Bucharest Center for Economy & Society: The labor market in Romania, between the aging of the active population, lack of investment in competitive workforce development and exodus

• By 2030, the local labor market will need more than 600.000 people to fill highly skilled jobs. In Romania, only 1% of the population aged 25-64 participates in vocational training courses.

• In the next 10 years, Romania will have a triple number of active people aged over 65.

• A 10% increase in the share of the active population over the age of 60 reduces GDP growth per capita by 5.5%.

• Romania, on the 17th place globally in the phenomenon of population migration.

Romania faces multiple demographic challenges, which will have a major impact on the labor market in the next 10 years: the country’s population is aging, there are fewer and fewer active young people on the labor market, and the demand for highly qualified labor continues to grow, in the conditions of a developing economy, shows a BUCHAREST CENTER FOR ECONOMY & SOCIETY (CES Bucharest) analysis. By 2030, Romania will need more than 600,000 people to occupy highly qualified jobs and, at the same time, in the next decade, the aging phenomenon will intensify: our country will have a triple number of active people aged over 65 years.

Thus, according to the data of the National Institute for Scientific Research in the Field of Work and Social Protection (INCSMPS) analyzed by CES Bucharest, by 2030, occupations that require highly qualified labor such as IT, legal or health specialists will register increases in demand by 624 thousand people[i] (on average, 100.000 people/year), given that the profile faculties in the country, both state and private (Polytechnic Faculties, Faculties of Administration, Business and Law or Faculties of Medicine), provide cumulatively, annually, a total number of only 40 thousand of graduates, according to an estimate made by CES Bucharest based on the data of the National Institute of Statistics[ii].

At the same time, also until 2030, the demand for people with medium and low level of qualification will register a sharp decrease, by more than 400.000 people, according to INCSMPS. In order to remain competitive on the labor market, they should re-specialize, either at work or through vocational retraining courses, to acquire new skills adapted to current market requirements, such as digitalization and automation skills, sustainability or human resource management, according to a World Economic Forum report[iii].

The number of young people active on the labor market in Romania, in decline

The phenomenon of population aging has intensified in recent years, between 2012 and 2022, with the average age of the resident population in Romania increasing from 40.8 to 42.3 years, according to data from the National Institute of Statistics. According to the estimates of the European Center for the Development of Vocational Training (CEDEFOP), in the next decade, Romania could have on the labor market a triple number of active people aged over 65[iv].

A 10% increase in the share of the active population over the age of 60 reduces GDP growth per capita by 5.5%, the report of the National Institute for Scientific Research in the Field of Labor and Social Protection also shows.

At the same time, the number of young people active on the labor market, aged between 20 and 34, could decrease by 3.5% in 2035 compared to the level of 2020, according to CEDEFOP.

Only 21% of Romanian companies invest in employee skills training

According to World Bank data, in Romania only 1% of the population aged between 25 and 64 participates in professional training courses, compared to the European average of 9.1%.

On the other side, only 21% of Romanian companies invest in training employees skills adapted to the demand of the labor market, the same data show[v].

Comparatively, in Luxembourg companies can request subsidies from the state, to cover a percentage between 15-20% of the annual employee training expenses. Training support is limited to 7 skills, including digital, foreign languages, management or business training, according to an OECD analysis[vi].

Romania, in the top 20 countries globally in terms of population migration

Another major challenge for the labor market in Romania is the phenomenon of migration. Our country ranks 17th globally, with over 5.7 million Romanians who have chosen to work and settle abroad. The ratio between the number of Romanian emigrants and the number of foreign immigrants who settled in Romania is 6 to 1, according to the World Organization for Migration[vii].

At the same time, Romania has been importing more and more workforce in recent years, especially from Asia. In the year 2023, almost 30 thousand people from Asia were working in Bucharest and Ilfov county, most of them from Turkey, Nepal, Sri Lanka, China, India or Bangladesh, according to the official data of the General Inspectorate for Immigration[viii]. According to the public data analyzed by CES Bucharest, most are active in fields such as construction, HoReCa, transport or retail.

On the other hand, the official data of the Ministry of Foreign Affairs[ix] show that most of the 5.7 million Romanians who went abroad are settled in countries such as Italy, Spain, Great Britain or Germany and work mainly in fields such as agriculture, sales, construction, the medical system or IT[x]. Among the main reasons for the exodus of Romanians are the higher level of remuneration in other countries, high-performance health systems, developed educational infrastructure, mentality or more favorable climatic conditions.

Education contributes to greater productivity, to the growth of the national economy, but also to the identification and promotion of innovation, which brings with it the development of new better-paid jobs, according to another OECD report (Organization for Economic Cooperation and Development)[xi], one of the most important intergovernmental forums, to which Romania officially applies from 2022, but the accession process may even last 4-5 years, according to information appearing in the public space. For example, in Belgium, the contribution of education to the economy is 14%, according to a study by the International Journal of Science and Research[xii]. Practically, the education and continuous specialization of the active population, in line with economic and technological development, are the foundation of a healthy and performing economy.

Romania also has one of the lowest funding of the education system in Europe, at 3.2% of GDP compared to a European average of 4.8%[xiii], and this is reflected in the ever-lower number of students and master’s students who follow a form of higher education in the country’s universities. From 2020 to 2022, Romanian faculties registered a decrease of almost 22,000 young people, according to the figures of the National Institute of Statistics.

An analysis, research and information platform for the economic environment and society, CES Bucharest (BUCHAREST CENTER FOR ECONOMY & SOCIETY) is an independent organization, established to contribute to the debate on the most important topics in Romania, with the objective of supporting a competitive business environment and sustainable social development.