State, as employer in capitalist Romania: a different analyisis of private economy

Who keeps alive the economy, administrative systems, budgets of all kinds – from the investment to pension budget – and ultimately the whole society?

The answer to this question – that should be simple: private economy – looks more like a patchwork than it should.

There are entire areas of the economy where the state is the employer without which nothing moves. And „the private sector”….

Better see the detailed picture:

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Between 2008 and 2015, the ratio between the number of employees in the private economy and the number of employees in the public sector increased from 3.45 to nearly 4.

Total divergence: In 2015, in Vaslui, there were less than two employees in the private sector per each employee from the state sector.

Ilfov is at the other extreme, a county with a spectacular and atypical evolution in several fields – here, there were almost 10 people working in the private sector in 2015 per each employee from the budget sector.

Specifically, in 2015, there were 951,913 state employees in Romania and 3,783,902 employees in the private sector, according to the National Institute of Statistics (INS).

That means an average of about four employees in the real economy per each state employee.

Beware! The total number of employees from the public sector does not include the employees of the Ministry of Defence, Ministry of Internal Affairs, SRI, SIE, STS, which means an addition of about 200,000 people.

The number does not include the employees of the state companies either, as they are not paid from the budget, nor private companies.

The family workers and the members of the county and local councils are not considered either.

Employees are those working under an employment contract/employment relationship on a fixed-term or indefinite duration, full-time or part-time, including those working under an employment contract/suspended employment relationship.

For a complete picture of the staff from the state system, there is information available in REVISAL for December 2016:

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• Total posts, of which:

1. Central government
2. Institutions financed entirely from the state budget

• President’s administration
• Senate
• Chamber of Deputies
• High Court of Cassation and Justice
• Constitutional Court
• Legislative Council
• Court of Accounts
• Competition Council
• Ombudsman
• The National Council for the Study of the Securitate Archives
• National Audiovisual Council
• Secretary–General of the Government
• Ministry of Foreign Affairs
• Ministry of Regional Development and Public Administration
• Ministry of Public Finance
• Ministry of Justice
• Ministry of Defence
• Ministry of Internal Affairs
• Ministry of Labour, Family, Social Protection and the Elderly
• Ministry of Youth and Sports
• Ministry of Agriculture and Rural Development
• Ministry of Environment, Waters and Forests
• Ministry of Transportation
• Ministry of National Education and Scientific Research
• Ministry of Health
• Ministry of Culture
• Ministry of Communications and Information Society
• Romanian Public Ministry
• National Integrity Agency
• Protection and Guard Service
• Special Telecommunications Service
• Ministry of Economy, Commerce and Relationship with Business Environment
• Ministry of Energy
• Romanian Academy
• National Sanitary Veterinary and Food Safety Authority
• Secretariat for recognising the merits of the fighters against the communist regime, in the 1945-1989 period
• National Office for Prevention and Control of Money Laundering
• National Registry Office for Classified Information
• National Council for Combating Discrimination
• AGERPRES National News Agency
• Romanian Cultural Institute
• Superior Council of Magistracy
• Permanent Electoral Authority
• National Supervisory Authority for Personal Data Processing
• Economic and Social Council
• National Council for Solving Complaints
• Authority for State Assets Recovery
• Ministry for European Funds
• National Authority for Property Restitution
• Academy of Romanian Scientists
• Ministry of Public Consultation and Social Dialogue

2. Institutions entirely financed from the social security budget
3. Institutions subsidised from the state budget and unemployment insurance budget
4. Institutions entirely financed from own revenues, of which:

• – health units financed from FNUASS
• – higher education state units
• – other institutions

1. Local government, of which:
2. Institutions entirely financed from the local budgets, of which:

• – secondary schools
• – local executive authorities

2. Institutions entirely or partially financed from own revenues, of which:

• – health units from the healthcare network of the local government

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Since INS has not published the yet situation of the state system in 2016, the analysis is based on the 2015 data.

Some observations:

The poorest counties have less than 3 employees working in the private economy per one state employee: Botosani (ratio of 2.17), Iasi (2.37), Teleorman (2.63), Olt (2.75), Dolj (2.77).

The counties from the West Region have the best ratios: Timis, Arad, Sibiu, Brasov – with a ratio greater than 5.

An unusual thing for Cluj – a ratio of only 4.04, in a county where it seems that there should be a private investment a boom.

Another observation is that most employees from the private sector are concentrated in the county capital cities: the small towns – even if they have an urban infrastructure – are dependent on the jobs from the public sector.

Here is the situation of the counties, in terms of employee ratio between private economy/budget sector:

Black signals of an evolution from 2008 to 2015: Counties dependent on state have become even more dependent on state

In comparison with 2015, there were 1,072,591 state employees and 3,730,403 employees in the private sector in 2008.

Calculations show that the national average climbed modestly between 2008 and 2015 from 3.48 to nearly 4 employees in the real economy per state employee – but, what is important, only at the general level. The differences between counties have increased even more than in 2008.

The increase has been caused not only by the job growth in the private sector but also the reduction of posts in the state system, as the evolution comparison shows:

Infrastructure defeats everything: school case – Arad (average county) vs. Iasi (large county)

Data show that not the labour force is the main problem in Romania, but the infrastructure.

The proof – the comparison between the West (the most accessible region in terms of transportation infrastructure) and Northeast (the region from where it is the most difficult to reach Europe by road or railway).

The most illustrative comparison is between Arad and Iasi counties

The first is a county with a population at an average level, on the Western border – here is where Nadlac customs is located, the main point of exit to the West.

Iasi county has the Ungheni customs, the exit point of Europe to Moldova.

Arad has 426,459 inhabitants, unlike Iasi, the largest county in the country – 786,596 people.

However, there were 103,654 employees in 2015 in companies with private ownership, in the county with the highest population in the Moldova region, less than in Arad – 111,401 employees.

Iasi county is one of the largest academic centres, far more important than the humble Arad, in this regard, which means it should not raise problems to companies in terms of qualified labour force. But this detail does not matter when it comes to foreign investments, which seem to be more attracted by the low costs of transportation because they generally produce for export.

Arad has 44,197 employees in foreign-owned companies, nearly 3 times more than Iasi country – 15,482 employees in such companies.

The comparison is even more significant when we take into account other counties from Moldova – Neamt, for instance, with a similar population as Arad (459,372 inhabitants) has only 5,195 employees in foreign companies, almost 10 times less than the county where Nadlac is located.

In 2015, the foreign direct investment balance (FDI) in the Western region reached to EUR 5,237 billion, while in the Northeast region was only EUR 1,662 billion (according to BNR).

Vaslui and Ilfov, extreme cases

• Vaslui is the only county where there are less than two employees in the private sector per state employee, and there is no progress compared to 2008 – the ratio stood at 1.87, although the number of state employees has decreased and the number of employees in the private sector grew.
• Ilfov, an agricultural county before the Revolution, registers the highest ratio between the employees in the real economy and the public-sector employees- nearly 10 employees in the private sector per each state employee. It is an atypical county from several perspectives, as it is also the only one where the population increased – from 298,047 people in 2008 to 430,798 in 2015.
• Cluj does not have an impressive ratio – in 2015 it was 4.04, exceeded by far by Sibiu, Brasov, Arad and Ilfov counties. Nevertheless, GDP per capita (10,306 euro in 2015), higher than in Sibiu, Brasov and Arad, which proves that in the labour force structure there is a higher share of qualified personnel in the high added value fields. Cluj was in 2015 one of the counties with the lowest percentage of unskilled workers (11.22% of the total number of employees). In the same time, it was the county with the largest percentage of specialists in various fields of specialization (27.37% of the total number of employees), according to a study commissioned by PIAROM.
• Regarding the capital city, the large number of state employees is justified not only by the large population but also the fact that all the central government bodies are located here – ministries, etc.