Labour market dynamics and changes in fiscal and wage policies in Romania

Abstract

In the context of the COVID-19 pandemic outbreak, fiscal policies become essential in combating the crisis effects on both the labour market and the business sector. Thus, finding the most effective fiscal policy solutions to ensure a smoother economic recovery from the pandemic effects becomes a major concern worldwide. As compared to more developed countries, developing economies tend to have harder and usually longer recovery periods from economic crises. Therefore, this paper aims to study the changes in fiscal policies in correlation with the evolutions and transformations of the labour market for a case of a developing country. Evidence for the case of Romania is provided, where labour force participation is very low and youth unemployment is among the highest in Europe. This paper discusses the national legislative framework of fiscal policies and the recent labour market changes. Forecasts of moderate levels of economic growth are radically changed following the outbreak of the COVID-19 pandemic in early 2020.