Report on informal employment, Romania

About

Country: 
Romania
Target Groups: 
workers/suppliersemployers/purchasers

In 2008, under the auspices of the Development Centre of the Organisation for Economic Co-operation and Development (OECD), a country report was published with the aim of prioritising the issue of informal employment in debates on Romania’s labour market. The main conclusion of the report is that informal employment continues to persist in Romania, accounting for between 20% and 50% of all employment, depending on the definitions used for this phenomenon. The report also underlines the importance of centralising quality information on informal employment.

Background

Understanding the characteristics, causes and effects of undeclared work are the prerequisites of any efficient measures adopted by decision-makers to combat informal employment and undeclared work. The scarcity and, in some economic sectors, total lack of information on this topic has made it impossible for researchers to determine the real extent of informal employment in Romania. Most of the surveys previously conducted only reflect some of the many facets of this phenomenon.

Given the dearth of information, it was decided to compile a report, under the guidance of the Development Centre of the Organisation for Economic Co-operation and Development (OECD), analysing the incidence and characteristics of informal employment in Romania.

The main actors involved in this initiative were as follows:

  • the authors of the survey (Jante Parlevlit and Theodora Xenogiani);
  • the Romanian researchers who contributed to drafting the report (Cătălin Ghinăraru and Manuela Stănculescu);
  • the OECD Development Centre;
  • representatives of the Ministry of Labour, Family and Equal Opportunities (Ministerul Muncii, Familiei şi Egalităţii de Şanse, MMFES);
  • representatives of the National Office for Pensions and Other Forms of Social Security (Casa Naţională de Pensii şi alte Drepturi de Asigurări Sociale, CNPDAS);
  • representatives of the Labour Inspectorate (Inspectia Muncii, IM);
  • representatives of the National Institute of Statistics (Institutul National de Statistica, INS);
  • researchers from the National Institute for Scientific Research in the Field of Work and Social Protection (Institutul Naţional de Cercetări în Domeniul Muncii şi Protecţiei Sociale, INCDMPS);
  • researchers from the Institute of the National Economy (Institutul de Economie Naţională, IEN);
  • other experts.

Objectives

The compiling and publishing of a country report under the guidance of the OECD’s Development Centre sought to bring the issue of informal employment to the fore in debates on Romania’s labour market.

Specific measures

The main objectives of the report’s authors were as follows:

  • to clarify the concept of informal employment and identify the relevance of its various meanings for the Romanian economy;
  • to analyse the various ways in which informal employment occurs in Romania;
  • to give a detailed description of the personal characteristics of the individuals involved in informal work and of the sectors in which informal employment is particularly high;
  • to detect and examine the factors that favour informal employment and encourage its persistence;
  • to identify policies and measures for controlling informal employment, with a focus on the most vulnerable groups of workers.

The initial results of the survey were debated at a seminar on the ‘Vulnerabilities of the Romanian labour market’, held in Bucharest by the MMFES, the World Bank (WB) and the OECD on 17 April 2008, with the participation of reputed experts in the field. The seminar was also attended by representatives of national and international organisations, research institutes and trade unions.

Outcome and evaluation

Achievement of objectives

The initiative has yielded a number of benefits in understanding, assessing and controlling informal employment throughout the Romanian economy. Such benefits include: clarifying the actual concept of informal employment and the methods required to investigate this phenomenon; estimating the extent of informal employment in Romania based on its various definitions; identifying the characteristics of the individuals and sectors involved in informal employment.

During discussions on the OECD report, Romania’s Minister for Labour highlighted the usefulness of such a report and suggested that a meeting should be organised between its authors and representatives of the IM, in order to identify the best indicators for determining the true extent of informal employment in Romania. The indicators could then be used by the IM in its inspection activities and reports on the incidence of informal employment in Romania.

Obstacles and problems

No obstacles have been identified in implementing the abovementioned measure.

Lessons learnt

The conclusions of the country report were presented by the MMFES on 15 July 2008. Among the elements highlighted by this study is the finding that workers who engage in informal employment largely fall into two distinct groups, each of which require different approaches. The two groups consist of:

  • workers who engage in informal employment as a form of survival – for example, some agricultural labourers and non-paid family workers;
  • those who deliberately evade the payment of tax and social security contributions – such as businesses operating illegally, companies using undeclared workers that consequently never register employment contracts for these workers with the labour inspection offices, businesses that file incomplete tax returns, and workers who declare lower income and accept ‘under the counter’ payments.

The report concludes that informal employment continues to persist in Romania, accounting for between 20% and 50% of all employment in the country, depending on the definitions used for this phenomenon. Historically, the trend has remained stable, which is viewed as a positive finding and an outcome of the economic measures taken by Romania’s authorities.

The country report suggests the following lines of action for future initiatives:

  • improving the quality of public services provided to businesses and workers;
  • using the media extensively to develop people’s awareness of the advantages of formal employment and of the negative consequences of informal employment and tax evasion;
  • harmonising the policies of the various institutional decision-makers in this domain.

The country report also highlights the importance of centralising quality information on informal employment.

Impact indicators

An important contribution can be made to the abovementioned objectives through the joint identification by the report’s authors and IM representatives of the indicators that may best measure the situation regarding informal employment in Romania. These indicators could, in turn, be applied in monitoring and combating this phenomenon.

Transferability

The compilation of such reports is considered extremely useful, both for the authorities and other experts involved in this area of research. Virtually no barriers have been identified regarding the transferability of this initiative.

Commentary

As Romania’s labour minister has highlighted, such reports demonstrate the importance of strengthening the cooperation between academic researchers and public policymakers in the various economic sectors, to help identify, understand and solve problems in this area.

Contacts

Cătălin Ghinăraru, Scientific Secretary, INCSDMPS, Email: ghinararu@incsmps.ro

Ministry of Labour, Family and Equal Opportunities (Ministerul Muncii, Familiei şi Egalităţii de Şanse, MMFES)

See also the websites of participating organisations in ‘Background’ section.

Bibliography

Parlevliet, J. and Xenogiani, T., with contributions of Ghinăraru, C. and Stanculescu, M., Report on informal employment in Romania, Working Paper No. 271, Organisation for Economic Co-operation and Development (OECD) Development Centre, July 2008.

Constantin Ciutacu, Institute of National Economy, Romanian Academy

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