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. Last Updated: 07/27/2016

Report: Labor Flexibility Key to Survival

Flexibility of labor markets will prove the key to success for countries around the world as formerly isolationist nations adapt to market economies, a World Bank report states.


Made public Thursday and titled "Workers in an Integrating World," the report notes a doubling of the global labor force in the past 30 years. The result: falling wages and rising unemployment for many in emerging markets, and fears among industrialized nations that native workers will lose out to less expensive counterparts.


To become competitive, new market economies such as those in Eastern and Central Europe must focus on both training and equipping themselves to compete, and ensuring geographic and occupational mobility for workers, the report said.


Despite five years of progress toward a market economy, such geographical mobility for Russians is still greatly hampered, particularly by housing shortages, according to bank economists.


"It will take an immense amount of money and an immense amount of time to improve the situation," said Ardy Stoutjesdijk, head of the World Bank's Moscow office.


"It's a tough problem, especially for a country like Russia that has established economic centers under the old planning system for purely political reasons," said Hasso Molineus, manager of operations in Moscow.


Examples are found throughout the country, where Soviet planners built entire cities to handle a single industry such as defense or mining. "These cities were created for more political issues, and the question is, can they survive in the future, and what happens to the labor?" Molineus said.


Likewise, training issues will continue to be an issue for years in Russia, although the service sector has made great strides at raising competitiveness, economists said.


However, determining the success of active labor policies throughout Central Europe has met varying degrees of success, according to World Bank economist Michal Rutkowski, who presented the report.


Rutkowski told a press conference prior to the report's release that in Hungary, initial assessments of a training program showed that participants were more likely to find a job afterward.


Further analysis, however, determined that success had more to do with the type of person who participated than with the training session itself.


"We found that these countries that did proper evaluations ... did not show an effectiveness of active labor market policies," he said. "We cannot say for sure they work."


The 18th annual report stresses that emerging market countries undertaking the most aggressive reforms will see the quickest rise in real wages. Likewise, real wages have consistently risen with increased exports.