Central Europe’s Trademark: Low Unemployment

The labor market of Central European countries is doing better than in much of the EU. In addition, it is proving highly resilient to unforeseen crises.

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“Sine labore non erit panis in ore” (without labor, there will be no bread in mouth) says an old Latin proverb—an old truth whose universal appeal is known in every latitude. Just the same, everyone knows that good work comes with determination. “No pain, no gain,” as Anglo-Saxons like to say. Central Europeans are particularly attached to the concept. Nations that were under Soviet control until 1989 are now determinedly making up for almost half a century of underdevelopment. An excellent measure of this turns out to be the unemployment rate – much lower in CEE countries than in Western European states.

Central European countries take advantage of the high education levels of their own citizens, low wages – compared to other countries on the continent – and the high flexibility of their labor markets. Add to these reasonably fast-growing economies coupled with the EU’s huge internal market, and one can see a recipe for effectively limiting the extent of unemployment. But the low rates of joblessness are also a consequence of the rapidly growing group of people in the region who are retiring – and this, in turn, signals imminent problems in the future.

For whom the unemployment bell tolls

Let’s have a look at the numbers. According to Eurostat, from May 2023 (latest data available), the average unemployment rate in the EU was 5.9%. In 20 eurozone countries (including Croatia, which joined this group at the beginning of 2023), it was a little bit higher – 6.5%. In this respect, the situation in the EU is fairly stable. A year earlier, in May 2022, 6.1% were unemployed; in the monetary union countries, this percentage was 6.7. Thus, it can be seen that after a period of restrictions caused by the Covid-19 pandemic, the situation in the European labor market has stabilized.

Two countries in the European community maintain double-digit unemployment: Spain (12.7%) and Greece (10.8%). Italy, another country at the top of the list of countries with the highest joblessness rate for years, has managed to reduce it sharply. Just two years ago, it stood at 9.5%; today, it is 7.6%. France – another country that regularly tops the European unemployment average – has markedly reduced its unemployment levels in recent years.

“How did you go bankrupt? Gradually, then suddenly,” once said Ernest Hemingway. This sequence of events is not only true when talking about personal financial failure but also regarding the unemployment rate.

But this sequence is not being repeated by Central European states. In most countries of the region, unemployment has been clearly below the EU average for years. The lowest in Czechia and Poland where respectively 2.4% and 2.7% of people of productive age have not worked. In Slovenia, 3.6% are unemployed, and in Bulgaria and Hungary – 3.9%. Only Malta (2.8%), Germany (2.9%), and Ireland (3.8%) have also managed to go below 4% with their unemployment rate. Generally, all Three Seas Initiative countries (except Lithuania and Croatia) keep their joblessness rate below the EU average. A constant level, with no sudden swings. It is rare to see such predictable overviews in the economy.

Central Europe tested

Central European countries have maintained their unemployment rate for years. While in Western Europe, the financial crisis of 2008-2010 took a heavy toll on the labor market, in the CEE region, it was much milder. An analysis of Eurostat statistics showed that since 2011 the vast majority of Three Seas Initiative countries have consistently kept joblessness below the EU average. This includes Austria, Czechia, Poland, Romania, and Slovenia. Estonia and Hungary have been below the European average continuously since 2012. Bulgaria went under this line in 2015, and Slovakia in 2017. And we are talking about years in which average unemployment for the EU as a whole reached almost 12%; in Greece and Spain, it regularly exceeded 20%. During this period, Central Europe was an effective counterweight to the countries whose labor markets were hit hardest by the global crisis.

Why are the second and third decades of the 21st century proving so beneficial for Central Europe and the local labor market? Several factors have contributed to this. Most countries in the region had joined the Union a few years earlier. They were starting to be positively influenced by the inflow of funds from the EU’s cohesion policy and access to the common internal market. With lower wages and a well-educated workforce, they have proven to be an attractive destination for foreign investment.

In addition, the region’s countries had a relatively favorable demographic structure. Young people looking for their chance in life have proved to be an engine for economic growth. Effectively. When GDP growth figures are analyzed, it is clear that the growth rate in Central European countries is higher than in Western Europe. This is also the result of the demographic structure – and the determination of the region’s inhabitants, who wanted to live better than their parents who had to cope during the communist years.

How long can the trend continue?

Today, the most important question for the region is: how long will it be possible to preserve these assets that have been the foundation of development over the last decade? Observing, for example, the worrying demographic trends (low fertility rate, rapid population aging), it is easy to see threats looming on the horizon. But it is also worth appreciating the high adaptability to changing conditions. This was best demonstrated during the pandemic period. Although Covid-19 forced many restrictions, the worst was avoided: economic stagnation and rising unemployment.

Similarly, Central Europe is undergoing a test related to the war in Ukraine. Although the conflict is taking place in the immediate vicinity of the region, CEE countries are managing to maintain economic growth and low levels of unemployment. Another example is demonstrating the resilience of the Three Seas Initiative states to unforeseen events. “We know ourselves only as far as we’ve been tested,” wrote Wisława Szymborska, a Polish poet awarded the Nobel Prize in Literature in 1996. The economies of the Central European countries are continually passing new tests – with very high marks. And all the time they have within them the determination to achieve more – because they know that this is the only way to make up for the years of civilizational backwardness associated with almost five decades spent on the wrong side of the Iron Curtain.

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