The availability of workers is right now perhaps
the most significant factor for companies when assessing business plans and
prospects in the region. Very low unemployment, dynamic growth, emigration and
the fast development of the service sector have combined to create acute labour
shortages in the CEE-6 region. If these are not resolved, we foresee
limitations to GDP growth, perhaps a recession and a likely shadow over private
investment in the region in the medium to long run. If fulfilled, this path has
negative implications for the demand for commercial real estate in CEE into the
Robinson, CEE Research Specialist,
riddle exists because typically when economies reach cyclically – low levels of
unemployment, the historical precedent is for an economic slowdown to ensue.
That slowdown sees job lost, the unemployment rate rising and thus some
equilibrium to the labour force is restored. This mechanism involves economic
pain, which is not attractive to policy makers, business or real estate players
We see six possible solutions to the riddle:
- A return
of the labour force from the west. Our data presented in “Labour Force
Boomerang” report published in July 2017 suggested another 0,5mn CEE – 6
passport-holders migrated westwards in 2016. The “boomerang” is not with us yet
but the economic conditions to trigger it, including wage growth in CEE, are.
from the east, from the former USSR and elsewhere, can boost the CEE-6
workforces. The presence of foreigners is noticeable in the CEE-6 for the first
time. 7.1% of Czechia’s population in 2017 was foreign, according to World Bank
data. The lowest ratio was Poland’s 1,8% including the World’s Bank estimate of
221,307 Ukrainians although this figure could be a multiple of that in
actuality. Ukrainians are helping to drive Poland’s economic performance and
solve its demographic and labour riddle. Other CIS countries such as Russians,
Belarussians and Moldovans are sources as well.
up the quality of labour supplied in the region, through better education and
training to improve productivity. Switching workers out of public – sector jobs
may be an option in Hungary and Slovakia in particular.
the working “activity rate” in the population aged 15-64 and perhaps those of
retirement age. The CEE-6 have seen success over the past 15 years in policies
designed to increase the proportion of this population which is willing and
available for work.
of jobs and lower working hours in the week may do the job.
- Automation improves
productivity per worker by removing workers. Tight labour markets maybe even
encourage investments in automation. Whilst the CEE-6 is by no means unique in
the world regarding this “threat” to jobs, it does have tight labour markets
and a high proportion of GDP generated by manufacturing. Automation in
manufacturing may be closer to making a difference to the demand of labour in
manufacturing than in services. Signs of this are present in Germany where we
can see the examples of moving to a 28-hour working week in the auto production
companies. Where the German auto industry goes, that in CEE-6 may well
recession is not inevitable for the CEE-6 economies, but inflation is rising
and the central banks are starting to hike interest rates. An economic slowdown
/ recession can act to reduce the demand for labour and resolve the riddle by
Outcomes 1 and 2 we see as likely to emerge as
significant factors in the shorter term. Solutions 3 and 4 are longer term in
nature. Answers 5 and 6 are less helpful for job prospects.