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Rutkowski, Jan

Global Practice on Social Protection and Labor

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Labor economics

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Global Practice on Social Protection and Labor

Last updated January 31, 2023

Biography

Jan Rutkowski is a Lead Economist at the World Bank, Social Protection and Jobs Global Practice. He works on labor market issues in different parts of the world and has contributed to World Bank projects in jobs, employment, poverty, and skills. Rutkowski has advised governments on labor market reforms in a number of transition economies of Europe and Central Asia. His recent analytical work includes studies on labor market performance and policies. He co-authored the report Enhancing Job Opportunities: Eastern Europe and the Former Soviet Union (World Bank 2005), wrote a chapter on the demand for skills for the World Bank (2012) report Skills, not just Diplomas. Managing Education for Results in Eastern Europe and Central Asia, and contributed to the Vietnam Development Report. Since 2014, Rutkowski has been working on labor issues in the Philippines, leading the team that produced the 2016 Philippine Labor Market Review: Employment and Poverty.

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Firms, Jobs, and Employment in Moldova

(World Bank, Washington, D.C., 2004-03) Rutkowski, Jan

Despite low open unemployment, labor market outcomes are unsatisfactory in Moldova. Employment is low and job opportunities are scarce. The author examines labor market performance in Moldova by focusing on firm dynamics. He finds that the low level of employment in Moldova is due to the low rate of firm entry and the low rate of job creation in existing firms. Although the rate of job destruction is high, this is typical of transition economies, and is a problem only because it is not coupled with a commensurate rate of job creation. Firm exit is limited and thus is not an important factor behind job losses. The only sector of the economy that creates jobs on a net basis is that consisting of de novo private and small firms. However, in Moldova this sector is significantly smaller than in the most successful transition economies. The author argues that the primary factor behind the small size of the employment generating sector is the high cost of doing business in Moldova. These include numerous administrative barriers, intrusive and costly inspections, and associated corruption. These costs-extremely high even by regional standards-lower the expected returns to business activity and thus discourage firm formation and growth. The author hence recommends improvements in the investment climate as a primary policy aimed at increasing productive employment and lowering unemployment. Priority should be given to fostering job creation through facilitating the formation of new firms and to reducing the constraints on the expansion of existing firms. The government should avoid measures aimed at forestalling the destruction of unviable jobs and firm exit as these are not conducive to long-run productivity and employment growth. Enhancing labor market flexibility is a further priority, as currently the apparently stringent provisions of the Labor Code are not complied with and enforced. Given the unsatisfactory business environment, active labor market programs are unlikely to be effective unless carefully targeted at the most disadvantaged worker groups.
Does Strict Employment Protection Discourage Job Creation? Evidence from Croatia

(World Bank, Washington, DC, 2003-08) Rutkowski, Jan

Employment protection legislation in Croatia is among the most strict in Europe. Firing is difficult and costly, and flexible forms of employment are limited. Is this apparent rigidity reflected-as one would expect based on standard economic theory-in low labor market dynamics? Is job creation low and hiring limited? Is the job security of insiders achieved at the cost of outsiders not being able to enter the labor market? The author attempts to answer these questions by examining job flows. If the employment protection legislation is binding, then job and worker turnover should be low. He shows that this is indeed the case. Hiring is limited and the average job tenure is very long in Croatia. Job destruction is low, however job creation is still lower. The result is accumulation of unemployment, in large part due to new labor market entrants not being able to find a job. The high degree of job protection also seems to strengthen the bargaining position of insiders and results in relatively high wages. So, wages in Croatia are higher than among its competitors, even after adjusting for productivity. These high labor costs are likely to contribute to limited job creation in existing firms, but also are likely to discourage the entry of-and thus job creation in-new firms. The author presents evidence that firm growth has been indeed limited in Croatia, contributing to the low employment level. The author examines other potential causes of high unemployment in Croatia (the unemployment benefit system, labor taxation, the wage structure, and skill and spatial mismatches). He argues that they do not play a substantial part in accounting for poor labor market outcomes in Croatia. The author concludes that the stringent employment protection legislation is the key labor market institution behind low job creation and high unemployment. Based on this he recommends specific measures aimed at liberalizing the labor market to foster job creation and employment.
Rapid Labor Reallocation with a Stagnant Unemployment Pool : The Puzzle of the Labor Market in Lithuania

(World Bank, Washington, DC, 2003-01) Rutkowski, Jan

Lithuania is a transition economy undergoing rapid enterprise restructuring associated with substantial job turnover. At the same time, unemployment in Lithuania is high and of long duration. This presents a puzzle: high job turnover epitomizes labor market flexibility, while high unemployment indicates labor market rigidities. What are the reasons behind this paradox? Why do the unemployed not benefit from job opportunities created by high job turnover, which entails high rates of job creation and hiring? To answer this question, the author looks at three perspectives on labor market flexibility: 1) The macroeconomic perspective-A flexible labor market is one that facilitates full use and efficient allocation of labor resources. 2) The worker perspective-A flexible labor market means ease in finding a job paying a wage adequate to the worker's effort and skills. 3) The employer perspective-A flexible labor market does not unduly constrain the employer's ability to adjust employment and wages to changing market conditions. The author looks at all three dimensions of labor market flexibility by analyzing job reallocation, worker transitions across labor force states, wage distribution, and regulatory constraints faced by employers. He focuses on the issue of job creation and job destruction, using micro level data on all registered firms. He finds that flexibility in one dimension can concur with rigidities in the other. Specifically, employers in Lithuania have a substantial degree of flexibility with employment adjustment coupled with limited flexibility to wage adjustment due to a high statutory minimum wage. The relatively rigid wage structure locks low productivity workers who are preponderant among the unemployed. The low-skilled long-term unemployed have become marginalized and unable to successfully compete for available jobs, while the high job turnover is accounted for largely by job-to-job transitions. As a result, a dynamic labor market coincides with a stagnant unemployment pool.
Why is Unemployment so High in Bulgaria?

(World Bank, Washington, DC, 2003-04) Rutkowski, Jan

The author seeks to determine the main factors behind poor labor market outcomes in Bulgaria. Unemployment in Bulgaria is high and of long duration. The accumulation of the unemployment stock has been caused by relatively high inflows into unemployment coupled with limited outflows. These features of the Bulgarian labor market are typical of other transition economies in Central Europe and exploring their sources is of broad interest. The author focuses on determinants of and constraints to job creation. He uses data on job creation and job destruction from a survey of employment in all registered firms. He finds that the source of large inflows into unemployment is intensive enterprise restructuring associated with a high pace of job reallocation. However, job creation falls short of job destruction. Three main factors account for the limited job creation and hiring, and thus for low outflows from unemployment: a) The unfriendly business environment, reflected by a low rate of new firm formation, and a relatively small, small and medium enterprise sector. b) Labor market rigidities, including excessive hiring and firing costs. c) Skill and spatial mismatches brought about by enterprise restructuring, as well as low skills and marginalization of the long-term unemployed who cannot successfully compete for new jobs. The author recommends a three pronged strategy to improve labor market performance: (1) removing bureaucratic constraints to entry and expansion of firms; (2) enhancing labor market flexibility through lowering hiring and firing costs; and (3) improving the educational system so as to equip workers with broad and portable skills.
Skills Employers Seek: Results of the Armenia STEP Employer Skills Survey

(World Bank, Washington, DC, 2013-12-19) Rutkowski, Jan J.

The note presents the results of the STEP employer skills survey. The survey was implemented in early 2013 using a stratified sample of 354 firms. The firms were stratified by activity and firm size, with a booster sample of large firms. Post-stratification weights were used to make the results representative of firm size. The structure of the sample by activity, size and some other characteristics is presented in annex one. The small sample size implies that the estimates are subject to a wide margin of error. This problem is mitigated by the fact it is qualitative rather than quantitative results that are of primary interest. One should bear in mind that the survey’s results represent subjective perceptions, and as such should be taken with a grain of salt (for example, the employers may express exaggerated views). There are some additional limitations resulting from the survey’s design. It uses a pre-determined list of skills, which may or may not correspond with the skills that employers themselves are concerned about. Moreover, the skills are generic in nature, and not occupation specific. Skills are divided into groups (see below), and it is not possible to compare the importance of specific skills between groups (only within groups). Finally, the survey looks at skills of only two types of workers, highly skilled college graduates, and less skilled high school graduates (see below). These two groups are very heterogeneous, with a substantial variation in the skill set demanded from workers within a group. The upshot is that the survey’s results are very general in nature and as such are meant to highlight the importance of the skills gap problem, rather than to examine skill gaps specific to different types of workers and occupations. Put differently, the results are intended to inform the public debate on skills and education policy, rather than to identify specific skills-related problems. The note is structured as follows. Section one provides background information on the skill structure of employment, and presents evidence on a skills shortage in Armenia. Section two is central. It examines the demand for skills and the skills gap. It identifies skills that determine the employers hiring decisions, and skills that young job applicant most frequently lack. Section three focuses on firm organized training as a way of coping with a skills shortage. Section four concludes and discusses policy implications of the analysis.
Demand for Skills: Main Results of the Azerbaijan STEP Employer Survey

(World Bank, Washington, DC, 2015-01-12) Rutkowski, Jan J.

This note summarizes the main findings of the STEP Employer Skills Survey carried out in Azerbaijan in 2013. The note argues that there is a skills shortage in Azerbaijan. Azeri employers claim that it is difficult to find workers with required skills. The shortage is particularly pronounced in the case of modern, innovative firms, which tend to required more advanced skills. The education system does not meet the needs of the majority of employers. In particular, it does not equip young workers with the practical skills that are required in the workplace, and with knowledge that is up-to-date. The note finds that employers seek not only technical, job-specific skills but also cognitive skills (such as literacy, numeracy and problem solving) and adequate socio-behavioural skills (such as communication, teamwork, leadership and ability to work independently). Conscientiousness stands out as a personality trait that is critical for employability. Unfortunately, many young job applicants lack the skills demanded by employers. The key employability skills that young workers are most frequently lacking include job-specific technical skills, problem solving skills, communication, teamwork and leadership skills. Hence, the skills gap refers not only to technical skills but also to higher-order cognitive skills and socio-behavioural skills. By their nature, these results show subjective perceptions of employers. And these perceptions reflect not only the objective conditions, but also employers’ expectations regarding worker skills that may be excessive. Nonetheless the results signal a skill problem in Azerbaijan, and employers’ criticism of the quality and relevance of education should not be too easily disregarded. The survey’s results strongly suggest that the quality of education needs to be improved, and the education system needs to be more responsive to labor market needs in order to support growth and modernization of the Azerbaijan’s economy.
Workforce Skills in the Eyes of the Employers: Results of the Georgia STEP Employer Skills Survey

(World Bank, Washington, DC, 2013-11-29) Rutkowski, Jan

The objective of this note is to present the results of the recently completed employer skills survey, and to discuss their policy implications. The analysis finds that there is a skills shortage in Georgia despite high unemployment. It is difficult for employers, especially in the modern sector, to find workers with the required skills. Employers demand not only ‘hard’ technical skills, but also ‘soft’ social and behavioural skills (such as openness to experience) as well as higher-order cognitive skills (such as problem solving and creative thinking). And these are the skills that young Georgians often lack. Box one summarizes the main results of the analysis and shows the core employability skills that young workers lack most often. The note is organized as follows. Section one looks at the supply of and demand for skills, and shows that, despite high unemployment, there is a skills shortage. Section two examines the demand for skills more closely. It identifies skills that determine the employers hiring decisions, and skills that young job applicant most frequently lack. Section three focuses on firm organized training as a way of coping with a skills shortage. Section four concludes and discusses policy implications of the analysis.
Balancing Flexibility and Worker Protection: Understanding Labor Market Duality in Poland

(World Bank, Washington, DC, 2014-10) Gatti, Roberta V. ; Goraus, Karolina Marta ; Morgandi, Matteo ; Korczyc, Ewa Joanna ; Rutkowski, Jan J.
Skills, Not Just Diplomas : Managing Education for Results in Eastern Europe and Central Asia

(World Bank, 2012) Sondergaard, Lars ; Murthi, Mamta ; Abu-Ghaida, Dina ; Bodewig, Christian ; Rutkowski, Jan

The countries of Europe and Central Asia (ECA) are currently emerging from the deepest recession suffered by any developing region. Post-crisis conditions are very different from those of preceding years. Financial resources are more limited and more expensive, and export growth is restrained by potentially slower growth in destination countries. Restoring and sustaining growth in this context require reforms that boost competitiveness and increase labor productivity. Such reforms are all the more important given the shrinking of the working-age population in many countries of the region. This book uses a range of different data sources to argue that the skills problem in the ECA region relates more to the quality and relevance of the education provided in ECA countries than to problems of access. A central argument of the book is that ministries of education are constrained in a number of ways from effectively managing their education and training sectors. The three most important and interrelated impediments to improving quality and relevance are the lack of systematic data on key skills-related performance issues (i.e., how much students are learning and whether they are finding jobs after they graduate), the legacy of central planning, and inefficient use of resources. Lack of data on student learning and employment outcomes makes it difficult for education ministries to address the legacy of central planning, which emphasizes centralized management based on inputs. Ministries of education in the region continue to micromanage the sector using detailed norms and regulations. This input-oriented style of management leads to the inefficient use of resources and results in a rigid education sector not the type of flexible sector needed by ECA to create modern, skilled workforces. This book highlights how these constraints manifest themselves and then presents ways of overcoming them, relying on the experience of ECA countries that have successfully addressed them, together with international experience. Recommendations are presented in separate chapters for pre-university, tertiary, and adult education.
Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union

(Washington, DC: World Bank, 2005) Rutkowski, Jan J. ; Scarpetta, Stefano ; Banerji, Arup ; O'Keefe, Philip ; Gaëlle, Pierre ; Vodopivec, Milan

In the last 15 years, the countries of Eastern Europe and the Former Soviet Union have made impressive progress in their historical transition from centrally planned to market economies. In building the institutional foundations of a market economy, they have developed a vibrant private sector and opened themselves to international trade. After an initial economic recession, this has ignited economic growth, which in turn has brought about higher incomes and reduced poverty. But the transition and recent growth have been disappointing in one key area-jobs. In countries across the region, job opportunities remain scarce. This study focuses attention on the causes of these disappointing labor outcomes, and points to the solutions. Why has the job creation record of transition economies been disappointing? One reason is that the size of the new private sector that generates jobs is still relatively small in many of the Region's countries. And there is still enough room for firms to increase output through downsizing and retrenchment-what is sometimes termed "defensive restructuring." And why do firms not engage in more strategic restructuring? Often, they are discouraged by the poor investment climate-substantial risks, barriers, and costs associated with doing business. Two other factors also play a role. In countries in the Region with strong institutions and enforcement capacity, strict employment protection legislation can actually inhibit hiring. Again, for many firms in the Region, the lack of adequate skills among available workers also proves to be a significant constraint to growth. This study recommends a two-pronged strategy to create more and better jobs. First, in every country across the Region, the investment climate needs to be further improved to encourage new firms to enter the market, and for existing firms to grow. Second, countries in the Region need to have institutional and regulatory reform to develop an adaptable labor market, where core worker rights are effectively protected, but employers are not unduly constrained in adjusting the size and skill composition of their workforce to the changing product demand.