중동부유럽

Romania is facing demographic challenges. The size of the working-age population is falling, while the dependency ratio (working-age persons to young and old persons) is rising. This undermines potential output growth, thereby prolonging the convergence to Western European income levels. Labor force participation therefore plays a central role in determining the prospective path of Romania’s economy and living standards.

Romania’s labor force participation (LFP) is relatively low. The overall LFP in 2022 was 66.8 percent, the second lowest in the EU, and 9½ percentage points lower than the average of EU countries (excluding Romania). LFP is lower in Romania than the EU average across almost all demographic groups, as defined by gender, education levels, and age. This suggests that measures to boost LFP could be a natural way to at least partially offset the effects of demographic decline.

This paper analyzes the reasons for Romania’s low LFP, and outlines policy options to raise it. Section B provides an overview over Romania’s demographic challenges. Section C analyzes LFP across demographic groups and identifies possible causes. Section D outlines policy options that could help raise LFP of specific population groups and presents simple simulations of the impact on overall LFP and potential GDP if LFP of particular groups were to increase.