Workers’ rights in the post austerity period in Romania PERC Meeting Bucharest, 12 April 2018

Context: the impact of the 2008-2009 crisis in Romania In 2008 the stock lost 2/3 of its value The capitals were externalized by banks 7.4 bln euro in 2009 3.5 bln euro up to 2011 May 2009, Stand-by Agreement with IMF, WB, ECB 13 bln euro from IMF 5 bln euro from ECB 2 bln euro WB

Context: the impact of the 2008-2009 crisis in Romania One year later (May 2010), the IMF asked the Government to make structural reforms of the labour market. The Romanian Government undertook “to revise the labour legislation to increase the flexibility of the working time, to reduce the costs of hiring and dismissals by more flexible employment. And also increase the flexibility of wages.” (Letter to IMF, 16 June 2010) … “to strengthen the representativeness of social partners in the negotiation (…) Before the end of December (after consultations with the social partners, IMF, World Bank and European Commission) we will submit to Parliament the revised Social Dialogue Code and an improved Labour Code” (Letter to IMF, 22 Dec. 2010)

Austerity measures 2010 25% reduction of public sector wages VTA increase from 19 la 24% 15% reduction of pensions (rejected by CCR) but achieved by the reduction of the pension point 15% reduction of the majority of social benefits 2011 Comprehensive modification of labour laws (the Labour Code and the laws that regulated collective bargaining, trade unions, labour disputes)

2011 Labour Reforms The consultations started off in a tripartite structure during Jan.-Feb. 2011 At the pressure of AmCham and FIC (which at the time were not part of the national social dialogue structures) the government rejected social dialogue. And passed the laws without consultation by assuming responsibility in Parliament.

2011 Labour Reforms Elimination by law of the National Collective Labour Agreement Introduction of supplementary representativeness criteria and extension criteria at sector level (50%+1 threshold needed to register a sectoral collective agreement) 47 sector agreements between 2005 and 2010 0 sector agreements after 2011

2011 Labour Reforms At company level: consequences Raising the threshold for representativeness to 50+1 of the employees. The set up of a union by a minimum of 15 founding members from the same company (over 1 million employees from small enterprises denied freedom of association) The possibility to negociate & conclude agreements by employee representatives consequences

Impact of 2011 Labour Reforms In 2017: A total of 7,186 CLA concluded 90% of CLA were in the public sector Around 14% of CLA were signed by TUs (the majority were sighed by Employee Representatives) In the private sector, the proportion of CLA signed by TUs and trade union federations increased gradually to about half but the overall number of CLA is extremely low (767).

Coverage of labour agreements 2013 vs 2008

Coverage of labour agreements In 2010 about 99% of employees were covered by at least one collective agreement, while in 2017 only 19% In the public sector, coverage is around 65%. In the private sector, around 5% of employees are covered by the provisions of a CLA. 1/4th of employees are denied trade union and bargaining rights.

Full time contracts on Minimum Wage (2011-2017)

Distribution of wealth (2005-2015)

Adjusted share of wages in GDP

Productivity vs. wages

Other consequences… Worker Migration (an estimated 3.5 million Romanians work and live abroad); Social dumping and pressure to keep wages and working conditions low throughout Europe; Social unrest (recent increase in spontaneous strikes) Etc

Fiscal Reform 2017

Transfer of social contribution from employer to employee With no consultation with the social partners Amid opposition of trade unions and reticence of the employer’s organizations Despite the negative opinion of the Economic and Social Council …and of the Fiscal Council In October 2017, the Government passed by Emergency Ordinance the modification of the Fiscal Code. It is widely believed that the reason was the 25% increase of the wages in the public sector, provided by law 153/2017 which had to take effect on 1 January 2018 and for which there were no funds.

“Transfer” of social contributions CAS pensions CASS health Unempl Accidents, medical leave, wage guarantee 2017 Employer 23% 15.8%; (20.8% or 25,8%) 5.2% 0.5% 1.25% - 1.95% Employee 16.5% 10.5% 5.5% - CAS pensions CASS health CAM unemployment, sickness leaves, accidents, wage guarantee 2018 Employer 2.25% - (4% or 8%) Employee 35% 25% 10%

“Transfer” of social contributions No obligation for the employers to increase gross wages to include the increased contributions due by the employee For 20 days in december collective bargaining was mandatory for all companies (GEO 82/2017) However, there was no increase in the number of CLA in 2017

after three months...

Share of contracts on Minimum Wage and bellow

The median value of wages fell bellow the Minimum Wage

…more difficult wage bargaining Previously, for every 100 lei increase in wage negotiated the worker received 71 lei net. Now, for the same sum negotiated, the worker receives only 57 lei net.

Contributions to private pension funds decrease Previously, 5.1 points (from the 10,5% contribution of the employee) was paid in the privately managed pension funds Now, 3.1 points (from the 25% contribution of the employee is directed to the private pension system

A fiscal policy that fails to redistribute Flat tax dropped from 16% to 10% 5% tax on dividends maintained Independent workers pay contributions to the minimum wage regardless of their income Part-time workers pay contributions to the minimum wage even if they earn bellow it (temporary solution: the employer pays the difference) A cascade of legal acts to “repair” the disfunctionalities created by the shift of social contributions

TU Focus is on: Legislative change ( esp. Code of Social Dialogue) International pressure (ILO, ITUC, ETUC, etc) Shift in union strategies: Strengthening union internal legitimacy Organizing new categories of workers Gather support for trade union causes by making alliances with other civil society actors Ex. “Servici uşor” campaign; the Coalition for Work

Thank you!