Research Detail
| CEE Special Report | Can we work more for longer? |
CEE Special Report | Can we work more for longer? Shrinking working age population is unavoidable in the region. By 2050, there will be more than 10 million people fewer aged 15 to 64 years in CEE7 (Czechia, Croatia, Hungary, Poland, Romania, Slovakia and Slovenia), according to the baseline projection of the European Commission. That is a loss of roughly one-fifth of the current workforce or equivalent of the size of the Czech population disappearing from the labor market. Fertility rates have been declining across Europe over the last few decades. The region is no exception to that development, with Poland experiencing the biggest drop of the total fertility rate since 1990. On the other hand, life expectancy has increased in the region visibly since the transition. Such a development does not seem to outweigh the low number of births across the region. Is there a way to fill that gap? We look into three areas, namely mobilization of labor force, enhancing labor mobility and productivity gains to evalute the potential of workforce increse. Over the last two decades, employment rates and participation have increased visibly in the region (by more than 10 percentage points in Hungary, Poland and Romania). However, there is still some potential to increase the workforce when we compare CEE7 to countries with top employment rates (the Netherlands). Female employment has the highest potential to rise in Poland and Romania. Low retirement age (Slovenia, Slovakia and Czechia) or high retirement age gap (Hungary and Poland) if changed, could be an additional source of workforce on the labor market as well. Enhancing female labor participation through improving childcare arrangements and part-time job offers may motivate women to be more active in the labor market. Migration is a long-discussed matter that could help CEE countries. The recent inflow of migrants from Ukraine showed the need for workforce in the region. Not only did the unemployment rate remain low, the matching on the labor market also improved. Can we work more for longer, however? Health status is seen as an obstacle for longer labor market participation in the region. The expected number of healthy years at birth is below the EU27 average in all CEE countries except for Slovenia. On the other hand, implementation of new technologies such as Artificial Intelligence (AI) may be a key issue for the future development and effectiveness of the labor market. Initial findings (OECD 2023, IMF 2024 or Noy and Zhang 2023) suggest that implementation of AI could actually increase productivity and may be seen as a complementary factor for labor. Digital skills will thus be in need. Finally, lifelong learning, which is not sufficiently developed in the region, represents a challenge not only for effective adoption of AI but also for green transition. The net-zero transition will put lots of pressure on high-emission sectors to scale down. As a result, many working in those sectors will need to change employment or fully requalify. The addition of skills even after completing formal education is therefore essential for the ability to respond flexibly to changing conditions on the labor market. |
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| 2024/07/25 / Erste Group Research |
CEE Special Report | Can we work more for longer? Shrinking working age population is unavoidable in the region. By 2050, there will be more than 10 million people fewer aged 15 to 64 years in CEE7 (Czechia, Croatia, Hungary, Poland, Romania, Slovakia and Slovenia), according to the baseline projection of the European Commission. That is a loss of roughly one-fifth of the current workforce or equivalent of the size of the Czech population disappearing from the labor market. Fertility rates have been declining across Europe over the last few decades. The region is no exception to that development, with Poland experiencing the biggest drop of the total fertility rate since 1990. On the other hand, life expectancy has increased in the region visibly since the transition. Such a development does not seem to outweigh the low number of births across the region. Is there a way to fill that gap? We look into three areas, namely mobilization of labor force, enhancing labor mobility and productivity gains to evalute the potential of workforce increse. Over the last two decades, employment rates and participation have increased visibly in the region (by more than 10 percentage points in Hungary, Poland and Romania). However, there is still some potential to increase the workforce when we compare CEE7 to countries with top employment rates (the Netherlands). Female employment has the highest potential to rise in Poland and Romania. Low retirement age (Slovenia, Slovakia and Czechia) or high retirement age gap (Hungary and Poland) if changed, could be an additional source of workforce on the labor market as well. Enhancing female labor participation through improving childcare arrangements and part-time job offers may motivate women to be more active in the labor market. Migration is a long-discussed matter that could help CEE countries. The recent inflow of migrants from Ukraine showed the need for workforce in the region. Not only did the unemployment rate remain low, the matching on the labor market also improved. Can we work more for longer, however? Health status is seen as an obstacle for longer labor market participation in the region. The expected number of healthy years at birth is below the EU27 average in all CEE countries except for Slovenia. On the other hand, implementation of new technologies such as Artificial Intelligence (AI) may be a key issue for the future development and effectiveness of the labor market. Initial findings (OECD 2023, IMF 2024 or Noy and Zhang 2023) suggest that implementation of AI could actually increase productivity and may be seen as a complementary factor for labor. Digital skills will thus be in need. Finally, lifelong learning, which is not sufficiently developed in the region, represents a challenge not only for effective adoption of AI but also for green transition. The net-zero transition will put lots of pressure on high-emission sectors to scale down. As a result, many working in those sectors will need to change employment or fully requalify. The addition of skills even after completing formal education is therefore essential for the ability to respond flexibly to changing conditions on the labor market. |
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