The working age population is likely to continue to shrink over the decades to come. The CEE region should thus focus on increasing participation rate.

The labor market in CEE faced a fast convergence process in both wages and productivity after EU accession. Emigration, improving educational attainment (despite the heritage of archaic education systems) as well as a dynamically aging population have been the main trends shaping the labor market over the last two decades. As a result, unemployment has been continuously falling and the labor markets, before the pandemic outbreak, had never been so tight across the CEE region.

The working age population is likely to continue to shrink over the decades to come. The CEE region should thus focus on increasing participation rate by higher employment of young people and women. Among these two groups, the gap to the benchmark country (Sweden) is the highest. Flexible work arrangements (part-time employment, teleworking), supported by investment in digital infrastructure, services and skills, could be positive for women’s employment as well and labor market participation among elders.

The pandemic outbreak only revealed the need for flexibility and accelerated changes. Such work arrangements tend to dominate among white-collar workers and highly educated people. This brings us to another aspect: further improvement of educational attainments, including life-long learning, which reduces the probability of being unemployed. Among other factors that could increase labor market participation, we should mention an increase of the retirement age, including information about estimated pension entitlements, migration, as well as addressing structural problems, such as the unemployment of marginalized groups.