Description
The emergence of open unemployment is an unavoidable consequence of postcommunist transition. Some countriesnotably in the former Soviet Unioninitially slowed economic contraction. But in the longer run slower reformers have generally sustained deeper and more prolonged recessions than faster reforming central European countries. Moreover, the initially low unemployment rates in the former Soviet Union are now rising, and may stabilise at higher post-transition equilibrium rates than in Central Europe. Across the region, real wages reacted in unexpected ways, with significant effects for employment. Productivity gains in Central European industry tended not to be passed along into proportional real wage increases, slowing inflows into unemployment. In addition, and contrary to some earlier assessments, the restructuring process affected not only wage structures, but also the level of unemployment over time. An important constraint on post-socialist countries response to unemployment is the role served by EU social insurance and labour law standards as guides to countries progress toward normal economic systems. When considering the possible impact of EU integration and harmonisation on equilibrium rates of unemployment, the wide range in regulation falling under the European model suggests there is still scope for Central European countries to adjust their policies to meet their specific circumstances.
