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-EMPLCommittee on Employment and Social Affairs.

We did all this, we raised our hands in the Parliament, but now the money must be directed primarily towards investment and jobs (Emil Boc, prime minister of Romania) Facing the challenge of a fast increasing number of unemployed in Romania: What measures should be implemented in order to decrease the number of unemployed and economic immigration to other countries? How the government can create new places of work?

CONTENTS

1. INTRODUCTION 2. DEFINITION 3. ROMANIAS CURRENT SITUATION REGARDING UNEMPLOYMENT 4. OPINIONS, FACTS AND PERSPECTIVES 5. UNEMPLOYMENT: CAUSES AND CONSEQUENCES 6. CONCLUSION

INTRODUCTION

In the last two years, the number of unemployed has increased in Romania. Against the background of the economic crisis, in January 2010, Romania has nearly 750 000 people out of work. In order to cope with this problem, the government has to come up with solutions in order to accelerate the development of the economy.

Unemployment has increased rapidly after the communist period. It appeared as a normal result of the artificial communist economy and continued to manifest during the period of transition to the market economy. During the period of economical development however, the number of unemployed has paradoxically grown, reaching alarming numbers between 1998 and 2000. The situation began once again to improve, until 2009 when, the crisis and recession, combined with a series of ineffective government measures determined once again the rising of unemployed numbers. In this context, from 1990 to 2010, the process of labor emigration has developed. People decide to leave the country in order to seek jobs abroad which are often better remunerated. Romania has made the big mistake not to take advantages of the good times which has passed. The government did not invest, build, create or develop, but only raise the number of the budgetary, offered extra salaries and other benefits without the direct and multiplier effect in economy. They watched short-term problem, not looked in the future. Once identified the historical background to the problem, one can find ways to improve the situation. The main goal is to find solutions to improve the main branches of the economy: industry, tourism and agriculture.

DEFINITION

Unemployment describes the state of a worker who is able and willing to take work but cannot find it. As indicated by the unemployment rate and other yardsticks, unemployment is an important measure of the economy's strength. Though many people care about the number of unemployed, economists typically focus on the unemployment rate. This corrects for the normal increase in the number of people employed due to increases in population and increases in the labor force relative to the population. The unemployment rate is expressed as a percentage, and is calculated as follows: The numbers of unemployed and the monthly unemployment rates are estimates based on results of the LFS which is a continuous household survey carried out in Member States on the basis of agreed definitions.

ROMANIAS CURRENT SITUATION REGARDING UNEMPLOYMENT

2009 was a very tough year for Romanias economy, which proved virtually all forecasts from the year before wrong. Romania did not record the expected growth, but did a big step backwards after being hit by the crisis. Needles to mention, that no analyst could foresee such a development before the outbreak of the crisis, which happened to affect Romania beginning only during spring 2009 to its full extent. FDI inflows in the first quarter were even higher than in the first quarter of 2008. Yet, though higher than anticipated by the IMF, FDI in 2009 dropped likewise. Overall the Romanian GDP fell by some 7.7 %. The situation on the labor market formerly characterized by notable shortages in labor supply and low unemployment reversed completely. Main driver have been falling exports due to a falling external demand and bad access to credit as international finical markets froze. Internal demand, formerly heavily based on credit was the second main driver of the former growth and thus, of the recession in 2009. The only positive things to be mentioned are a relatively low inflation rate and a shrinking Current Account deficit. However, both developments are again the result of a massive breakdown of disposable income and credit, which also resulted in dramatically shrinking import volumes. A rapid and massively dropping exchange rate for Romania contributed significantly to this development. The public deficit continued growing and Romania was one of the first which had to apply for a credit at the EU and the IMF. Though the Romanian Government denied last year that Romania was in danger of declaring bankruptcy and the huge credit of 20 Bill Euro was meant just a safety belt for the private sector the credibility of this notion is still missing. The crisis between government and the president Traian Basescu did not ease the economic hardships, but delayed the payout of the second part of the IMF credit to 2010 and set the Romanian currency under further pressure. Coping with the political instability will be a major task for 2010 in order to strengthen the credibility in Romania and its economy. The former level of unemployment in Romania of just some 4.4% is not expected to be reached again before 2014, though a first decrease of 1.4% to 6.2% is expected for 2010. Real wages in Romania experienced a negative growth -2.3% though average gross salaries grew by some 5%. However, the times of double digit growth rates seem to be gone for the next few years when it comes to salaries in Romania. The GDP of Romania is estimated to grow by 0.5% during 2010 (CNP, some banks even estimate a growth up to 1.9%), but the former level of 2009 will not be reached before the end of 2011 according to the latest CNP estimations. The very same is true for exports from Romania, which have been a main driver of growth during the past years. Inflation is believed to remain on the low side for Romanian standards, yet still on the high side for overall trends in the EU. The Exchange rate for Romanias currency is estimated to stabilize at 4.25 RON/EUR, yet this estimate has not remained unchallenged. Several analysts expected the LEU to drop until 4.5 RON/EUR. On July 12, the European Commission approved the European Regional Development Fund (ERDF) Operational programme for Romania for the period 2007-2013, entitled "Regional Operational Programme" (ROP). The total budget of the programme is around EUR 4.38 billion and the Community assistance amounts to EUR 3.7 billion (approximately 19 % of the total EU money invested in Romania under Cohesion policy 2007-2013).

The overall objective consists in supporting the economic, social, territorially balanced and sustainable development of the Romanian regions, according to their specific needs and resources, focusing on urban growth poles, improving the business environment and basic infrastructure. The Romanian regions, especially the ones lagging behind, could become more attractive places where to live, visit, invest and work. The unemployment rate in Romania went up to 8.3% in February, after recording 8.1% in the first month of the year, according to the Romanian National Agency for Employment (ANOFM). The same time last year the unemployment rate read 5.3%. The total number of jobless recorded with the county agencies for employment read 762,375 at the end of the previous month. From the total number of jobless at a national level, 468,863 are remunerated unemployed and 293,512 have no income.

Such a high number of jobless has only been recorded in Romania in March 2003, when 779,154 people did not have a place to work. The highest rates of unemployment were recorded in Mehedinti (South-West) 14.6%, Vaslui (East) 14.2% and Alba (Central-West) 13%, while the lowest rates were in Bucuresti 2.4%, Ilfov (South-East) 2.7% and Timis (West) 4.6%

Romania's population is constantly decreasing due to negative natural growth and population migration. Today million Romanians live outside the state borders.

Life expectancy has increased, Romanians currently living in more than 3 decades ago to 70 years. The statistics indicate that number of people beyond 65 years was multiplied by 4 times during this period. Over the past 70 years, women's place in society has undergone extensive changes, increasing the number of employed women over 15 times. As Europe's population grows older faster and the pool of young workers shrinks, the EU will rely more and more on its younger generation. According to a Commission analysis presented today, young people are often insufficiently prepared to take on this responsibility. One in six young Europeans still leaves school early and 4.6 million 15-24 year-olds are unemployed. In the Romanias case, labor migration has become the main form of migration, after 1989. The latest data reveal a number of over 2.500.000 persons working abroad, most of them on temporary basis. The migration patterns shifted from permanent to temporary (circular migration, back and forth), becoming a life strategy. Many unskilled workers who went to work especially in Spain and Italy are now coming back home because the employment prospects in these countries is degraded as a result of economic contracting. The only areas in which it announces a trend of stability are retail and service sector. In what concerns the economic plans the first affected one are those related to the export, especially those related to EU export where is almost 70% the total one. The Romanian automobile industry is affected by the effects of the economic crisis; the market will be given to the locals, like Dacia. In metallurgical industry have been decided to shrinked the laminate production and to close some sectors. The constructions are affected by the conditions and the increasing costs of credit which dominate the requests grow in the residential sector. Generally the conditions and the increasing costs of credit, the relative lack of liquidity it already affects the economical agents from different economical sectors from Romania. The Social Services also suffers of the lack of money. The medical budgets research more efficient formula that shall give the same results with less money. The education, the research and the culture are prived by the necessary funds and they feel also the need to work in a severe period. The existence in Romania of a long unemployment, which generated the labor crisis, imposes an active law which must regard the objectives on micro and macroeconomic level. Last month, more than 600 companies have announced their intention to dismiss employees, and nearly 50,000 Romanians are in danger of losing their job, according to the National Agency for Employment of the Workforce. The areas most affected by the crisis are construction and processing industries Unfortunately, in the economic crisis context, all these Government's measures do not provide the expected results and the labor market from Romania is hard to recover in 2010. Official data show that in February unemployment was 8.3%, even higher than in January, which was only 8.1%.

Facing the lack of measures for the crisis, without being able to borrow from the IMF, European Bank or even the local banks, the private sector has made all that it could do: cut the costs, as proof that we have witnessed massive redundancies last year. And this year, the labor market doesnt shows signs of recovery, most employers being still very skeptical when it comes to recruitments.

OPINIONS, FACTS AND PERSPECTIVES

EU integration brought the lowest unemployment rate in the last 15 years, but Romania still has an unemployment rate higher than several EU member states, according to EUs statistics office, Eurostat. Analysts say that the trend of unemployment reduction will continue, and the domains with most acute work force deficits will be construction, services, tourism and ready-made clothes industry. In September 2008, with the collapse of U.S. bank Lehman Brothers, the financial crisis began to affect more strongly the real economy. But unemployment rose in Romania in the last year and a half, almost three times faster than in the European Union, shows an analysis of The Money Channel made on the basis of Eurostat and the National Agency for Employment. ING analysts say that "we should not expect a quick recovery of the economy in 2010" "Unemployment is at 8% and will continue to grow in the first half of 2010. I wouldnt be surprised to reach 10% in that period, before it starts to fall," said an IMF official. Regarding the top unemployment that could be achieved this year, opinions are, as always, divided. The Government is considering a rate of unemployment rate around 7% for this year, this means less than 650.000 unemployed. But the government officials had recently taken in consideration a risk scenario based on an economic growth of 0.2% instead of 1.3% of GDP, where unemployment rate could reach 9%, which would mean that the total number of unemployed would reach almost a million, said The Fund. On 16 February 2010, in its White Papers, the Association of Romanian Business People (AOAR) says Romania's Gross Domestic Product will likely increase by 0.5 to 1 percent in 2010 and inflation will vary between 3.5 and 4 percent. AOAR also expects the Government deficit to vary between 5 and 7 percent of the GDP, while AOARs major opinion is that the exchange rate will be RON 4.2 to the euro. According to the Romanian National Institute of Statistics, between the third quarter of 2008 and the third quartet of 2009, the unemployment rate rose from 5.4% to 6.8% and from the second quartet of 2009 it has increased by 0.5% percent. Over 2.5 million of the Romanian houses had at least one of its inhabitants living abroad on a provisional or permanent basis, pursuant to a statistical study made by Open Society Institute.

These facts point out that there are some huge problems in Romania but especially highlight issues in the labor market. Furthermore, according to the International Monetary Found forecast, the unemployment rate will go as up as 10% by the end of this year, thus becoming one of the highest in European Union. One of the main causes for the alarming unemployment rate is that jobs are not being created. Therefore, in Romania are almost 700.000 unemployed people and there are only 8.600 unfilled jobs registered at the National Labor Force Agency. Even worse, 7.000 of those jobs are for people that do not have a higher education graduate.

UNEMPLOYMENT: CAUSES AND CONSEQUENCES

According to the Keynesian economic theory, unemployment results from insufficient effective demand for goods and services in an economy. Some believe that structural problems and inefficiencies in the labor market cause unemployment. Others believe that regulations like minimum wage laws imposed on the labor market lead to unemployment.

Underemployment is one of the serious consequences of unemployment. Because of losing their jobs, people are forced to take up jobs that do not befit their skills, experience and educational qualification. Another major consequence of unemployment is stress and anxiety in the minds of the unemployed. Labor migration is also an important consequence of this situation. Most of the people who decide to leave Romania to work abroad do it because they either can not get a job with their specialization, or they have tried and worked here but decided to leave because the income for the same service is greater in other countries. More immigrants mean fewer workforces. Fewer workforces mean less competition for a job, which can only generate problems, because it will be harder to find specialized people to do the most important jobs. Another problem generated by the big rate of immigrants is that there are now too few people that can work in construction and agriculture. As a quick result, Romania now imports over 80% of the fruits and vegetables that are sold in autochthonous hypermarkets. Also, the most important contacts in construction were signed with companies from abroad. Once new places to work are created in Romania, people, as the Open Society Institute study has shown, would rather stay in their homeland, or come back if they have already gone. All they need are minimum conditions to work in the domain they want and they have studied and on a decent salary.

CONCLUSION

To conclude with, unemployment is a serious problem which can be passed if some important steps are followed. In order to succeed, and pass the recession, Romania has to apply a series of measures which should develop the economical situation. Once the economy will reach a higher level, the unemployment rate will also lower.