Finding Romania’s hidden labor force

CLUJ, Romania – The tiny village of Jucu in northwestern Romania, which will host a new factory making Nokia mobile phones, currently earns its livelihood from farming vegetables such as peppers, tomatoes and eggplant. It doesn’t have a full-time doctor, a schoolhouse or indoor toilets. Some 60 houses don’t have running water. But it still has relatively cheap labor. A decision by the Finnish mobile handset giant to move a major production line to Romania this year sparked rage in Germany over job losses, but in the nearby city of Cluj in Romania, it calmed fears that foreign investment was drying up. Over the past year, alarm bells have been sounding all around Eastern Europe about a rising shortage of labor that may stunt the growth and long-term development prospects in some of the poorer regions. «In our area, we are only missing workers in the construction sector,» Nicolae Beuran from the Cluj Chamber of Commerce told Reuters. «Many builders went to Germany, some went to Spain or wherever else they got paid more.» The fears are that ballooning wages and migration to Western labor markets have eroded the competitiveness of manufacturing in Eastern Europe and could stop an influx of foreign cash. Industry observers say Romania is missing hundreds of thousands of workers in some sectors since migration depleted the work force. Roughly one in 10 Romanians lives abroad. But Nokia appears to have found a pocket of labor supply around Cluj, a Transylvanian university town dating back to the Roman era, where residents hope that thousands of graduates will attract foreign cash and well-paid jobs. «We can offer what we have,» said Beuran. «We are a big university center and have 100,000 qualified students.» Even though unemployment is as low as 3 percent in Cluj, local officials say foreign investors are managing to attract labor by paying more than local employers. Average pre-tax salaries are -450 a month in Cluj – one seventh of levels in Germany’s state of North Rhine-Westphalia which includes Bochum, the economically depressed region that Nokia is to quit for Romania. The pay is still low despite Romania’s double-digit real wage growth in recent years as it speeds up toward Western European living standards and taps cash from the European Union. Some foreign manufacturers complain about skill shortages, while the state Employment Agency in Cluj says there is a «crisis» in the labor market. But city authorities say there is more foreign investment in the pipeline. According to city council head Marius Nicoara, Cluj is talks with several companies, including a large US firm in the auto industry which wants to invest $200 million. «We are in advanced discussions with other investors but can’t offer them as much land and electricity as they want. So we are in a great position to choose,» he said. For Cluj and the impoverished countryside surrounding it, Nokia’s -60 million investment spells a promise of much-needed government cash, modernization and basic facilities. «We need many things here and I hope they will be resolved faster thanks to Nokia,» said Jucu Mayor Dorel Pojar. «Since its arrival, there is a prosperous future ahead of us.» He hopes the Bucharest government will funnel more cash and faster for development projects and infrastructure to spruce up the area, a long valley surrounded by farmland and barren, grayish-brown hills. Local authorities in Cluj say they are investing dozens of millions of euros on infrastructure projects in the region, building up roads, water networks and industrial parks to bring in foreign manufacturing. A multibillion-euro highway project connecting central Romania with Western Europe through Hungary is planned to run just kilometers away from Jucu. Nokia, which plans to start production in Jucu in the first quarter, reported a 57 percent rise in its October-December earnings per share yesterday, with booming demand in emerging markets boosting its global market share to 40 percent. The company declined immediate further comment on its choice of Romania, but has said the move aimed to lock into lower wage costs to defend its profit margins: at just under 24 percent on cell phones, these are already much stronger than its rivals.