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How Flexible are Labour Markets in the EU Accession Countries Poland, Hungary and the Czech Republic?

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Abstract

Over the next few years, Poland, Hungary and the Czech Republic will experience fundamental structural changes in their economies, not least because of their accession to the European Union. The economic adjustment processes that will take place in these countries require a high degree of labour market flexibility. This paper analyses whether the labour markets in Poland, Hungary and the Czech Republic are flexible enough for these processes to take place smoothly. In particular, it discusses the following areas: labour force participation, qualification and regional mobility of the labour force, wage-setting systems and statutory minimum wages, labour taxes, government regulations affecting working time and protection against dismissal, and public job-placement services. The paper reveals that there are impediments to labour market flexibility in all of these areas. It also shows that the specific rigidities vary from country to country, both in nature and in intensity.

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Notes

  1. In 2002, their GDP per capita (converted at purchasing power parities) amounted to only 39% (Poland), 57% (Hungary) and 60% (Czech Republic) of the EU average (European Commission, 2003, p. 42).

  2. Six of the major Western industrialised countries are being used for comparison: France, Germany, Italy, Spain, the United Kingdom and the United States. The United States has not only been included because it is the largest industrialised country in the world but also because its labour market is very flexible, contributing decisively to its comparatively low level of unemployment.

  3. Incomplete primary education means leaving the first stage of basic education without a degree.

  4. According to the international standard classification of education (ISCED), upper secondary education is characterised by more specialisation and more highly qualified teachers than lower secondary education (or the second stage of basic education). Upper secondary education often begins at the end of compulsory schooling. The entrance age is typically 15 or 16.

  5. See, for example, Deere et al. (1995), Burkhauser et al. (2000a), (2000b), Neumark and Wascher (1992), (2002); Currie and Fallick (1996), Abowd et al. (2000), Williams and Mills (1998), (2001), Zavodny (2000).

  6. ‘Active’ labour market policy programmes are those designed to help the unemployed back into work, as opposed to ‘passive’ measures concerned with the payment of benefits to the unemployed.

  7. For example, while the surcharge increases the employment cost for a worker earning the average wage by 2.4%, it increases the employment cost for a worker earning half the average wage by 4.8%.

  8. In particular, see Scarpetta (1996), Elmeskov et al. (1998), Heckman and Pagés-Serra (2000), International Monetary Fund (2003).

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  1. Department of Economics, University of Tübingen, Nauklerstr. 47, Tübingen, D-72074, Germany

    Horst Feldmann

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Feldmann, H. How Flexible are Labour Markets in the EU Accession Countries Poland, Hungary and the Czech Republic?. Comp Econ Stud 46, 272–310 (2004). https://doi.org/10.1057/palgrave.ces.8100026

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