According to the PwC 2023 survey of CEOs, the lack of labor and skills is the main concern of Romanian companies, as they are considered the biggest risk that could negatively affect the profitability of the industry in which they operate in the next decade. workforce availability and readiness emerges from our analysis and surveys and is a constant part of the executive’s agenda. Recently, demographic changes caused by aging populations and migration, as well as the impact of new technologies, have heightened these fears. We see that more and more companies are having difficulty hiring and especially people with the right skills. This mismatch between the skills of workers and the needs of employers creates a paradoxical situation: there are jobs, but there is unemployment.

An analysis conducted this autumn by PwC Romania for Amcham showed that the sectors with the greatest shortage of personnel in Romania are: manufacturing, transport and IT&C. At the economy-wide level, the labor shortage estimated for 2022 was 145,000 workers, and could reach 224,000 in 2026 in the absence of some measures. The economic impact at the 2022 level, defined as lost productivity, is estimated at €4.4 billion, and these losses are expected to double to €9.5 billion. In particular, in construction, HoReCa, agricultural production and courier services, part of this deficit was covered by foreign workers. The quotas accepted in Romania have been 100,000 in the last two years, double the number in 2021, and will be increased to 140,000 in 2024. But the “import” of workers is not enough to meet the needs of the economy, especially in areas that require increasingly complex skills.

One of the main conclusions of our analysis is that this deficit can be corrected by measures aimed at activating the labor force from the segment of those who are not currently integrated into the labor market: the unemployed, young people, pensioners, among whom the greatest potential for activation is the age group from 15 to 24 years old, who currently does not receive any form of education and does not work, has about 350,000 people.

Romania’s ability to sustain and attract capital to the economy will depend on how the structural problems are resolved, as well as targeted and rapid measures.

At the same time, the system of education and professional development should receive more resources to adjust modern trends. Romania has the highest school dropout rate in the EU, at 15.3% in 2021 compared to the EU average of 9.7%, while the rate of youth not in employment or education remains one of the highest in the EU – 18%.

Approximately half of the inactive population in Romania consists of secondary school and secondary vocational education graduates, and 62% are represented by women. Although there are many elements that make up this field of reasons for not participating in the labor market, including the degree of legal registration of work, one aspect that deserves attention concerns the level of gender inequality in employment and wage levels, which in Romania is one of the largest in the European Union. At the European level, it is proposed to halve gender inequality in employment and equalize women’s incomes with men’s incomes by 2030, with new rules on wage transparency being important. a step towards combating this disparity.

In terms of skills, of course, the rapid development of new technologies in recent years requires unparalleled digital skills. Romania, however, performs poorly on digital skills, with only 28% of adults having at least basic digital skills, well below the EU average (54%), according to the European Digital Decade: Digital Goals for 2030 report. Furthermore, only 9% have digital skills above basic level, compared to the EU average of 26%. Obviously, employers should offer training and development programs to their employees. The willingness to learn and adapt seems to be there, especially among Gen Z. In the PwC survey of employees in Romania, Hopes and Fears 2023, when asked about the impact of artificial intelligence on their careers, they appeared to be optimistic and more likely cite the positive impact of AI rather than the negative, saying that it will increase their productivity, enable them to acquire new skills or create employment opportunities.

In addition to the peculiarities of the labor market in Romania, the trends that determine the direction of the world economy should be taken into account. A green economy also means a new set of skills. The European Commission’s European Year of Skills report points out that workers have a very important role to play in technology efforts and integration into the green economy. According to the study, companies have partially solved this problem by moving departments, increasing training budgets, more attractive benefits.

From this perspective, PwC’s annual Employees Hopes and Fears survey shows that employers are aware that a world driven by “digital and green” will require different skills than those available. But only 15% of unskilled workers believe that the work they do now will involve other tasks five years from now, compared to 51% of skilled workers who do. Thus, we can identify an expectancy problem that can make those who do not adapt and do not believe they need to learn new skills more vulnerable to job loss. Furthermore, the gap between these categories also has to do with the way in which inequality spreads. This is a chain of consequences that affect both the labor market and the company.

Efforts to attract and retain workers in an increasingly competitive labor market are also exacerbated by the instability of the macroeconomic context, inflationary pressures on wage budgets, and fiscal changes. Restrictions on tax benefits for IT, construction, agriculture, as well as a possible increase in income tax rates through the introduction of a system of progressive rates instead of a flat rate system, in turn, put pressure on wage costs.

In summary, Romania has recovered from the development gap compared to Western European countries over the past 15 years, contributing to positive increases in welfare levels and implicit wages, but it faces emigration and an aging population. population and has an outdated state system of formal education. These factors create difficulties for employers in an economy under pressure to change and reduce the attractiveness of investment. The authorities, companies and other institutions should address this situation, which can slow down the development of Romania, by investing more in training and education programs that meet the needs of the labor market.

This article is part of PwC Romania’s Agenda for Tomorrow editorial project, which will run until the end of this year and aims to discuss the context and perspectives that can guide companies to make informed decisions in the midst of change. Previous articles of the series can be read here.

The article is signed by Daniel Angel, Francesca Postolache and Kenneth Spiteri

Article supported by PwC Romania