Workers in transition

After Central and Eastern European and Central Asian economies abandoned central planning, nearly 195 million workers had to adjust to new rules of work and life. Most transition economies have not yet fully committed themselves to the rules of the market place. A few that have are already enjoying growth in wages and employment; in other countries, labor income growth is still to come. Reform has not been so well accepted in countries that were forced to enter the transition. Transition brought increasing differentiation in wages, incomes, and employment status. But there is a positive relationship between stabilization, structural reform, and private sector development on the one hand, and labor incomes on the other. The balance between benefits of such a path (dynamic growth of private employment and wages) and the drawbacks (labor force withdrawal, increasing unemployment, income differentiation, and poverty) improves every year in the leading reform countries. Continued stagnation in the countries resisting reform could result in persistently low labor income. The Organization for Economic Cooperation and Development (OECD) experience with active labor market policies has not been entirely encouraging but in the transition economies such policies - if well designed - could help build social acceptance of reform and smooth the labor force's adjustment to new demands.