Stark warning to applicant states over skills gap

Date: 19/10/00

By John Shelley

THE inability of countries vying to join the EU to create jobs and train workforces is endangering their prospects of closing the wages gap with existing member states, according to a European Commission report.

The draft paper, drawn up by Anna Diamantopoulou's social affairs department, warns that the low level of education and vocational skills in central and eastern European countries is hampering their economic and social development - calling into question their ability to meet EU standards.

"Insufficient or inappropriate investment in human resources development can mean that countries lack the skills needed to compete in newly opened foreign and domestic markets," warns the report.

Narrowing the growing gap between wage levels in the EU and the applicant countries is seen as vital to avoid a rocky first few years for an enlarged Union. Diamantopoulou's paper will be seized on by those who are arguing for transition periods before workers from new member states are given the right to work anywhere in the Union as evidence that a delay is essential.

Germany and Austria, in particular, are worried that if there is still a huge difference in pay levels when candidate countries join, large numbers of their citizens will commute across borders to work. Average rates of pay in the Czech Republic are, for example, currently around one-quarter of those in Austria.

This has prompted both countries to call for a time lag of up to ten years before citizens from new member states are granted full free-movement rights, although this is being fiercely resisted by the applicants.

The skills gap in the candidate countries is also prompting a rethink about the nature of any such transition periods. Diplomats say governments are considering a quota system which would allow a limited number of workers from new entrants into existing member states. These quotas could be fine-tuned on a regional basis, or to allow skilled workers in while keeping the unskilled out.

However, the applicant countries are bound to resist any proposal which could contribute to their existing brain drain problem. EU diplomats also warn that introducing a quota system instead of a blanket ban on free movement would make it easier for those countries which favour transition periods to persuade others to keep the restrictions in place for longer.

Diamantopoulou's report points out that the employment rate in the central and eastern European applicant countries is actually falling, with an overall drop of 1.3% in 1999 despite a strong global economic situation. This compares poorly with existing EU member states, all of which are seeing an increase in employment numbers.

The paper points to key structural problems in the candidate countries' labour markets, particularly in relation to poor training and skills.

"The biggest challenge appears to be the inherited educational and skill structure," it states. "Contrary to common belief, skill and educational levels in these countries are lower than in the Union and have not much improved in the 1970s and 1980s up to the early 1990s."

The Commission's report finds that more young people in these countries drop out of school without sufficient skills, and detects a growing divide between the 'knowledge-rich' and the 'knowledge-poor'. It blames this in part on regressive tax regimes. "Basic individual exemptions in the personal income tax code are relatively small and social contributions tend to be high and strictly proportional," it states.

The inability of countries vying to join the EU to create jobs and train workforces is endangering their prospects of closing the wages gap with existing Member States, according to a European Commission report.