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Social Consequences of Transition Vladimir Gligorov Content • • • • • Risks and skills Flexibility and social safety nets Migration Inequality Public finances GDP and employment growth in NMS and NIS Index 1995 = 100 GDP BY GDP RU GDP UA EMP UA GDP NMS EMP NMS EMP BY EMP RU 220 200 180 160 140 120 100 80 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: INDEUNIS research results GDP, employment, productivity 2000-2006 2000 = 100 With approximately five years delay, developments similar to those in the NMS Employment, LFS GDP Productivity Candidates countries (HR, MK, TR) 130 120 110 100 90 2000 Source: wiiw Database 2001 2002 2003 2004 2005 2006 GDP, employment, productivity 2000-2006 2000 = 100 With approximately five years delay, developments similar to those in the NMS Potential candidate countries (AL, BA, ME, RS) 150 Employment, reg. GDP Productivity 140 130 120 110 100 90 2000 Source: wiiw Database 2001 2002 2003 2004 2005 2006 Employment trends in SEE 1990=100 AL HR BG RO MK ME RS 110 100 90 80 70 60 50 1990 1993 1996 1999 2002 2005 Unemployment in SEE unemployed in % of active population, average, LFS Bosnia & Herzegovina Macedonia Bulgaria Croatia Montenegro Romania Kosovo Serbia 60 50 40 30 20 10 0 1996 1999 2002 2005 Long-term unemployment in SEE unemployed - 12 months and more, in % of total unemployed 2000 2005 BG EU-15 100 90 80 70 60 50 40 30 20 10 0 HR AL BA MK RS ME Kosovo RO Youth unemployment rates in SEE, LFS 15-24 years, in % Albania Macedonia Bulgaria Croatia Montenegro Romania Kosovo Serbia and Monten. 90 80 70 60 50 40 30 20 10 0 1996 1999 Notes: Note: Albania registration data. 2002 2005 Flexibility • Relatively flexible labour markets • Declining social safety nets EPL index, employment, unemployment in the SEE and peer countries Country total EPL index reg. temp. males females coll. (1) (2) (1) (2) Albania 2.6 2.1 3.0 2.8 61.4 12.9 38.3 18.2 Bosnia and Herzegovina 2.6 1.8 3.1 3.3 42.3 28.9 20.8 34.9 Croatia 2.7 2.7 2.8 2.5 60.7 12.8 46.3 15.6 Macedonia 2.8 2.0 3.1 4.0 45.6 37.0 31.3 36.3 Serbia and Montenegro 2.9 2.2 3.1 3.8 54.6 15.1 40.6 17.2 Bulgaria 2.0 2.2 3.4 2.6 56.0 14.1 49.0 13.2 Romania 2.8 1.7 3.0 4.8 63.8 7.5 51.5 6.4 Slovenia 2.7 2.7 2.3 4.8 67.4 6.3 57.6 7.1 (1) - employment rate, (2) - unemployment rate, in per cent respectively. Sources: see above. Inequality • Diverse • In Central Europe similar to average in the EU • In others higher inequality • Effects of market power • Effects of crisis Development of income inequality in Central Europe, Baltic States, SEE and CIS, 1989-2006 unweighted averages of Gini coefficients (income based) Central Europe SEE Transition countries (polynomial trend) Polynomisch (Transition countries) CIS Baltics 45 Gini coefficient 40 35 30 25 20 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: UNU-WIDER: World Inequality Database Version 2.0c, w iiw calculations. Income inequality in world regions unweighted averages of Gini coefficients (income based), 2003 55 Sub-Saharan Africa Latin America 50 China 45 Gini coefficient South Asia East Asia Russia 40 CIS USA Middle East & North Africa 35 SEE 30 Central Europe & Baltics Western Europe 25 Source: UNU-WIDER: World Inequality Database Version 2.0b , own calculations. Distribution of income & source of income Correlation of functional distribution and inequality in transition countries CE & Baltics, SEE and CIS 50 2002 Gini coefficient 45 y = -0.40x + 48.75 2 R = 0.27 40 35 30 25 20 15 15 20 25 30 35 40 45 50 55 Compensation of employees, in % of GDP Sources: AMECO database, CIS STAT database, UNU-WIDER: World Inequality Database Version 2.0c . Role of labour market institutions Correlation of coverage rate of collective agreements in transition countries, 2001 45 40 Central Europe, 2001 & Baltics BGR, ROU, HRV Gini coefficient 35 y = -0.15x + 36.80 30 2 R = 0.44 25 20 15 10 0 20 40 60 coverage rate of collective agreements Sources: Schroeder (2004), UNU-WIDER: World Inequality Database Version 2.0a. 80 100 Migration • Very high outflow from some countries • Significant numbers of refugees in some regions • Brain drain and return migration • Functionings and capabilities Public sector Public sector Pensions spending Pensions Health Education Conclusions • Social impact large but often positive after the initial transitional recession • Social differentiation increasing, but not unusual for development • Crisis effects may be significant