Is No Employment Better Than Self-Employment? The Story of How Romania Managed To Create a Class of ‘Invisible’ and Forgotten Workers

Abstract

Romania has been, for the past decade, not only the country with the highest in-work poverty among the European member states, but - unlike most European member states - also a country with a steadily growing welfare polarization of the working force. The paper aims to explain why, after more than a decade of fine-tuning of labor market, fiscal and social policies, Romania still finds itself in this situation. Despite constant improvements over the past 12 years in the welfare indicators of the overall employed population, the gap between employees and self-employed widened. The paper documents the increasing differences in exposure to poverty and social exclusion between the two segments of the employed population and points out to the mix of factors responsible for this development. Unlike most of the European countries, where a certain gap between employees and non-employees is the result of the flexibilization of the labour market, thus of the increase in atypical and non-standard employment forms, in Romania this appears to be rather the result of a mix between a unique inherited structure of employment and an inadequate package of social and fiscal measures, which kept and further pushed self-employed into informality. Thus, contrary to other European countries, which face the problem of how to better protect workers in new forms of employment, Romania is still searching for a policy solution that would allow for both the existing self-employed to become ‘visible’ in a formal economy and the diversification of employment forms. Finally, the paper explores the possibilities to reverse the current trend.