Enhancing Job Opportunities: Eastern Europe and the Former Soviet Union addresses why labor market outcomes have been disappointing during the transition and suggests policy interventions that can foster job creation and reduce unemployment. In many countries in the Region, productive job opportunities are scarce, despite the resurgence of economic growth. The book argues that the primary cause of this outcome is defensive enterprise restructuring-enterprises are improving productivity largely by shedding redundant labor. For the creation of more and better jobs, enterprises should move towards strategic restructuring, so as to turn productivity gains into new investment and expansion. This shift from defensive to strategic restructuring-as well as the creation of new activities-requires improvements in the investment climate. Governments need to remove key obstacles to firm entry, operation, and growth. The authors recommend that countries in the Region pursue a two-pronged strategy: first and foremost, lower the costs of doing business to encourage investment, firm growth, and job creation; and second, develop an adaptable labor market, where employers have incentives to hire and workers have incentives and skills to take available jobs. With contributions by Arup Banerji , Gaëlle Pierre , Milan Vodopivec , Philip O'Keefe.
Intro Contents Foreword Acknowledgments Acronyms and Abbreviations 1. Overview Changing Labor Markets in the Region The Drivers of Labor Demand during the Transition The Role of the Region's Policy and Institutions The Policy Challenge: Promoting Job Creation in the Region 2. Main Labor Market Developments during the Transition An Economically Diverse Region with Differing Labor Markets Unemployment and Underemployment: Major Economic and Social Problems Rebounding Real Wages, but Widening Wage Differentials The Changing Nature of Jobs during the Transition Labor Market Outcomes: Disappointing during the Transition? Summary: Key Stylized Facts on Labor Market Transition in the Region 3. Macroeconomic Policy, Output, and Employment: Is There Evidence of Jobless Growth? The Employment-Output Link during the Different Phases of the Transition Any Role for Macropolicy to Influence the Employment-Output Link? Summing Up: Employment Prospects in CEE and CIS Countries 4. Restructuring, Productivity, and Job Creation The Required Transformation of the Transition Economies and Progress So Far What Is the Role of Firm Restructuring and the Entry and Exit of Firms for Job Creation? What Is the Role of Firm Restructuring and the Entry and Exit of Firms for Productivity and Output Growth? What Drives Restructuring of Existing Firms? How Many Firms Enter and Exit the Market in Transition Countries? Summing Up: Entry Conditions and Incentives to Create Jobs Are Essential for Improving Job Creation in the Region 5. The Investment Climate and Job Creation Importance of Investment Climate for Job Creation Employers' Views on the Major Obstacles to Firms' Operation and Growth in the Region The Impact of Investment Climate on Job Creation in the Region. Investment Climate: International Comparisons and Variations within the Region Summing Up: Promoting a Better Investment Climate to Foster Job Creation 6. Labor Market Policy and Institutions: Combining Protection with Incentives for Job Creation The Role of Labor Market Policies and Institutions The Divergent Paths of Wage Determination during the Transition Employment Protection Legislation Remains Strict despite Reforms, Although Enforcement Is Variable Taxes on Labor The Role of Passive and Active Labor Market Programs Summing Up: The Challenge of Labor Policy Reforms in Transition Economies Bibliography Index Boxes 1.1 Geopolitical Country Groups Reflect Economic and Institutional Differences among the Region's Countries 1.2 In Most of the Region's Countries, Higher Investment Rates Are Necessary to Accelerate Economic Growth and Job Creation 2.1 Do Geopolitical Groupings Help in Assessing the Economic Performance of the Transition Countries? 2.2 The Challenge of Job Creation in Turkey 2.3 Employment in Moldova 2.4 International Migration Patterns in the Region 2.5 Growth and Job Creation in Low Income CIS Countries 2.6 Relative Position of Women in the Labor Market Has Not Deteriorated during the Transition, and New Employment Opportunities for Women Emerged in the Expanding Services Sector 2.7 Internal Migration in the Region in Search of Jobs 2.8 An Increase in Educational Wage Premiums Has Been an Important Factor behind the Rise in Wage Inequality 2.9 The Surge in Informality during the Transition: Key Features and Policy Challenges 3.1 An Empirical Investigation of the Possible Links between Employment, Output, and Macroeconomic Policy 4.1 Economic Development and the Employment Structure 4.2 A Consistent International Firm-Level Database. 4.3 Assessing the Impact of Labor Reallocation on Productivity Growth 4.4 The Decomposition of Productivity Growth Using Firm-Level Data 5.1 Small Entrepreneurs Complain about the Business Environment in Bulgaria 5.2 Service Sector Employment Rate as an Indicator of Job Creation Potential 5.3 Stringent Employment Protection Regulations May Forestall Job Destruction, but at the Same Time They Discourage Job Creation 5.4 What the Official Data on Entry Barriers Do Not Show: Romania 6.1 The Role of Labor Market Policies and Institutions: Some International Evidence 6.2 Wage Bargaining in Estonia: A Radical Reformer 6.3 Innovative Ways of Targeting the Poor 6.4 Public Works and Workfare: An Alternative to the Unemployment Benefit? Figures 1.1 The Payoff to Reforms in Transition Economies: Higher Output, but Still Insufficient Jobs, 1992-2003 1.2 Unsynchronized Job Creation and Job Destruction Can Give Rise to Unemployment 1.3 Unemployment Continues to Be High in Most Transition Economies 1.4 Employment Rates Have Declined and Are below the Lisbon Target of 70 Percent 1.5 Different Patterns of Labor Reallocation: The Czech Republic (CEE) vs. the Kyrgyz Republic (CIS) 1.6 Wage Inequality in the CIS Is Higher than in the CEE 1.7 Labor Reallocation Has Played an Increasing Role in Promoting Labor Productivity Growth in Russia 1.8 The Rate of Job Creation Is Higher for More Productive Firms in Moldova 1.9 Firm Entry and Exit Are Critical for Productivity Growth 1.10 Major Obstacles to Firm Activity, 2002 1.11 The Tax Wedge on Labor in the Region Is High, Often Higher than in Most OECD Countries 1.12 Obstacles to Business Operation and Growth Vary by Subgroup 1.13 The Region's Countries Have More Stringent Regulations on Hiring and Firing than OECD Countries Do. 1.14 Labor Regulations Seem to Be a Binding Constraint Only in the New EU Member Countries and Not in the Other Parts of the Region 1.15 Access to Finance Is More Difficult in Transition Economies than in Market Economies at Similar Income Levels 1.16 Constraints Reported by Firms Vary across the Region's Countries 2.1 Unemployment Is High in Most CEE and SEE Countries, 2003 2.2 Employment-to-Population Ratio Is Low in Most of the Region's Countries 2.3 More Workers Are Hired in Regions with a Developed Services Sector, Educated Workforce, and Infrastructure (Poland's Regions, 1997) 2.4 Real Wages Have Rebounded in the Mid-1990s 2.5 Wage Inequality in the CIS Is Higher than in the CEE 2.6 Informal Sector Accounts for a Substantial Share of Total Employment, Especially in CIS 3.1 Output per Capita Growth Is Largely Driven by Productivity Growth 3.2 Inflationary Pressures Have Declined over Time in Most Countries 3.3 Employment Adjustment Has Been More Marked in CEE than in CIS Countries 3.4 Real-Wage Adjustments Have Been More Marked in CIS than in CEE Countries 3.5 Real Interest Rates Have Increased in Recent Years in CEE Countries 3.6 Share of Gross Fixed Capital Formation as a Percentage of GDP 3.7 Share of GFCF and Productive GFCF as a Percentage of GDP 3.8 Loosening of the Fiscal Stance in CEE Countries in Recent Years 3.9 Real Wages in the Public Sector Have Increased More Rapidly than in the Private Sector in CEE Countries 4.1 Different Patterns of Labor Reallocation across Transition Economies 4.2 Large Job Flows in Transition Economies 4.3 Unsynchronized Job Creation and Destruction Can Give Rise to Unemployment or Underemployment 4.4 Job Flow Rates, Selected Transition Countries, 1990-2001 4.5 Decomposition of Labor Productivity Growth, CEE Countries. 4.6 Contribution of Reallocation to Russian Labor-Productivity Growth, 1986-2001 4.7 Sources of Productivity Growth in Transition and Emerging Economies 4.8 Relationship between Net Entry Contribution and Productivity Growth of Incumbents 4.9 Effects of Foreign and Domestic Privatization on Multifactor Productivity Growth (MFP) 4.10 Effects of Foreign and Domestic Privatization on Productivity, Employment, and Wages 4.11 How Many Firms Enter and Exit the Market? 5.1 Most Frequently Reported Major Obstacles to Firm Operation in the Region 5.2 Obstacles to Business Operation and Growth Vary by Subgroup 5.3 Smaller Firms Are More Constrained by the Investment Climate 5.4 Market Service Employment Is Higher in Countries with Easier Access to, and Lower Cost of, Credit 5.5 Excessive Market Regulation Hurts Job Creation 5.6 In Some of the Region's Subgroups, Time Spent Dealing with Government Regulations Is Still Substantial 5.7 Protection of Property against Crime Can Be Costly 5.8 Firms in the Region Rely to a Lesser Degree on Capital Coming from Formal Institutions than Do Firms in Other Regions 5.9 Starting a Business Is Not Easy in Many of the Region's Countries 5.10 Job Creation in the Region Is Likely to Be Hampered by Difficult Access to Credit 5.11 Markets in the Region Tend to Be Overregulated 5.12 Corruption Is High in the Region 6.1 Density and Bargaining Coverage, Early 2000s 6.2 Minimum-Wage-to-Average-Wage Ratio, 2002 6.3 Minimum Wage in Ukraine Accounts for a High Percentage of the Market Wage of Low-Skilled Workers, but It Is Not Enforced 6.4 Employment Protection Legislation in EU-8 and Other Selected Countries during the Transition 6.5 Transition Countries Have More-Stringent Regulations on Hiring and Firing than Do OECD Countries. 6.6 There Are Significant Differences within the Region's Countries on EPL.
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