Thursday, July 5, 2007

IHT on Skilled Labor Shortage in Central Europe

An International Herald Tribune article based on a report by the Vienna Institute for International Economic Studies.

"Slovakia could soon become the world's biggest car producer per capita - if it can find enough skilled workers to assemble the vehicles." [...]

"The problem is particularly acute in the automotive industry in the Czech Republic and Slovakia, but it also affects segments of such high-skill service occupations as health-care personnel, architects, civil engineers and Internet technology experts, he [one of the report's authors] said.
In 2003, the Czech Republic began a program, appropriately called Selecting Qualified Workers From Abroad, which entails offering permanent residence permits to those who have lived and worked in the country for two and a half years. Poland said last month that it was introducing a similar program."

Perhaps a policy inspiration for the Slovak government? (The government recently made the requirements for obtaining citizenship tougher.)

Thanks to Michal Onderčo for this post.

PS: A careful observer might spot a mistake in the target year of euro adoption in Slovakia. It is not 2008, as in the article, but 2009.

1 comment:

Edward Hugh said...

Hi Michael,

Yep. I saw this one. Glad to see you are picking upon it.

"Perhaps a policy inspiration for the Slovak government?"

definitely. Although at the end of theday all the numbers aren't going to add up here.

(The government recently made the requirements for obtaining citizenship tougher.)

This is very disturbing. Shooting yourself in the foot.

The thing is the problem is becoming very large in the Baltic right now (I guess you saw my Latvia post on Afoe).

Claus Vistesen has done some data analysis for Lithuania and the results are very worrying number data analysis for Lithuania. Basically, if to feed growth they need 5,000 workers a month, and they only have 50,000 unemployed left on the books, in ten months they run absolutely dry, and this is, of course, impossible. Unfortunately they will crash first. In theory with wages rising so rapidly you should be able to leverage increased participation (all the theories on how to cope with ageing are based on this) but it just does not seem to be happening, or rather it doesn't seem to be happening to the extent people expected. Understanding why this is the case may turn out to be important.

Claus is now working on data for Poland, since unemployment there is dropping very rapidly too. On a back of the envelope guess they have a maximum of two to three years before they go into the Baltic spiral, and if this hits Poland then the whole EU8 will know about it. Bulgaria is obviously also another high risk situation, due to the rate of population loss they have been having.

The Economist has a piece on the situation in the Baltics, and they say this tucked away in the middle:

"So how to cool things down? For countries that can do it, keeping their interest rates above the euro's and letting their currencies appreciate helps. So does bringing in foreign workers from places such as Ukraine in order to reduce upward wage pressures. Slovakia is a prime example of how to pull off both tricks."

Obviously Economist journalists don't read the IHT.

Clearly there is a huge debate going on in the background here vis-a-vis the relative weighting of demographic versus institutional components in economic growth. As you know, I tend to give quite a lot of emphasis to demographics (which doesn't mean I don't consider institutional changes important), while the Economist goes the other way. All of this is now about to be tested in the EU8 context. I hope letting the "experiment" run there isn't going to be the price of me being proved right.

Incidentally, I replied to your mail, did you get it?