New EU states face labour shortages

BRUSSELS - Member states in central and eastern Europe are facing serious labour shortages while thousands of their workers are employed in richer western countries.

While the jobless rates have fallen "substantially" in all eight post-communist countries that joined the EU in 2004, the current lack of skilled and unskilled workers could become an "impediment" to further growth and job creation, according to a report by the World Bank.

The report points out that there has been a "substantial improvement of labour market conditions over a short period of time," in the region, particularly due to a boost in demand for workers in the domestic economies.

However, some labour resources have still not been utilised sufficiently, with younger and older people included among the jobless and a significant long-term unemployed rate.

"Many persons of working age are economically inactive either because they lack skills demanded by employers, or because of labour supply disincentives, such as early retirement benefits, high payroll taxes, and limited opportunities for flexible work arrangements," authors of the report point out.

The World Bank experts suggest three concrete steps to overcome both the labour shortages and the unemployment rate among certain demographic groups.

Governments in central and eastern Europe should reform their social security systems in a bid to make it more attractive for people to work, says the bank.

Secondly, a big challenge for the region is to "improve worker skills through reforming the educational systems and improving domestic mobility."

And finally, national authorities should consider importing skilled workers in the areas with the highest labour shortages by opening the countries' labour markets to foreign workers.

"The weights assigned to each policy depend on the nature of the most binding constraint to labour supply, which vary across countries," Jan Rutkowski, the bank's lead economist commented.