig. 7). Again, there is no single region reporting the lowest unemployment rates. In general, the battle is fought between Bucharest-Ilfov, the North-West or the West. Nevertheless, the area of focus is not as close to the centre of the circle as in the rural environment. The South, the Centre, the South-East and the South-West are placed towards the outside of the circle. Also, there are extreme points for each region, but the highest values are not followed by values reflecting significant falls. The highest unemployment rate, of 13.4%, was recorded in 2015Q1 in the South, while the lowest, of 3.1%, was recorded in 2008Q2 and 2008Q3 in Bucharest-Ilfov.
Figure 7: Unemployment rate – total by residence environments and regions (15-64 years old) (Charts drawn up by the author based on INSSE data)
It is noteworthy to mention that during the entire period under survey, the male unemployment rate is higher than the female unemployment rate. Overall, the rate difference ranges from minimally 0.5% (2014Q3) to maximally 2.5% (2009Q1) – fig. no. 8. The highest male unemployment rate is 8.8% (2010Q1) and the lowest is 6.2% (2008Q3). The times when female unemployment rates reach the lowest and highest values match those of male unemployment rates. As such, the lowest female unemployment rate, i.e. 4.4% occurs in 2008Q3, and the highest, of 7.1%, in 2010Q1.
Figure 8: Unemployment rate – total and by genders (15-64 years old) (Chart drawn up by the author based on INSSE data)
The difference between female and male unemployment rates is also highlighted in chart no. 9. It can be observed through a greater closeness of female unemployment rates’ level to the inside of the circle in the case of women. At regional level, the steepest difference between male unemployment and female unemployment is found in the South-West, where the values of male unemployment rates are much higher, which takes this region closer (in the case of women) or farther (in the case of men) to the centre of the two circles. In the case of women, the regional poles are Bucharest-Ilfov and the North-East for the lowest unemployment rates and, most of the times, the South and the Centre for the highest values. In 2011Q4, the highest level of unemployment, of 12.4%, was reported in the Centre, and in 2008Q2, the lowest level, of 2.4%, was reported in Bucharest-Ilfov. In the case of men, the lowest rates are generally reported in Bucharest-Ilfov and North-West. The highest rates are reported in the Centre, the South, the South-West and the South-East. In 2014Q1, the highest level of unemployment, of 14.3%, was reported in the South-East, and in 2016Q2, the lowest level, of 3.1%, was reported in the North- East.
Figure 9: Unemployment rate – total by genders and regions (15-64 years old) (Charts drawn up by the author based on INSSE data)
3. Efficiency of Romanian Labour Market Operation
In order to assess the balance between supply and demand on the Romanian labour market we proceeded to plot the BC. This curve reflects the relationship between the job vacancy rate and unemployment rate, highlighting the efficiency of the labour market. BC shifts may be generated by the influences of the economic cycle (along the curve) or by structural factors (changes of the curve’s slope). As in the work “Curba Beveridge în România și Uniunea Europeană” (Tatu & Tăbîrțoiu, 1015) we decided to divide the surveyed period into three sub- periods: 2008-2009 (the peak of the economic crisis), 2010-2012 (post-crisis rebound of the European states) and 2013-2016 (resumption of the upward trend). Compared to the referenced paper, in this paper the last sub-period was extended to include year 2016. Its added value lies in the regional approach of this curve’s evolution.
According to fig. 10, in the first sub-period (2008-2009), the BC path is typical to economic depression (high unemployment rates and low job vacancy rates), and accordingly, the curve shifts downward to the right. This highlights critical shortages and high equilibrium unemployment. For the sub-period 2010-2012, the economy shifts towards the bottom of the curve occurred both on the left and on the right side, specific to the rebound period. Moreover, we find that in the last sub-period (2013-2016) the economy shifts along the curve resume an upward direction to the left (specific to the phase of economic boom or resumption of the upward trend). These last shifts explain an improvement in unemployed workers’ compatibility with the available job vacancies. We should note that the lack of balance on the labour force is obvious on several portions of the curve, where the increase of the vacancy rate is accompanied by the increase of the unemployment rate (shifts upward to the right). BC shifts to the right are associated with structural unemployment (increase of unemployed workers who are not properly qualified for the vacant jobs of the economy).
In Romania, from 2009 to 2011, the downsizing of economic activities led initially to a significant increase of short-term unemployment, felt in particular among young people and low-skilled workers. However, part of them continued to be unemployed after the economy picked up, doubling this long-term unemployment level in 2010-2014. This also led to an increase of structural unemployment. Outward shifts of the curve’s slope point out a greater inefficiency in identifying the appropriate applicant, respectively job, and consequently, an extension of structural unemployment (determined mainly by unskilled workers in industry and constructions). Moreover, the focus of economic activities on lines of business with better technological equipment, where qualified staff was reported to be scarce, decreased the capacity of the economy to create jobs (Iordache, Militaru & Pandioniu, 2015).
According to fig. 10, the extreme ends are: on top – 3rd quarter of 2008 (5.6% unemployment rate and 2% vacancy rate); at the bottom – 4th quarter of 2009 (7.5% unemployment rate and
0.5 % vacancy rate).
Figure 10: Beveridge curve (BC) – Romania (2008T2-2016T3) (Chart drawn up by the author based on EUROSTAT data)
At regional level, the evolution of the unemployment rate – vacancy rate is presented in figure 11. Notable differences in the BC evolution can be observed from region to region. From this point of view, increases in the unemployment rate accompanied by increases in the vacancy rate are marked especially in the South-East and South-Muntenia, which implies a gap between the training level requested on the labour force and unemployed workers’ level of training. Such curve shifts to the right are also noted in other regions, but only for relatively short periods of time compared to the above two regions. Better operation of the labour force (compatibility between unemployed workers and job vacancies is observed in the Centre, for which the BC shifts much to the left (the curve’s slope becomes negative at the end of 2014 – fig. 11). From this point of view, the Centre is followed by the North-East. In fact, these two regions reported visibly lower unemployment rates in the 3rd quarter of 2016 compared to the 2nd quarter of 2008. At the same time, however, the vacancy rate for this period was lower than that in the 2nd quarter of 2008.
Nevertheless, in the beginning of the surveyed period (2008Q2), the best results were reported in Bucharest-Ilfov (vacancy rate of 2.64% and unemployment rate of 3.4%), and the worst in the Centre (vacancy rate of 1.77% and unemployment rate of 8.5%). Even if, in general, the unemployment rate is on the decrease in the 3rd quarter of 2016, such decrease fails to bring the great majority of regions back to the values of the 2nd quarter of 2008. The example of the South-West which, in the second part of the surveyed period, shifts the BC downward, to the right, speaks for itself.
On the whole, however, for all regions, we notice a more or less obvious return to a CB trend (top left), which means better matching of supply and demand on the labour market.
Figure 11: Beveridge curve/regions (2008T2-2016T3) (Charts drawn UP by the author based on EUROSTAT data)
This paper enables us to point out the following relevant conclusions:
- The number of job vacancies and the rate of job vacancies tend to resume an upward trend once again, even if they failed to match their corresponding initial levels in the last part of the surveyed period;
- At national level, the regional poles for labour demand are Bucharest-Ilfov, with the most job vacancies, and the South-West, with the least job vacancies;
- By main activities, the highest labour force demand is reported in the services sector, followed in the same order by the industry, constructions, agriculture, forestry and fishing;
- When it comes to labour supply, we can no longer speak about the same regional poles, considering that to some extent there is a rivalry for the first and last place at general level, by gender and by residence environments;
- Also, in the last part of the surveyed period, the unemployment rate is on the decrease, without reaching, however, the initial values;
- The regional differences in labour demand and supply, through the level of the assessed indicators, also left its mark on the BC;
- Nationally, the BC has achieved a slight recovery in the top-left direction, which indicates a “struggle” to balance labour supply and demand;
- Although in comparison with the rest of the regions, the starting point for the BC, for the Central region, is located more to the right (the worst position in the beginning of the surveyed period), the curve’s shift of direction towards the top-left is the most visible. This entitles us to claim that this region achieved the best correlation between labour supply and demand, ensuring a more efficient operation of the labour market;
- The slightest shift of the BC curve is observed in the South-West, which makes it the most inefficient segment on the Romanian labour market.
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