Weekly Briefing, Vol. 30, No. 3 (RO), June 2020
Outlook for the second half of 2020 in the social field
The activity is slowly resumed following relaxation measures, although the number of active cases of coronavirus started to increase again. While the medical system is under pressure under the auspices of a second wave, the labour market is dealing with a lot of changes. The number of unemployed persons is going to increase this year, working from home is envisaged by more companies, while poverty remains a problem in rural areas. Other sectors strongly affected by the crisis, such as the education system, still has to deal with major uncertainties.
The state of the alert was extended for another 30 days in mid-June in Romania, but with supplementary measures of relaxation. Among the most important, there is the opening of the churches for inside ceremonies, of shopping malls and private schools and kindergartens. Moreover, there are 17 European countries for which flights are allowed without imposing afterwards quarantine measures. However, indoor restaurants and theatres keep remaining closed, as it is considered that the risk of contagion is highest there. Therefore, people in the sectors of hospitality and entertainment are the most affected following the pandemic. At this point, the authorities cannot provide a term at which all the remaining closed activities will be resumed.
Romanians managed to respect the social distancing measures imposed during the state of emergency. The situation of infections was manageable, but this was due to the speed of introducing the needed measures and respecting the rules. However, just one month after the end of the emergency state, the upward trend in coronavirus disease returned. Romania is thus approaching 23,000 confirmed patients, almost four months after the first case. At present, the number of active patients who are still fighting the virus is 5,200 people. There is an obvious increase in the number of cases which is distributed almost evenly in the country, which reveals the fact that the virus still has a community transmission. From the part of the authorities, this is a period of uncertainty. The prime minister called for very great vigilance and strict observance of the rules, otherwise, Romania risks facing a very significant increase in the number of cases which could force the adoption of new restrictions. Authorities recommend maintaining protective measures, from social distance to wearing a mask.
The Head of the Emergency Situation Department, in charge with managing the crisis measures, considers that the situation is still difficult, as there is not a constant decrease in the number of cases and hotspots still exists. The possibility of a second wave is high. Authorities already declared that they are preparing for such a situation, without having enough information for pointing whether it will be a stronger or a weaker one. In this respect, the stocks of medical equipment are starting to be prepared and the medical system is still carefully monitored. A modular hospital for coronavirus patients, built by a Non-Governmental Organization from donations, was recently finalized. The hospital, which worth EUR 2 million, has 38 beds and a capacity to provide intensive care or to treat patients with infectious diseases or burn injuries, which will be treated here after the crisis is over. Romania also joined the European system for the vaccine against the new coronavirus, for which a donation was made a month ago. It is possible that the health system to suffer several changes in the future. The prime minister pointed out that the hospital infrastructure is an old one, which creates problems due to the fact that very few new investments were carried out. The level of digitalization in health is extremely low, but this trend could be reversed. Digitizing the patient experience, from scheduling to receiving the final medical report, is inevitable, considers private operators in this field.
If at the beginning of the year, there was a high fear of a shortage on the labour market, once with the start of the pandemic a lot of Romanians returned home. This time, the major problem is to provide enough jobs for those unemployed. Some of them are seasonal workers in agriculture and managed to return to their working places, such as farms in Germany, once the free movement of seasonal workers was approved by the European Union. Besides them, about one million people lost their jobs due to the pandemic, taking into account suspended and terminated employment contracts at the end of May. Areas such as IT and telecom were less affected, while employees in sales, production, logistics or tourism and food industry faced challenges such as job loss, technical unemployment or pay cuts. A recent study shows that people most affected by job loss are between 45-54 years old, are from rural and middle cities or have an average and sub-average level of education. At the economic level, about 500,000 jobs will probably be lost this year, according to human resources specialists, and their estimation of the unemployment rate is around 8%; at this point, official data do not include terminated employment contracts and people who have returned from abroad. The International Monetary Fund (IMF) forecasts an explosive increase in the unemployment rate in Romania, from 3.9% in 2019, to 10.1% in 2020, followed by a decrease to 6% in 2021.
For the second half of the year, human resources experts expect a strong resumption of employment, in many cases at a level similar to last year. Those working in IT will continue to have the highest chances for being employed, similar to persons with experience in e-commerce and digital sector, retail, automation and medicine. Persons with journalistic, law, clothing and real estate background will either have to wait longer than usual to find a new job or will have to change their career path. Employers pointed out that working from home will continue to be implemented in the long term and, in some cases, even replace going to the office. 80% of a survey respondents consider that the number of companies offering working from home opportunities will increase, while 38% believe that companies’ interest in turning to freelancers or project-based specialists will represent another important change in the labour market.
Another study points that one in three companies took measures to reduce wages, but with the aim of maintaining the jobs. Most companies have pledged to make efforts to keep jobs. After the economic activity slowed down, they generally opted to reduce spending that did not affect employees, such as postponing investments or adjusting operating costs. If the economic recovery is rapid, the negative effect will be greatly mitigated, implicitly on employees.
Several measures were approved by the Government for stimulating the resumption of activity on the labour market. Starting with the 1st of June, the state will provide the settlement of 41.5% of the salary of employees returning from technical unemployment and will continue to support technical unemployment in companies where the restrictions imposed by the authorities will be maintained. In addition, the state ensures the payment of half of the salaries for one year in case that the companies will employ persons over the age of 50, aged between 16-29 years old or for Romanians returning from Diaspora whose employment relationship with foreign employees has ceased for reasons not attributable to them. While the private environment is welcoming such measures, they still consider that they are not enough, as there are industries who need more help to recover and for a longer period. In addition, they request a labour legislation adapted to the actual times.
One of the consequences of the fact that almost 1.2 million Romanians returned home as a result of the reduction of economic activity in different countries is that the financial amounts sent home to their families ended. This raises the problem of poverty, already persistent, in rural areas. Recent Eurostat data indicate that the risk of poverty recorded in Romania for the entire population was higher in 2019 than in 2008. Almost one in four Romanians (23.8%) had a disposable income less than 60% of the national median. Romanians already seized a decrease in their well-being. The survey of the credit management and debt recovery company Intrum revealed that almost 7 out of 10 Romanians (67%) believe that their financial well-being has decreased in the last 6 months, mainly due to the health crisis, as compared to the EU average of 48%. The share of people in the EU who declare that their financial well-being has decreased is the highest in Romania, along with Greece. Romanian analysts declared that, besides the obvious causes of such a situation, this decrease could also be due to the reduction of confidence in the economy.
Many uncertainties regarding the impact of the crisis in the society persists and the priority of the measures for resuming the activity is still to be decided. An important sector affected by the pandemic is education, which saw an important transformation during the lockdown months. At this point, the resumption of activity in the education sector starting with the next academic year is still unclear. The Minister of Education stated that the school infrastructure does not allow the organization of courses respecting the physical distance of two meters between people. The authorities are considering the possibility of a new wave of coronavirus and at present, a “semi-online” mode of teaching activities is envisaged for the start of the new school year. Decision are to be made in this field, also considering the experience and good practices of other European countries.