Eastern Europe Needs Skilled Labour

 By Henry Srebrnik, [Charlottetown, PEI] Guardian

Over the past few decades, many of the political leaders in eastern Europe have focused their efforts on curbing the flow of migrants and asylum seekers, contending that an influx of third-country nationals would undermine social stability, threaten cultural cohesion and even pose a security risk.

For example, in 2015, at the height of the European Union’s migration crisis, the four Visegrad countries (the Czech Republic, Hungary, Poland and Slovakia) opposed the EU’s refugee-quota system, which aimed to share the burden by allocating a certain number of asylum seekers to each EU country based on population, GDP and other factors. Hungary and Slovakia were among the most vocal critics of the plan, arguing that mandatory quotas were an attack on national sovereignty.

Hungarian Prime Minister Viktor Orban champions a homogenous Hungary. In Slovakia, Prime Minister Robert Fico’s left-populist Smer-Social Democracy party won the 2023 election by exploiting resentment against even Ukrainian refugees. This has helped such leaders to consolidate electoral support by playing on voters’ fears of economic anxiety and desire for stability in an unsettled world.

But the region is facing an acute shortage of skilled workers. So these countries are increasingly liberalising their immigration rules and procedures to enable the entry and employment of skilled foreigners. In January, Hungary passed a new immigration law that introduces new short-term guest and skilled-worker visas. It was accompanied by new ways to improve the efficiency of visa processing in countries such as Oman, Qatar and Uzbekistan.

Hungary has little choice. Labour shortages in the coming years would hamper the government’s ambition to become an electric vehicle manufacturing country. In 2022, China’s CATL announced that it would build a $7.9 billion EV battery plant in the eastern Hungarian city of Debrecen, its biggest overseas investment in Europe to date, to supply German carmakers BMW, Mercedes-Benz and Volkswagen.

 In late 2023, China’s BYD, one of the world’s largest electrical vehicle manufacturers, announced it would open its first European EV production factory in Hungary. BYD will construct the plant near the southern Hungarian city of Szeged and is expected to provide thousands of jobs to the region.

The Chinese manufacturer has already located in Hungary. In 2017 it opened its first European factory in Komarom, where, among other things, electric buses are produced, and in the fall of 2023, it started selling its passenger cars in Budapest. 

 The German defence contractor Rheinmetall recently opened a new factory in the Hungarian city of Zalaegerszeg, while armoured tactical vehicles are to be produced in the city of Gyor. All of these ventures will require sufficient human capital.

The Czech Republic in September 2022 simplified the recruitment process for “critically needed” workers and improved oversight of working conditions for foreigners. This allows the Czech government to offer more favourable residence conditions to some third-country nationals, making the Czech Republic more competitive as a destination for talent.

This past summer, Prague implemented a regulation that grants free access to the Czech labour market for citizens of nine selected countries: Australia, Japan, Canada, South Korea, New Zealand, the United Kingdom, the United States, Singapore, and Israel. They do not need to obtain any employment permit to work in the Czech Republic, but only a residence permit.

The number of foreign workers in Slovakia increased seven-fold between 2013 and 2022, with some manufacturers, such as the British carmaker Jaguar Land Rover, relying heavily on labour from abroad. And more of these workers are coming from farther away, from India or Kazakhstan rather than Serbia or Ukraine.

But there is still a need for tens of thousands more workers, especially in the mechanical engineering, automotive, transport, healthcare and IT sectors. So, like the Czech Republic, Slovakia also streamlined its procedures to attract foreign workers last summer.

The labour shortage in eastern Europe is likely to worsen: demand for skills in the industries of the future is only increasing, at the same time as fertility rates are declining and young people are leaving the region to pursue better opportunities elsewhere.

To plug these competency gaps, countries must continue to reform their immigration policies. Failure to do so could result in widespread economic pain, as they may miss out on new investments that could generate GDP growth and raise tax revenue.

The question is not whether immigration is good or bad, but how it can yield benefits for both destination countries and third-country workers.