Will Romania accommodate Asian workers and change its labor market?

Bucharest, Romania (Nicu Buculei, CC BY-SA)

Romania's Ambassador to Pakistan, Nicolae Goia, has discussed with Pakistani Prime Minister's chief assistant Sayed Zulfikar Abbas Bukhari on bringing Pakistani workers to Romania.

The Islamabad Ministry of Information also revealed both officials agreed to establish a mechanism to provide security to Pakistani workers. Ambassador Nicolae Goia stressed that Romania needs additional labor force and can absorb about a million of skilled and unskilled workers from around the world. According to the press release, the Romanian diplomat also explained that his country needs thousands of drivers, doctors, engineers, construction workers and IT specialists. Both officials agreed to draw up a plan and set up a working group to develop a mechanism to eliminate the exploitation of workers in the host country. They agreed to send more than half a million of workers from different sectors to Romania by 2020. This has stirred up many reactions in Romania and neighboring countries.

Romania, like most countries of the Central and Southeast Europe (CSE), suffers from both large emigrations of its citizens and from the negative birth censuses. Most immigrants legally settled in Romania at the end of last year were from Moldova, Turkey, China, Israel and Vietnam. The big surprise over last year is the increase in the number of immigrants from Asian countries. At least according to the latest data from the General Inspectorate for Immigration. According to Romanian law, a legal immigrant is a person who has been granted the right to stay for 12 months (temporary immigrant) or by obtaining an identity document (permanent immigrant).

Immigrants in Romania

Almost 10 thousand citizens from the Republic of Moldova had the residence permits. It is worth noting that if we only look at the permits granted in the first half of last year, we notice that half of the Moldovans received permits to study in Romania. Others have been granted for family reunification or working permissions. Till September 2018, there were 8,968 legal Turkish immigrants. Also, in the first half of 2018, most of the permits granted to the Turks were for working (more than one-third). These were followed by those for family reunification or studies.

The next country in the ranking is China. Specifically, 7,831 Chinese people had the right to stay in Romania last autumn. It is worth pointing out that in the first half of 2018, more than half of Chinese citizens have received a residence permit for a working purpose. In fourth place there were Israeli immigrants with 3,329 residence permits. Most of them were granted study permits. Furthermore, 2,763 Vietnamese had valid residence permits, and over 90 per cent were for employment.

Several types of immigration are developing in Romania. On the one hand, there are immigrants who have been living in Romania for several months or years, and who extend their residence permits for various reasons: they continue their studies, extend their employment contracts, and so on. There are minorities that have a history of carrying out economic and social activities in Romania. A good example would be Turkish citizens with various connections and business, or young people from the Republic of Moldova who come to study in universities in Romania. The latter either remain for the period of studies, after which they are replaced by next generation, or they are building a future in Romania.

On the other hand, there is a significant increase of immigrants from Asian countries, like China or Vietnam. But these people represent an important workforce for the Romanian state, as the country is undergoing a major labor force crisis because many of specialists that left the country. And for those coming from China or Vietnam wages in Romania are relatively high.

Immigrants chose two types of destinations: Moldovan counties (mostly preferred by immigrants from the Republic of Moldova) and areas with a rapid economic development (Bucharest, Cluj, Constanta, Prahova, Timis), in some cases mainly because of the industry (Dolj, Arges). This polarization makes 2/3 of the counties of Romania receive less than 41 per cent of the total immigrants. Increasing migration is an important test for civil society in Romania, as well as for local/national authorities, requiring action on several levels: protecting the economic rights of immigrants and ensuring their access to basic services (education, health, etc.) to prevent discrimination.

Romanians keep on emigrating

Despite political populism the lack of workers in Romania is soaring, and the trends show it is going to be worse in the near future. An unanswered question is why Romanians, especially young people, continue to flee from their country even though the economy is growing, banks are giving mortgages, companies are looking for employees, wages are increasing, and large investment projects are announced weekly.

Although Romania had a year of economic growth, the intensity of departures in Romania increased in 2017 and 2018 compared to previous years. Last year, 242,200 people emigrated from Romania and some 166,000 people came to the country, resulting in a minus of 53,000 inhabitants. This is in a vivid accordance with other countries in the region. A total of 22 of the EU Member States reported more immigration than emigration in 2017, but in Bulgaria, Croatia, Latvia, Lithuania, Poland and Romania the number of emigrants outnumbered the number of immigrants.

In its first decade as a EU member, Romania lost more than 10 per cent of its population. Eurostat estimates that about 3 million Romanians have left, the UN says it would be 3.7 million, and the World Bank estimates about 3-5 million of Romanian emigrants. The report, which aggregated the migration values in 2010-2016, notes that “every day about 500 people move from Romania to another country, making foreign migration one of the main challenges for decision-makers.”

Specialists write about the patterns which have been created within the counties, correlated with the migration to a particular country. For example, migrants from eastern Romania are heading mainly to Italy, while those in the center and south of the country prefer Spain. Greece is a preferred destination for the inhabitants of southern Romania, while Germany and Hungary are preferred by Romanian citizens in the west of the country, an area traditionally inhabited by communities of Hungarians, Saxons and Swabians.

At the beginning of April, the Minister of Public Finance, Eugen Teodorovich reiterated that he wants to reduce workers’ mobility in order to reduce brain drain. The study made by the European Commission highlights that Romania has the highest proportion of active people (19,7 per cent) living abroad. High rates are also found in Lithuania (14.8 per cent), Croatia (13.9 per cent), Portugal (13.8 per cent), Latvia (12.6 per cent) and Bulgaria (12.4 per cent), but taking into account that these countries have a smaller population than Romania, the total number of emigrants is considerably lower. Not only the number of people who emigrated is high, but also the annual percentage rate goes higher. Romania excels here as well, annually about 1-1.5 per cent of the remaining active population leaves the country.

The brain drain

As regards the phenomenon of the brain drain, the previously mentioned study shows that the impact in Romania is less severe than other EU states, but the emigration of educated workers has a disproportionately negative impact on Romania’s productivity and economic outcomes. The European Commission notes, however, that Romania is the source of almost half of all health care workers who emigrated to the EU, with Italy as the main destination country. These losses raise serious concerns about the provision of health services to Romanians at home. Romania now has the lowest density of doctors in the EU and nearly 25 per cent left the country. The study also shows that wage differences between countries of origin and recipient countries have diminished, especially for Romania, Bulgaria and Poland. For example, wages in Romania reached about 45 per cent of Italian wages in 2015 compared to only 30 per cent in 2007 and are estimated to reach about 60 per cent by 2020. If we also take into account the reported earnings at prices, the convergence is even greater. For example, the study shows, the Romanians’ incomes in terms of prices have reached 60 per cent of the German ones.

But if the better salary was the reason Romanians emigrated, those who leave now take other factors into account. Studies show that emigrants, especially those with qualifications, leave countries with weak institutions. The quality of institutions is more important for skilled migrants, though, while unskilled migrants seem more attracted to the generous social benefits of host countries. An EBRD study shows that if a worker is satisfied with the quality of air and water, education, health, housing and roads and transportation in the country of origin, the intention to emigrate is reduced by about a third. According to the study, this counts as much as a wage increase that would reduce the income gap between the home country and a possible host country by 70 per cent. This perceived satisfaction can be measured by the social progress index, an indicator that measures the ability of society to provide citizens with basic needs and to create the conditions to reach their full potential. Romania and Bulgaria are at the top of this ranking.

Revenues from abroad

The calculations show that 20 per cent of the Romanians working abroad earn 50 per cent more than the active population left in Romania, so most of the remaining ones rely heavily on the money sent by those who have gone abroad. According to the data, Romanians working abroad contribute EUR44.4bn to the economies of the host countries. From money the Romanians send home the maximum was recorded in 2007, when remittances accounted for 3.5 per cent of Romania’s GDP. They have declined, but still represent 1.5 per cent of GDP, and in absolute terms, they amount to 60 per cent of total FDI. Still, Romania boasts the highest economic growth in the EU, but the Romanians continue to leave in an impressive number of countries. Romania, like other CSE countries, has been an attractive destination for foreign investors, especially after joining the European Union. The 2006-2008 period represented a peak in attracting foreign direct investment, but the financial crisis strongly affected the local economy and investors’ interest in Romania. Thus, from around EUR8bn each year before the crisis, investments fell to EUR2-3bn in 2009-2013 and in 2017 barely reached EUR4.7bn, about half of the level recorded in 2008. The gradual increase in foreign investment went hand-in-hand with economic expansion.

In recent years, the economy has accelerated, amid private consumption stimulated by tax cuts and wage increases, which have been criticized by both analysts and European bodies. In 2017, Romania’s economy grew by almost 7 per cent, the biggest GDP gain in the EU, but this consumption-driven growth is not lasting. Last year, growth has slowed to 4 per cent, still robust, but far below the expectations of the government.

And yet, it seems that economic expansion has not brought a proportionate increase in welfare. Income levels remain modest compared to the European average, and a large proportion of the population is below the poverty line. Thus, Romania is one of the three EU member states (along with Bulgaria and Greece), where over one-third of the population was exposed to the risk of poverty and social exclusion, with 35.7 per cent of the population living in this situation. But besides poverty and the unfavorable economic situation during the financial crisis, there are other considerations that underlie migration, such as disappointment with the evolution of society or the lack of prospects for development. According to the latest Eurobarometer, in March 2018, social inequalities, migration and unemployment are at the top of the concerns of Europeans. In Romania, inequalities are only the third. The first places on the public agenda are the subjects of economic growth and migration.

If Romania accepts half a million Pakistani and other Asian workers, it would be a first large step in the CSE countries in liberalizing the labor market. But the Romanian Foreign Ministry said, reacting to media coverage of the issue, that Romania’s ambassador to Islamabad had a meeting with Prime Minister’s special assistant as courtesy reception, in which several topics have been addressed. “We would point out that the talks did not include the setting of quotas or figures on a possible labor transfer from Pakistan, or any concrete action plan to do so. In this context, we underline that according to the legislation in force, namely the Government Decision no. 34/2019, the contingent allocated to non-EU workers for 2019 at the national level is 20,000,” the MFA said.

Vedran Obućina is an analyst and a journalist specializing in the Croatian and Middle East domestic and foreign affairs. He is the Secretary of the Society for Mediterranean Studies at the University of Rijeka and a Foreign Affairs Analyst at The Atlantic Post.

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