Making the Transition

Education and Labor Market Entry in Central and Eastern Europe

Irena Kogan, Clemens Noelke, Michael Gebel, Irena Kogan, Clemens Noelke, Michael Gebel

• Editorial: Stanford University Press
• Año: 2011
• ISBN:
  9780804778954
• Edición: 1
• Categoría: Social Sciences
• Categoría: Sociology

After the breakdown of socialism in Central and Eastern Europe, the role of education systems in preparing students for the "real world" changed. Though young people were freed from coercive state institutions, the shift to capitalism made the transition from school to work much more precarious and increased inequality in early career outcomes. This volume provides the first large-scale analysis of the impact social transformation has had on young people in their transition from school to work in Central and Eastern European countries.

Written by local experts, the book examines the process for those entering the workforce under socialism, during the turbulent transformation years, in the early 2000s, and today. It considers both the risks and opportunities that have emerged, and reveals how they are distributed across social groups. Only by studying these changes can we better understand the long-term impact of socialism and post-socialist transformation on the problems young people in this part of the world are facing today.

CHAPTER ONE

Social Transformation and Education Systems in Central and Eastern Europe

Clemens Noelke and Walter Müller

INTRODUCTION

Social transformation in Central and Eastern Europe (CEE)¹ has been a singular process in modern history (Elster, Offe, and Preuss 1998; Kornai 2006). Within a few years after 1989, democratic governments and capitalist markets replaced dictatorial communist parties and planning bureaucracies as central mechanisms of political and economic coordination. Across the region, reforms introducing a market economy were implemented, freeing up prices, liberalizing trade, and privatizing state-owned enterprises. Markets for capital, goods, and labor developed and gradually became integrated into the European and global economy. For a number of post-socialist CEE countries, this process culminated in accession to the European Union (EU) in the new millennium.

While transformation from socialism to capitalism and democracy has expanded civic liberties and political freedom in most CEE countries, initial hopes of rapid economic convergence to Western standards have been largely disappointed. The demise of the socialist state and the emergent capitalist order put an end to former guarantees of lifetime employment and basic economic security. In the early years of transformation, aggregate output, employment, and real incomes plummeted, while unemployment, poverty, and inequality soared. Economic turmoil was accompanied by demographic crisis. Fertility rates dropped, while divorce, morbidity, and suicide rates rose. Nevertheless, until the region was hit by the 2008–2009 economic and financial crisis, most CEE countries had been growing at rates sometimes far above the Western European average.

Because of this fundamental, pervasive, and rapid social transformation, system change in CEE has provoked much research and debate among social scientists. A central concern in the literature has been to link changing economic institutions (i.e., the rise of markets) to changing patterns of social inequality (Nee 1989; Rona-Tas 1994; Walder 2003; Heyns 2005; Diewald, Goedicke, and Mayer 2006; Verhoeven, Dessens, and Jansen 2008). By studying market societies in the making, we have the rare opportunity to obtain fundamental insights about how institutions and markets interact to shape individuals’ life courses and determine overall patterns of social inequality.

In this volume, we study the impact of social transformation on young people and their transition from school to work in ten CEE countries. The transition from school to work is commonly understood as the process of entering a stable job after an individual’s primary involvement in education has been completed (Müller and Gangl 2003). Public and scientific interest in this issue has grown in response to increasing and persisting difficulties in youth labor markets in a number of Western countries. Entering the workforce has become a prolonged, more turbulent, and more precarious process, at least when compared to the smooth transition from full-time education to lifetime employment in the 1950s and 1960s (Ryan 2001). Structural change, globalization, educational expansion, and flexibilization of labor markets have left their marks on young people entering the workforce. Research has shown that the difficulties experienced at this life-course transition, as well as the inequalities that emerge at this point, persist well beyond this initial phase and throughout working life (Kerckhoff 2001; Ryan 2001; Müller 2003; Müller and Gangl 2003). Hence, social scientists and policy makers alike are interested in finding solutions to the challenges of harnessing the potential of young people in aging societies and preparing them for a long, productive labor market career. Among the factors discussed, education is of crucial importance.

In the course of social transformation in CEE countries, the transition from school to work gained importance in people’s lives. Access to employment had been more or less guaranteed under socialism, which considerably diminished the risks and uncertainties now associated with this transition under capitalism. The end of socialism freed young people from coercive state institutions, but the subsequent economic contraction made their social and economic positions precarious. While young people could take advantage of new educational opportunities, particularly in tertiary education, they suffered disproportionately from rising unemployment. Youth unemployment has persisted at an extremely high level in a number of CEE countries since the turbulent early 1990s, with societal repercussions beyond the labor market problems of immediately affected young people.

As of 2010, virtually no larger-scale comparative research has addressed the transition from school to work in socialist and post-socialist CEE.² Both in Eastern and Western Europe, young people have been affected by economic restructuring, educational expansion and economic deregulation, flexibilization, and globalization, providing scholars with the opportunity to understand how institutions and markets shape this life-course transition. The aim of this volume is to study how transformation has altered the transition from school to work and to portray the youth labor market in CEE countries in the early 2000s. We ask precisely how the transition from school to work has been affected, and what role the education system has played in this regard. What new risks and opportunities have emerged for young people in CEE countries, and how are these risks and opportunities distributed across education groups? How does the process of labor market entry function? Are the patterns similar to what we observe in Western countries or have they evolved in ways specific to CEE countries? Given a disadvantaged heritage from socialism, can education systems prepare young people for successful labor market entries?

To answer these questions, we pursue two main avenues of analysis. First, we study how the transition from school to work has changed across several cohorts of youth entering employment under socialism, during the turbulent transformation years, and in the early 2000s. Then we conduct detailed analyses of labor market entry for the most recent cohorts entering the labor market to pinpoint the underlying mechanisms that lead to advantages or disadvantages. By studying both changes over time and current conditions, we can learn about the long-term impact of socialism and transformation on problems young people face in entering the labor market.

The chapters in this volume study the transition from school to work in ten CEE countries, which represent the diverse starting conditions, transformation trajectories, and institutions observed in the region. Among the countries emerging from the Soviet Union, we focus on Estonia, Ukraine, and Russia. Despite a shared heritage, these countries underwent very different developments after 1991. We also study three countries emerging from the Socialist Federal Republic of Yugoslavia (SFRY), which also have experienced different transformation outcomes: Slovenia, Serbia, and Croatia. Finally, we study four countries in Central Europe,³ which were among the most developed socialist economies in 1989: East Germany, Poland, the Czech Republic, and Hungary. We try to identify common consequences of system transformation while remaining sensitive to the implications of particular conditions prevailing during transformation in different countries.

Chapter 1 provides a general overview of core features of the transformation process in the countries in our study. Following the introduction, the second section of this chapter, “Social Transformation and the Role of Education,” develops our main analytical approach in relation to previous work on transformation- and education-related inequalities. In the third section, “The Transformation from Socialism to Capitalism,” we describe the countries in more detail, focusing on their diverse transformation experiences, key institutional differences, and macroeconomic developments. The fourth section, “Education Systems in Central and Eastern Europe,” surveys education systems in the CEE countries studied, both before and after transformation. The fifth section, “The Transition from School to Work Under Socialism,” briefly portrays the school-to-work transition under socialism, while the final section, “The Impact of Social Transformation on the Transition from School to Work,” provides an outlook on the main questions and analyses to follow in this volume.

SOCIAL TRANSFORMATION AND THE ROLE OF EDUCATION

The transformation from socialism to capitalism represents a fundamental change in institutional conditions in CEE countries, and therefore provides a unique opportunity to analyze how institutions structure individual life courses (Mayer 2004, 2006). Since hardly any aspect of economic, social, and political life was not affected, disentangling the exact mechanisms through which this transformation has affected individuals presents a challenge for social research. The analyses in this volume reduce the inherent complexity of transformation by restricting the analytical focus to young people making a specific but crucial life-course transition. To explain the phenomenon we study, we focus on the extent of market reforms, the structure of the education system inherited from socialism, and changes in the education system induced by transformation. We also consider the political economy of on-the-job training and changing labor demand. These macro-level phenomena alter individual behavior by changing the constraints on individual decision making. By linking macro-level phenomena to microlevel models of individual behavior, we attempt to unravel the complex ways in which transformation has an impact on individual life courses, and to show how historic, institutional, and structural changes intertwine to shape the transition from school to work.

In capitalist economies, individual educational attainment is generally regarded as the key determinant of labor market outcomes. Employers hire, dismiss, and remunerate workers according to their education because it is assumed to be correlated with individual productivity (Becker 1964; Spence 1973). Both human capital and signaling theories about the relationship between education and earnings are based on this assumption. It is sometimes left implicit, however, that competitive markets provide the incentives for employers to behave in this manner. The opportunity or necessity to operate businesses profitably provides an incentive for the efficiency-oriented behavior of employers, which among other things entails that they try to attract the most able and productive employees and pay them according to their skills or productivity (Becker 1964).

In contrast, Kornai’s analyses of socialist economies have shown that the incentive of firms to maximize profits and minimize costs was curbed by “soft budget constraints” (Kornai 1980, 1992; Kornai, Maskin, and Roland 2003). Enterprises were shielded from domestic and foreign competition and tended to hoard production inputs, including labor, to achieve plan targets, which created persistent scarcities. Scarcities in turn increased the tendency to hoard inputs. While economic planners tried to create incentives for efficient firm behavior, even chronically loss-making enterprises continued to have access to credit and could rely on being bailed out by the state. In consequence, incentives for efficient behavior were weakened; and the economic necessity to hire, remunerate, or promote workers on the basis of their productivity diminished. Instead, governments enforced socialist wage grids that dampened wage inequality between different skill groups, sometimes raising rewards for manual jobs above those of more skill-intensive non-manual jobs (Atkinson and Micklewright 1992).

By removing politically enforced wage norms and raising incentives for efficient production, we should expect transformation to lead to a stronger correlation between educational qualifications, as measures of skills or productivity, and labor market outcomes. Drawing on Szelenyi’s (1978) analysis of the allocation of economic rewards under socialism,⁴ Nee (1989) advances the claim that the more economic coordination is based on market principles, the stronger the relationship between skills or human capital (measured by education) and economic rewards will be.⁵

In the course of transformation in CEE countries, the power to decide whom to hire and dismiss and how to promote and remunerate workers was transferred to employers in private enterprises. Their behavior was increasingly constrained by the competitive pressures of capitalism. As markets are more effectively implemented, efficiency and profit-maximizing considerations cause employers to increasingly rely on individual education as an indicator of productivity when making personnel decisions. While Nee’s (1989) original work focused on agricultural reform in rural China, we now have considerable evidence that the correlation between education and earnings has been growing in a number of post-socialist CEE countries (Svejnar 1999; Fleisher, Sabirianova, and Xiaojun 2005; see Flabbi, Paternostro, and Tiongson 2008 and Verhoeven, Dessens, and Jansen 2008 for multicountry comparisons); for example, Russia (Brainerd 1998; Gorodnichenko and Sabirianova 2005), Hungary (Campos and Joliffe 2007), the Czech Republic (Munich, Svejnar, and Terrell 2005), and Poland (Newell and Socha 2007). While there is a lot of evidence on the changing relationship between education and earnings or income, it is less clear whether this applies to all demographic groups equally and whether it can be generalized to other outcomes, especially in regard to the transition from school to work, the speed of finding a first significant job, and its stability and socioeconomic status. From a life-course perspective, it appears more plausible that transformation has had heterogeneous impacts on individuals at different stages in their lives. In this volume, we especially focus on the changing role of education at the individual’s entry into working life and study its impact on the speed of finding employment as well as the quality and stability of first significant jobs.

As widely emphasized (Walder 1996; Heyns 2005; Mayer 2006), transformation should not be conceptualized as a linear process with identical starting and ending points. Origin and destination states as well as the speed, scope, and outcomes of transformation differ substantially across countries and have implications for the role of education on the labor market. All countries made substantial efforts to introduce markets starting in 1989, or even earlier, but the extent and kind of market reform and the emerging kind of coordination of economic actors differed. A key hypothesis for our analysis therefore relates to the relative success of market reforms and educational inequalities: If the regulatory framework on which market competition rests is not effectively implemented, we should observe a weaker correlation between education and labor market outcomes. This would result from weaker incentives for competitive behavior.

Apart from the success of market reforms, the question also remains about which kinds of market economies are emerging in different countries (Walder 1996, 1068). Concerning the coordination of economic actors, we refer to the distinction between liberal and coordinated market economies (Estevez-Abe, Iversen, and Soskice 2001; Hall and Soskice 2001). Research on Western countries suggests that “coordinated market economies,” such as Germany or Austria, succeed in operating large-scale vocational education programs, where employers sponsor substantial amounts of on-the-job training. These education programs not only supply globally competitive manufacturing industries with skilled workers (Hall and Soskice 2001), but also facilitate labor market entry for young people (Ryan 2001; Breen 2005). Given that socialist education systems were strongly oriented toward vocational education and industrial production, it is crucial to understand if CEE countries could transform their socialist heritage into an asset, or whether it has become a liability. The next section briefly surveys the diverse transformation patterns seen in CEE countries and also addresses the political economy of vocational education in more detail.

THE TRANSFORMATION FROM SOCIALISM TO CAPITALISM

Most CEE countries experienced a rapid transformation from socialism to capitalism and democracy. System change in the economy implied privatization of enterprises and liberalization of prices and trade. As markets began to function and governments started to refrain from bailing out loss-making enterprises, many employers were forced to cut costs, close, or were broken up, leading to drastic job losses and declines in economic output. Although all CEE countries introduced liberal market reforms, they exhibit a remarkable diversity in approaches to economic reform and emergent institutional configurations (Bohle and Greskovits 2007; King 2007; Lane and Myant 2007; Gebel 2008), which are important to understanding the relationships between the economy, the education system, and labor market entry.

Transformation Pathways and Institutional Configurations

The Estonian case is often used as an example of the rapid implementation of a classical liberal economic policy regime focused on macroeconomic stability (Feldmann 2006; Bohle and Greskovits 2007; Buchen 2007; Feldmann 2007; Saar and Lindemann 2008). Part of the former Soviet Union, Estonia achieved independence in 1991 and had to overcome a comparatively disadvantaged heritage. The environment created by liberal economic reform has proven adverse for the development of powerful industrial relations regimes. While income inequality is h...