Trends in the development of labour markets and labour relations in Central and Eastern Europe

In light of the commencement of European Union accession negotiations with five countries in Central and Eastern Europe, due in 1998, there is a growing preoccupation with the impact of enlargement on labour markets in the potential new Member States and in the rest of the EU. Accession will also bring the involvement of social partner organisations from new Member States in the European social dialogue process. We highlight the key trends in the development of labour markets and labour relations in Central and Eastern Europe, with particular attention to the challenges facing trade unions and employer organisations in these countries.

Over the last 10-15 years, the countries of the former Eastern bloc have experienced a radical transformation in political, economic and social structures, in their struggle to rid themselves from the legacy of Soviet domination. Many of these new democracies are keen to join the European Union and in July 1997 (EU9708143F), the European Commission published a document outlining its assessment of the readiness of these countries to achieve the acquis communautaire (as part of its Agenda 2000 programme). While this document assesses political and economic structures, little attention is paid to social and labour market policies and the nature of labour relations in the accession countries. This is an area where much has changed, and at the same time much uncertainty remains in many countries. This article seeks to outline a number of the key trends which can be identified in the development of labour markets and labour relations in Central and Eastern Europe over the past 10-15 years, though in this context we cannot provide a comprehensive account of developments and it is clear that experiences have different widely in these nations.

The long process of transformation

The system of labour market administration which existed in one form or another in all the countries of the former Eastern bloc was one which effectively "abolished" unemployment and provided for "full employment", with many individuals expected to work beyond retirement age, while others were expected to be pensioned off at an early age. The government authorities controlled wages and in some cases even labour mobility. In most countries, labour and employment relations were governed by complex Labour Codes. As industry was state controlled, no private employer organisations existed. Trade unions operating during this period primarily acted as so-called "transmission belts" for the ruling party and were in many cases responsible for the allocation of enterprise benefits.

Labour markets

Since the late 1980s, and with the break-up of the Eastern bloc, this situation has changed dramatically, as most countries were forced to abandon their commitment to full employment (which in many cases only served to disguise a vast problem of under-employment) as unemployment rose - in many cases dramatically, although reliable figures remain difficult to obtain, as in a large number of countries in Central and Eastern Europe, official and unofficial unemployment statistics continue to diverge significantly.

The rise in unemployment can partly be attributed to the decline in public sector employment, reflecting the desire to privatise industry, as well as the overall reduction in the provision of public services. In a recent journal article ("Labour market governance in Eastern Europe", Guy Standing, European Journal of Industrial Relations, Volume 3, Number 2, July 1997), Guy Standing has argued that what he calls "state desertion" (ie the withdrawal of the state from many areas of activity) has resulted in an erosion of the capacity of public administrations to regulate the labour market. This, together with the decline in salary levels for employment in the public sector, has served to contribute to an increase in corruption and the involvement of public employees in informal activities. In the countries where the increase in unemployment has been less dramatic (as in the Czech Republic), this has been attributed to different factors. While some see this as the result of the positive impact of labour market and economic policies (and as a result of high levels of foreign inward investment), others attribute it to the persistence of hidden unemployment.

As far as labour market policies are concerned, recent years have seen the increasing emergence in these countries - partly encouraged by western governments - of active labour market policies, such as labour market training for unemployed people. While this has attracted a lot of interest, it has been argued that the numbers involved have on the whole been small, and many schemes have been unable to achieve the desired outcomes.

Labour relations

Standing charts a widespread desire in the countries of Central and Eastern Europe to formulate detailed legislative provision relating to employment and unemployment. In some countries, these framework laws took a very long time to develop or went through many amendment stages. In most countries, they are seen by experts to be excessively detailed and unsuitable - in many cases a reflection of the lack of consensus at the political level on how to regulate the labour market.

Governments have also endeavoured to support the formation of "western-style" labour relations, in providing for freedom of association, the right to strike and so on. This process has been difficult, because both employer and trade union organisations have experienced a difficult period of creation, transformation and redefinition. Previously mainly organs of the ruling party, some were transformed into protest movements, while others were less involved in the political transformations and were redefined and reinvented with the ascendance of the new democracies. Despite significant national variations, a general trend towards fragmentation and decentralisation in the trade union movement, as well as a general trend towards de-unionisation can be observed.

While the problems facing trade unions were related to their involvement in the old regime and the need to regain legitimacy and redefine their role, employer organisations experienced the opposite problem, as they have only recently begun to emerge. These organisations remain weak in most Central and Eastern European countries and are still in a considerable state of flux, with new organisations springing up and disappearing all the time, although in some countries a number of organisations have become well established and have developed effective lobbying mechanisms.

Collective bargaining in conducted at the sectoral and company level in most Central and Eastern European countries - a process which is again often hampered by the weakness of employer organisations.

Despite the problems facing trade union and employer organisations, governments have been keen to involve them in tripartite bodies, looking at social, employment, economic and/or labour market policy. It has been argued that in many cases, this remains more formal, rather than an effective arrangement with real decision-making powers.

The Phare programme

The European Commission has sought to support the development of the social dialogue in many of the countries of Central and Eastern Europe through the Phare programme. However, this sphere of activity is only a very small part of a programme which commanded funds of almost 5.5 million ECU between 1990 and 1995 (another 6.7 million ECU are earmarked for the years 1996-9). Since the Essen European Council summit meeting in December 1994, Phare has been an important part of the pre-accession strategy. Initially, it focused very much on supporting economic reform, but has recently adopted a greater thrust towards human resource institutional reform. From 1993 on, Phare began to sponsor social dialogue programmes, motivated by the desire to strengthen tripartite structures. A recent paper by the European Trade Union Institute (ETUI) argues that the attempt to institute such programmes has been very much characterised by the granting of financial support to government- sponsored tripartite bodies in which the autonomy of the social partners in questionable ("Phare social dialogue programmes - some lessons from 18 months of experience - a structural reflection", Renate Langewiesche, Transfer, Volume 3, Number 2, August 1997). A reform of the Phare programme is currently under way to make its activities more relevant to the accession strategy.


While the five countries currently preparing for accession - the Czech Republic, Estonia, Hungary, Poland and Slovenia- have on the whole more widely developed labour relations and labour market policies, much remains to be learned about their situation and also about the organisations representing the social partners and their power and strategies. Their involvement in the European social dialogue will therefore not only represent a significant opportunity, but also a significant challenge to existing structures. (Tina Weber, ECOTEC Research and Consulting Ltd)

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