The financial crisis and changing labour markets in post-transition countries

Abstract

Labour markets in post-transition countries have undergone radical changes, with a shift away from full employment and strong legal protection for employees, though the extent of these changes has differed between countries. I show that the loosening of employment protection went in parallel with growing income inequality and widening poverty levels, which led to a rise in household debt. This enabled additional consumption in the short term, but later deepened recession by hampering consumption. Following the financial crisis, the tendencies to make labour markets more flexible were confirmed and strengthened. This was facilitated by the weakness of trade unions, conditioned by structural changes brought about by transition.