SIMILAR ARTICLES

Historical record for trade deficit, in July 2019. We also moved to monthly deficit both in transport machinery and equipment

The trade deficit in July 2019 rose sharply to the historical record of EUR 1,755.5 million, by 38% more than in the same month of… Mai mult

Denmark, a country almost entirely digital. Interview with Rikke Zeberg, director general of the Danish Agency for Digitisation

First steps towards digitalization were made in the 60s. More recently, twelve years ago, the digital ID was introduced for all the citizens, for free.… Mai mult

Romanian companies keep up with state: investments decline by half compared to 2009

Both public and companies’ long-term investments halved in 2018 compared to 2009. This is proof that without state investments, the private sector does not have… Mai mult

Increasing trade deficit, in an increasingly difficult European context: in all other states it is the opposite

Romania is the only country in the region where results in the first half of this year in foreign trade worsened, according to data published… Mai mult

Draft law: Tax regime for foreign companies’ profits obtained in Romania is changing

The Ministry of Public Finance (MPF) will propose to the Government another emergency ordinance for amending the Tax Code and the Tax Procedure Code, after… Mai mult

Cronicile

Important crossroads: Last ones in EU by public sector employees, but next to Germany by industry in gross value added. Where are we heading to?

de Marin Pana , 6.11.2017

Romania ranks last among the EU member states by the share of public sector employees in the total workforce, according to data published by Eurostat for 2016. That, although we registered the highest increase in the percentage of public sector workers compared to 1995, from slightly above 6% to 14% last year. But that is compared to an EU average of almost 24%.

In this context, the decision to freeze public sector employment, except for very well-founded cases, appears to be paradoxical. Especially because we do not excel at the number of medical staff or teachers in relation to the size of the population. Significant increases in public sector wages would be useful, on the one hand, but also affect the possibility of new employment.

Chart – Share of public sector employees in EU:

Truth is that the main problem is not that there are too many public servants but that we have too few employees (more precisely taxpayers), a relatively low productivity of those involved in the direct production processes and besides, their remuneration is below the average national wage, an atypical situation for the Western economies.

It is worth mentioning the penalizing effect at the level of the whole economy of a relative productivity in agriculture that currently is only 40% compared to the one registered in 1995. In simple terms, the share of about 40% of the employed population produced then almost 20% of the gross added value (VAB) included in GDP. Now, the remaining 25% still contribute less than 5% of the VAB.

Based on that, we can argue that there has been a much higher productivity gain in industry (the one that sets the tone across the economy) than in agriculture, due to massive investments in the technological upgrade but also that agriculture cannot be left anymore outside some intensive programs for increasing yields and shifting to forms of local industrialization of the production.

By contrast, the industrial sector (the former pile of scrap blamed in the early 1990s) has ensured us (based on a tradition built with great sacrifices at that time, when we ignored the opposition from Moscow) an honourable position in the EU in terms of contribution to the formation of gross value added in the economy.

Respectively, behind some countries like the ones in Central Europe, now transformed into a “workshop of the West” (the Czech Republic, Slovenia, Slovakia, Hungary or Poland), but right after Germany (the Western state that sets the tone in the EU in terms of development model and ahead of Bulgaria or Lithuania.

Graph:

Basically, we have a strongly divided Romania between an industry more developed and performing than we think (not that there would not be room for improvement) and an agricultural sector closer to the 19th than the 21st century. Which gives, by the average resulting from this arrangement, social services of equally low quality, especially for those who carry out an activity of high productivity.

It would be interesting to also see what share of the workforce by sector, in the total economy, obtains these results (we will exclude Ireland, where the Eurostat reporting is affected by strong flaws of reporting large production which is obtained in other member states, related to a lower population and, implicitly, lower workforce), compared to an EU28 average of 15.3%.

*

  • Share of workforce employed in industry, in some EU countries
  • Countries        Share of workforce in industry

*

In this context, we should emphasize the importance of this economic sector strategically developed during the times of the planned economy, when a specialized workforce was also formed. The results reported by INS show that almost 26% of the VAB (about RON175 billion out of RON 683 billion in 2016) are obtained with 21.7% of the workforce, the one in the industry.

Which means that this key sector is the driver, through the productivity and high-value base, of the whole economy. It also means that, if we look not only to Germany but also to the neighbouring Hungary and Bulgaria, there would still be room for increasing the share in VAB, on the current structure of the economy. Especially that the productivity in the agriculture sector, where even more people are involved, is low.

Thorny problem of Romanian wages in industry: lower than in public sector

It should be noted that ALL our former socialist colleagues that joined the EU have budget revenues far higher than us as a share of GDP, have wages in the industry sector above the national average, and employ more people in the public sector than us. People whom we mostly support, directly or indirectly, through our activity in the industrial sector.

Last, but not least, we should pay attention to a certain way of looking at the formation of the gross added value, more profitable in the trade and services sectors but much more solid in the industry sector. Here we are dealing with totally different approaches.

Although money is fungible, which means it adds to the same amount in the formation of GDP, it is not quite the same at a qualitative level, for the stability and strength of the economy, which afterwards translate into public services and the standard of living induced by the quality of social services.

That is, we have the Germans in the EU (who set the tone for the former socialist countries around) and the Northern countries, which prefer to contribute a relatively high added value to industrial products and are not very keen to pay much in the trade and services sectors, versus the Latin populations (French or Spaniards or Italians, who tend to add a slightly lower value to tangible results and slightly more to services and trade.

A kind of as much food as possible versus as much entertainment as possible, a phenomenon well described by the prices of transfers in the football domain. Where the largest amounts are spent in Spain and Italy but the result in terms of quality/price ratio is by far higher in Germany.

Now, it depends on us how much we want to increase the quality of state-provided services based on an economy with real industrial force and towards what kind of system we move.

Mergeți în homepage ›

Publicat la data de 6.11.2017

Lăsați un comentariu


NEWS

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult

Mugur Isarescu: We should make a film for Viasat History about treasure in Moscow

A book should be written or a movie should be made and sent to Viasat History about a treasure evacuated to Moscow, as it is… Mai mult