Romania’s Demographic Future: Between High-Tech Country and Subsistence Economy

Romania’s Demographic Future: Between High-Tech Country and Subsistence Economy

When Romania joined the European Union on 1 January 2007, Bucharest, with its population of just under 1.9 million, became the sixth-largest city within the union. Yet apart from its large population, the Romanian capital had little else in common with other European metropolises such as London, Berlin or Paris. The old buildings in the historical city centre were in a wretched state of decay and the many new buildings that had sprung up under the socialist regime of former President Nicolai Ceausescu were in need of thorough renovation. Besides the crumbling buildings, the urban landscape was dominated by traffic gridlocks in the woefully inadequate road network. Thousands of Dacia 1300s – the Romanian equivalent of the East German Trabant, almost two million of which had rolled off the production line between 1969 and 2004 – polluted the air and their engines contributed to a background din punctuated only by the constant hooting of impatient commuters.

A good ten years later, Bucharest has become a symbol of a modern, aspiring Romania – a country whose GDP per capita, even in the wake of the crisis, rose by an average of 4.1 percent annually between 2007 and 2016. After Malta (5.4 percent), Bulgaria (4.9 percent) and Lithuania (4.6 percent), this was the highest growth rate in Europe. The heart of Bucharest‘s old city has now been almost entirely restored and, to some extent, is once again living up to its old reputation as the Paris of the East. Although many Romanians have remained loyal to the domestic car industry and still drive Dacias, most of them have switched to the more economical new models. Many young people now use the city‘s growing network of cycle paths.

Cities on the data highway

In Bucharest, almost one citizen in ten now works in the creative and IT sectors. As in Romania‘s other major cities – Timisoara, Cluj-Napoca and Constanta – a lively start-up scene with incubators and co-working spaces has emerged. At six percent, the proportion of students registered as studying information science was higher than in almost any other country in the EU in 2015. Only in Estonia and Finland was the share higher – eight and nine percent, respectively. What is more, future graduates will have a good chance of being well prepared to meet the demands of the labour market. In terms of the quality of education in mathematics and science, Romania occupies 32nd place out of 138 countries worldwide in the World Economic Forum’s Global Competitiveness Index (GCI) – scoring the same number of points as high-tech countries like the United States, Israel and South Korea. Moreover, the Romanian government is making an effort to encourage IT personnel to stay in Romania by offering tax incentives for investors and entrepreneurs in this field.

The IT sector is a success story in a country that has lost many jobs as a result of the transformation to a market economy and the global economic crisis. The number of people over the age of 15 working in the IT industry rose by almost 50,000 between 2008 and 2016, a period in which a total of 920,000 jobs were lost overall. The IT industry now generates 5.5 percent of GDP – the fifth-highest share in the European Union after Ireland (7.5 percent), Luxembourg (6.5 percent), Malta (6 percent) and the United Kingdom (6 percent). The boom in this sector has been made possible not only by well-educated personnel but also by the good infrastructure. When Romania upgraded its Internet system, it invested straight away in state-of-the-art technology. In recent years, ROMANIA Population size in million (2016) 19.8 Projected population size in million (2030) 18.0 Projected population size in million (2050) 16.3 Total fertility rate (2015) 1.58 Annual net migration per 1,000 inhabitants (2011-2015) -1.5 Median age (2016) 41.4 Life expectancy (2015) 75.0 GDP per capita in euros (2016) 8,600 GDP per capita at PPP (2016) 17,200 Unemployment rate (2016) 5.9 Between High-Tech Country and Subsistence Economy 114 Europeʼs Demographic Future the average Internet speed in Romania has been one of the highest in Europe.

Villages without road links

But a visit to a major Romanian city with a booming economy and a technically versed middle class tells only half the truth about Romania‘s economic and social situation: some 11 million people, roughly half of the Romanian population, live in the countryside and many of them have no Internet access at all. Here it is agriculture rather than IT that dominates. With the exception of BucharestIlfov, at least a fifth – in some cases as much as a third – of the working population, is employed in agriculture in every region of the country. Overall, just under a quarter of the Romanian working population over the age of 15 are employed in agriculture – around 20 percent more than the average for the 28 EU states. A third of the EU‘s agricultural enterprises are in Romania – a total of 3.6 million; but they contribute only 3.4 percent of the total value generated by this sector in Europe as a whole. Many enterprises are very small farms with fewer than five hectares of land. Nine out of ten operate at subsistence level. Of the almost two million people employed in agriculture, just under 45 percent are unpaid labour on the family farm. As a result, although the Romanian agricultural sector does provide employment, it does not offer sufficient paid work. Adjusted for purchasing power, GDP per capita in rural regions is not even a third of that in the cities. In Germany, rural inhabitants generate two-thirds of the GDP per capita of their urban counterparts; in Italy the figure is almost 90 percent.

The standard of living among the Romanian rural population is correspondingly low. In the thinly populated northeast of the country, around a quarter of the population have major problems covering basic expenses. Many people in the country live in cramped, often ramshackle accommodation. Whereas in the capital region of Bucharest-Ilfov, nine out of ten households have an Internet connection, many villages are not even connected to the mains water system. The roads to the villages are not asphalted, and many of them are not even reachable by road. Although Romania has invested heavily in expanding its infrastructure since joining the EU, the GCI evaluates the quality of Romanian roads as on a par with that of developing countries like Chad and Nigeria.

Only if Romanian villages succeed in becoming physically connected to the rest of the country will they have a chance of securing their economic existence in the long term. Moreover, agricultural enterprises will need to be restructured if they are to be able not only to cover their own needs but also to grow produce that they can market for a profit. In the meantime, the government has launched consultation and further-education programmes for those running agricultural enterprises. In addition, it plans to help enterprises to modernise farms and support young people starting farming businesses. Beyond the agricultural sector itself, there are plans for major infrastructure projects that would generate 27,000 jobs in rural regions.

As well as boosting the rural economy, it is important to help the young rural population get a good start in life. To date, pupils in the country not only do worse in comparative tests than their counterparts attending school in the cities; they also frequently leave the education system earlier. Whereas in the thinly populated regions of central, northern and southeastern Romania around a quarter of 18- to 24-year-olds have only a lower secondary education, the same applies to only a tenth of this age group in the economically strong city of Timisoara and the capital region, Bucharest-Ilfov.

In future, the government plans to help children from low-income families by providing school materials, subsidising the purchase of a computer and offering educational grants to prevent their parents from terminating their education prematurely. The government provides buses for the many children who live a long way from school or compensates families for travel expenses. In a pilot project, teams of social and health assistants, mediators and educational consultants have been sent to 100 disadvantaged municipalities. Their task is to help improve labour market outcomes among the rural population. If the project is successful, it will be expanded to another 500 municipalities.

EU accession triggers wave of emigration

Despite all these efforts, many rural inhabitants are likely to leave their home villages because of the difficult living conditions. If they do, they will be following a trend that has persisted for some years now. Today, 1.2 million fewer people live in rural areas of Romania than in 2007. Only 250,000 of that loss can be attributed to death surpluses. Overall, Romania’s population has shrunk during the country’s first ten years of EU membership from 21.5 million to 19.9 million inhabitants. Two-thirds of this loss was accounted for by migration. After Latvia and Lithuania, no EU country lost a greater share of its population between 2007 and 2015 than did Romania.

Emigration not only reduces the population; it also accelerates demographic change, since the migrants tend to be mainly young people at the start of their working lives. Their departure both raises the average age and deprives the country of potential future parents. In terms of median age, Romania is likely to be one of the EU‘s oldest societies by 2040.

Currently, however, Romania is one of the youngest EU member states in terms of population because it is still benefiting from the effects of the Ceausescu regime‘s rigid demographic policy, which banned abortion and severely limited access to contraceptives. In the year of the revolution, 1989, the fertility rate was 2.2 children per woman and thus higher than in most other socialist countries in Europe. The generation born in the 1980s was therefore large. But only a few weeks after the bloody end to the Ceausescu era, the government overturned the law on abortion and in the years that followed increasingly facilitated access to contraceptives. The demand for them was certainly high and combined with the major political and economic uncertainty of the post-socialist era, led to a drop in the average number of children per woman to 1.8 in the first twelve months after the change of regime. This trend has continued, albeit at a more moderate tempo, for many years. The fertility rate reached the record low of 1.2 children per woman in 2002. Since then, it has risen again; but at just under 1.6, it is still far from the level needed to keep the size of the population stable without immigration.

Rural regions as pioneers of demographic change

What the reduction in fertility combined with the strong emigration trend means for Romania is already evident today in the rural regions. For every 100 people between the age of 20 and 64 there are 30 people over 65; in the cities the ratio is 100 to 23.47 Until recently, the custom in the countryside was for children to look after their elderly parents. Now parents and children live far away from one another, and the state does not provide any comprehensive or viable alternative to the traditional model of care within the family. Throughout Romania the health and care systems are regarded as poor – and in the countryside these structures are much worse.

In cities, by contrast, the effects of demographic change can scarcely be felt and will start to have an impact only in the coming years. Currently, Romania‘s urban centres still have a broad stratum of young people between the age of 25 and 39. This is the first generation to have experienced only the tail end of the Ceausescu regime, and it has come to take democratic rights for granted and make use of them. Romania has seen several protest movements in recent years – most recently, in the winter of 2016–2017 when Prime Minister Sorin Grindeanu tried by decree to liberalise corruption legislation – a step that would have legally favoured some of his political cronies. According to media reports, the last time that so many people took to the streets was during the Romanian revolution of December 1989. And the recent protests opposing the decree were successful: just a few days later, the government withdrew the draft legislation. The young urban middle class seem to have become fully-fledged citizens of the EU and are prepared to defend the rule of law and democracy actively. Now the task is to enable the rural population to take part in the successful course on which Romania has embarked./IBNA

Source: Berlin Institute for Population and Development