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September 30, 2022

The tip of the iceberg

When the head of the IMF mission Jeffrey Franks announced, at the end of the negotiations with the Romanian authorities, that the level of unemployment could reach a million persons in 2010, the officials from Bucharest came up immediately to deny such a variant. Even the representative of the Fund, probably asked by the authorities, has somewhat sweetened the “verdict.” As for PM Emil Boc and Finance Minister Sebastian Vladescu, they both declared that unemployment will rise a little bit, but towards the end of the year the unemployment level will be below that of the same period of the past year. “The figure of one million unemployed has never been discussed, nor that of 100,000 layoffs,” the finances chief declared.

But, the data furnished this week by the National Employment Agency (ANOFM) confirms the upward trend of the unemployment rate. Thus, in January, as many as 31,500 persons were laid off, the unemployment level reaching 741,000 – the highest level of the last seven years, meaning 8.1 per cent of the labour force. A higher value of the number of unemployed, 781,000, was registered only in January 2003, the national rate being 8.6 per cent.

Speculations over the reasons can always be found, some analysts saying that this growth from January is due to the seasonal sector, especially constructions blocked in wintertime. But, while the authorities mime optimism, the layoffs continue. On another hand, we should note that the unemployed from the private sector are 4.5 times more numerous than those from the state sector. The explanation of the phenomenon is relatively simple. In the private sector, the managers must take action quickly to maintain the efficiency of the firm, be it big-sized or a micro-company. Otherwise, especially in the present conditions of financial crisis, the perspective of bankruptcy draws near at a fast pace. Consequently, one of the first decisions that a manager can make to cut expenditures is to reduce personnel. Since most of the layoffs come from small and medium sized companies, in this case there aren’t unions to prolong the “agony” of the layoffs, or obtain at least compensatory payments, etc. Such things happen only in the case of the big companies which have negotiated collective labour contracts with the unions. And thus, from the private environment the employees go directly under the care of the state, being entitled to nine months of unemployment aid.

In exchange, in the state sector the layoffs are a real adventure, in spite of the recent declarations of the officials, who demonstrated the need to lay off personnel (15,000 in Education, several thousands in the rail system, from the public administration, city halls, etc.) In this case, the unions are very active and can exert pressure on the decision making factors. Moreover, the current legislation has important remainders of that which preceded 1989 or from the ‘90s, when the emphasis laid on social protection and the rights of the employee was primordial. Thus, enforcing the layoffs in the state sector is a complicate job which needs time. And the unions are specialized in extending the negotiations, in legal or procedural gimmicks. Finally, under the present legislation, some of the persons laid off take the state to court and frequently win. The state must not only hire them in the previously held posts, but must also pay the salaries for the period when they were fired. Moreover, the legal precedent creates premises for other persons who are in this situation to proceed in a similar way. Wherefrom also the 4.5 times ratio between the unemployed coming from the private environment and those who come from the state sector.

If the officials mime optimism, the private sector is more pessimistic. The businessmen expect unemployment to rise to 10-12 per cent this year, in spite of the fact that the data (seasonally adjusted) point to a flattening of the trend and a stabilization of the unemployment level. “I believe that unemployment will rise towards 10-12 per cent, in the conditions in which the real figure is bigger than that which was officially reported,” Florin Pogonaru, president of the Businessmen Association from Romania (AOAR), was declaring on Monday, explaining on another hand the growth of the number of jobless also through the already high unemployment from Spain (19.5 per cent), country which used to be a kind of valve for the domestic unemployment. And he is not the only one who anticipates the further growth of the jobless number.

Actually, the unemployment level is much bigger compared to the official figures which reflect only the peak of the iceberg. The unemployed include those who are not registered with the authorities, those who have completed the nine-month period in which they receive the unemployment aid, those who did not have a job so far (i.e. the young graduates of vocational schools, of high schools, of universities), and those from the rural area who work seasonally without labour records. To the above also add those who are temporarily engaged in illicit trade (and they are not few), without being entered in an official act and who were also laid off.

In front of these challenges, the Government takes decisions which are considered by many “half measures.” It is getting ready to approve a normative act regarding technical unemployment, shifting for three months the financial responsibility for those who are in difficulty on the companies that must pay to these workers 75 per cent of the salary. On another hand, PM Emil Boc declared that the Government will issue this month a normative act through which the firms which hire unemployed will benefit from certain tax discounts for the payment of the social insurance contributions, in order to help the business circles to overcome the crisis and save jobs. A good intention, but in this context in which the social insurance system is already in pain, where will the Executive find the money balance? “The measures proposed by the Government, to stimulate the hiring of the unemployed, are offensive and will not have the expected effect,” an analyst from the private environment has recently said.

As for the idea, frequently mentioned, of supporting the professional re-training, it remains only on paper. Difficult to apply such an initiative in Romania, especially that there isn’t any sector here to “overheat with activity” awaiting for labour.

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