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Unemployment: a curse of transition
Valeriu Prohnitchi, September 1, 2005
Why to analyze unemployment
The analysis of unemployment is part of the most difficult and responsible sides of the economic analysis. The explanation is that human fates and tragedies are behind statistics, rather than an empty economic phenomenon. The governments no matter how liberal they are and how insignificant is their intervention in the game of the economic forces on market, they must do their best to find solutions to joblessness. Many arguments support a careful monitoring of this phenomenon and favor an active employment policy.
Firstly, to be jobless is a social condition, one of the class, rather than a simple economic rating of the individual. This is a label that has a deep psychological impact on whom it concerns. Unemployment becomes a risk factor which may make a human take a criminal way, get addicted to alcohol, or be violent in his family. We often observe such negative influences in Moldova.
Secondly, unemployment is a grave form of spending of resources needed to ensure an economic growth and to raise large incomes. In turn, the growth must generate new jobs, improving living standards for large masses of people and reducing unfairness in distributing incomes. If this does not happen, a relatively small segment of people benefits from created incomes. We face such a situation in Moldova, which is worsened because 40 percent of population is employed or subsisting from agricultural activities which bring very small incomes.
Thirdly, the unemployment may be very expensive in political terms, with many governments in the world failing reelection after unemployment got serious sizes.
Statistics and unemployment
The analysis of unemployment in Moldova becomes complicated because of incomplete statistics. The economically developed countries calculate the joblessness rate on basis of data registered by employment offices. This method does not work in Moldova because most of citizens do not hurry up to get registered with employment offices. These offices registered 27,000 jobless citizens in the 2nd quarter of this year, though the Employment Investigation in Moldova indicated almost 96,000 job seekers. This lack of interest should give some food for thought for politicians. It demonstrates either the inefficiency of the governmental policy on assistance of job seekers, or the distrust of the citizen and the fact that he does not expect anything from the state, with the employment office being a creature of the state authority under these conditions.
The information on joblessness rate was collected on basis of the labor investigation, and this means that the statistics office must "catch" the job seeker. If the citizen has a temporary job, even of a couple of days or weeks (as for example, he is hired by his neighbor by the day for agricultural works), he will not be found at home to fill up the questionnaire. In compliance with the definition recommended by the International Labor Bureau, a job seeker must: 1) have no job; 2) be ready to begin working within two weeks, if he immediately finds a job; 3) seek a job. This is an ample definition, and a better one cannot be imagined. However, the citizen in our country can have a job, but he may not earn an efficient salary for his work (an aberrant phenomenon, but available in European countries). Statistics show that employers had arrears worth 126 million Lei on salary payments in July 2005.
Also, citizens may be unable to start working within two weeks and may not actively seek a job in Moldova, where salaries are very low and even miserable in sectors such as agriculture. Instead, the citizen would rather actively search a tourism agency to help him immigrate abroad, to countries with higher salaries.
Emigration and unemployment
Unemployment in Moldova is in a deep correlation with emigration of labor force abroad. In other terms, emigration is a factor which reduces pressures on labor market and substantially declines the joblessness rate. It is not hard to imagine what social revolts would take place if for certain reasons citizens were prohibited to emigrate.
In 2004, the National Bureau for Statistics (BNS) identified 345,000 people who have left for work abroad1. Let's suppose that they were in the country and added to the number of economically active people. Existing studies show that one third of Moldovan emigrants had no jobs before leaving the country2. Thus, one may assume that 115,000 out of 345,000 citizens who would not emigrate were job seekers. Using the new data, the unemployment rate in 2004 would be 13 percent, not 8 percent. However, half or even more of potential emigrants would become jobless sooner or later, increasing the number of job seekers.
Even more, emigration is followed by remittances from abroad which allow people who remain at home to refuse low-paid jobs. The number of job seekers, even of low-paid jobs, would grow, if the emigration did not exist, producing a significant rise of unemployment rate.
Unemployment and youth
Statistics say that unemployment especially affects youth aged between 15 and 29. They form the largest group of job seekers accounting for 36-percent. They are not accidentally the largest category among emigrants. Youths between 20 and 24 run the highest risk to be jobless, with most of them being graduates from higher institutions. The incidence of unemployment in this age category rose from 15.3 percent in 2002 up to 25.2 percent in 2004. Considering the trends registered in the first two quarters of this year, this indicator will surge up to 30 percent in 2005. The situation is very grave among young men from cities, as they run a higher risk not to find a normal job than the average per country.
More than 20,000 students graduated from professional, secondary and higher education institutions in 2004. We do not know how many of them were hired, but it is well-known that employers prefer experienced specialists instead of fresh graduates. The government makes some timid attempts to encourage the employment of young graduates, but the resources allocated for this purpose are too small and this policy envisages only the budget-financed students3.
The trends demonstrated by indicators of labor market and inefficiency of governmental policy on employment say that emigration will be fueled in continuation and may even grow on account of youths who are pessimistic to get employed in the country. Recent statistics say that emigration does not show any reverse signs. BNS identified in the 2nd quarter of 2005 more than 380,000 people who have left the country, and we may expect that this number exceed 400,000 persons by late 2005.
The national economy is unable to offer jobs to people who are part of the economically active population category. If a job is available, the salary makes the worker leave his employer shortly. Moldova organized a number of job fairs for youths in April-June 2005, with a public official saying on this occasion that the average salary offered at fairs accounted for 900 Lei. Such an earning is absolutely unacceptable for graduates from higher education institutions, as many of them have invested hard 4-5 years in their knowledge.
Graduates also face other problems. Firstly, the quality of knowledge and skills depends on requirements of managers. Graduates are theoretically prepared well and sometimes very well, but they lack any experience. Secondly, the higher education system offers specialties which reflect the current demand for "prestigious" faculties: 22 percent of graduates come from law faculties, 21 percent from economics faculties, 12 percent from philology and foreign languages. However, this distribution does not respond to the current demand on labor market, which needs more and more mechanical engineers, IT specialists and construction workers. Most of young lawyers, economists and translators will either have to accept offers which does not match their education, or will leave for abroad. There are few countries which afford the luxury to train job seekers and emigrants with higher education like Moldova.
1 See "Active, Employed Population and Unemployment in the 2nd Quarter of 2005", communication, August 2005, BNS
2 Ghencea Boris and Gudumac Igor, "Labor Migration and Remittances in the Republic of Moldova", sponsored by AMM and Moldova-Soros Foundation, March 14, 2004
3 See the June 20, 2005 Government Decision # 594 on approval of procedures aimed to encourage employers to hire state-financed graduates from educational institutions, Monitorul Oficial # 89-91 (1688-1690)