Alex Coiov, XI A
Confronted with seemingly inexorable inflation, Romanian families are now grappling with significant financial hardships and laborious-to-make choices. Yet, the impact of such difficulties is not evenly distributed. Amongst one of the most unequal EU nations, Romania exhibited a GINI coefficient of 0.343 in 2021 – an economic indicator used to measure a country’s income inequality – where a value of 1 signifies complete inequity. Accordingly, the nation displayed higher levels of income inequality than most EU member states, with a few exceptions, such as Bulgaria, Latvia, and Lithuania.
Due to iniquitous income distribution, wage increases do not affect everyone alike. Recent data from the National Institute of Statistics (‘Institutul Național de Statistică’) reveals that net wages, after taxes, experienced a 15.67% growth in March 2023 compared to the preceding year. Concomitantly, inflation during the same period grew by 14.53%. Therefore, provided net wages outpace inflation, people will see a real – adjusted for inflation – increase in their incomes. Should nominal wages increase by 15.67% after taxes, whilst the inflation rate climbs to 14.53%, real incomes would expand by approximately 1.14% – the difference between the nominal rate and inflation.
Subsequent to such arduous calculations, one might contend that people are, on average, better off due to real salary increases, despite perpetual inflationary pressures. However, a more comprehensive and meticulous examination of the data before March 2023 reveals an indubitably bleaker picture, with real wages entering negative territory. For instance, net wages experienced a 13.60% year-on-year increase in November 2022, whereas inflation soared by 16.76%. Thus, real wages plummeted approximately by 3.16% after taxes, hence the erosion of purchasing power and the diminishing living standards. Likewise, similar grim trends persisted throughout the latter half of 2022.
Hence, considering the aforementioned inflation-adjusted curtailments in average salaries recorded in the past year, alongside the unequal income distribution intrinsic to the Romanian economy, the recent and vehement teachers’ strike is duly corroborated. Contingent on the assumption that living standards are currently being eroded by inflationary forces, the ensuing essay strives to expound on the alleged nationwide educational crisis marked by the ongoing strike, thus scrutinising possible developments within this emergency-like event.
II. An Ambivalent Conundrum
On the one hand, the poor conditions and inadequate remuneration inherent in the government-run educational sector constitute an undeniable reality. Given the meagre post-bachelor entry-level salary, which scarcely surpasses the minimum wage, aspiring educators can feel disincentivised and discouraged from joining the field due to an overt scarcity of financial incentives. Moreover, even after attaining the status of an established full-time teacher, one cannot anticipate a substantial augmentation of their income throughout their career.
Contrastingly, private-sector professionals with comparable educational qualifications, such as adept IT specialists, canny statisticians, and vigilant financial-sector employees, can expect considerable financial advantages and a sound yet promising career trajectory. Yet, whether the contribution of a private-sector employee or that of a teacher bears greater significance for the overall progression of the nation remains a vexed subject of debate and contention.
Nonetheless, amidst the relentless persistence of inflation and with wages scarcely keeping pace, teachers have begun to experience profound frustration and discontent with the prevailing status quo, hence the fervent protests. Yet, nobody can blame them for yearning for better conditions and loftier wages, especially amid ongoing economic travails. Besides, since all individuals unequivocally possess the fundamental civil liberties of assembly and freedom of expression, it would be unjustifiable and unconscionable to deprive teachers of their elementary right to engage in strikes and protests, which they utilise to demand improvements.
On the other hand, by raising wages for a particular group, the government might establish a seemingly deleterious precedent. Increasing teachers’ salaries could prompt other sectors to demand similar treatment, potentially leading to additional strikes pressuring the government to comply. This presents a treacherous and perilous path, particularly considering the current inflationary environment. Provided teachers’ salaries are raised, other workers will foreseeably demand similar treatment, thus culminating in a proliferation of salary increases within the economy. Consequently, higher wages would invariably beget an upsurge in private consumption (i.e., consumer purchases), bolstering demand for goods and services throughout the economy. Subsequently, this increased demand would engender a rise in inflation, thus eroding purchasing power. If purchasing power decreases, workers will consequently seek higher remuneration in compensation, hence the consequent increased demand for goods and the perpetuation of a vicious circle known as the ‘wage-price spiral’. Essentially, when people are provided with higher salaries, they will increase their personal spending, which, in turn, can lead to higher inflation, hence the aforementioned reinforcing vicious circle.
Given the high inflation and the constrained nature of the national budget following the pandemic stimulus, which represented 10% of the national GDP, the government is understandably opposed to substantial wage raises due to the potential adverse consequences ascribed to a pernicious wage-price spiral. Whilst this argument is incontrovertibly legitimate and corroborated by current empirical evidence, the ongoing teachers’ strike begs the vexatious question of whether the infamous ‘special pensions’ and exceptional salaries relished by our parliamentarians are equally justifiable and legitimate in the prevailing inflation-ridden context.
While ordinary citizens are manifestly struggling to pay the bills and meet their financial obligations, as evinced by our teachers fervently demanding better conditions for them and their families, the government per se appears to be doing just fine, with the inexplicable tax reductions on stock profits implemented earlier this year adding further questions. In essence, the fact that there may not be enough money for teachers, but there is a sufficient amount for investors sends a dubious message, contributing to the perplexing nature of the ongoing situation.
III. Concluding Remarks
In summary, the astronomical economic challenges faced by Romanians amid the current inflationary pressures have helped clarify the deep-rooted income inequality within the nation. The disproportionate distribution of wealth, evident in Romania's high GINI coefficient, has hindered the effectiveness of wage increases, rendering them seemingly ineffective in improving the financial well-being of the population. Although nominal-wage growth may seem promising, soaring inflation has eroded the purchasing power of individuals, thereby leaving many workers worse off in real terms.
Furthermore, the ongoing educational strike portrays a poignant manifestation of the broader crisis plaguing the country’s educational system. The dire conditions and meagre compensation in the government-run educational sector have understandably prompted teachers to demand better treatment and remuneration. Accordingly, their prodigious grievances are irrefutably justified, considering the challenging economic circumstances that have made it increasingly onerous to make ends meet. Ergo, their freedom of assembly and free speech, as illustrated through strike actions and protests, cannot be infringed on.
However, addressing the teachers' demands poses an unutterably delicate dilemma for the government. Granting wage increases to a specific group may set a precedent for other sectors to demand similar treatment, potentially fuelling a wage-price spiral and exacerbating inflationary pressures. Balancing the need for fair compensation with the imperative to maintain macroeconomic stability is an unequivocally formidable and onerous task. Nevertheless, the government's handling of this crisis raises sundry questions about resource allocation and spending priorities, especially when considering the government’s questionable tax cuts and fiscal policy alongside the perceived disparity between the financial well-being of the citizens and that of certain privileged groups.
Given the gruelling complexities of the current situation, a comprehensive and nuanced approach is necessary to successfully navigate the path forward. Besides addressing the immediate concerns of teachers, attaining a sustainable solution to the educational crisis must equally address the systemic conundrums underpinning the aggregate educational system.
Likewise, inequality reduction is equally paramount. This necessitates structural reforms that promote equitable wealth distribution through reasonable and progressive taxation policies. Alongside more investments in education and professional development meant to boost our teachers’ and citizens’ human capital, fostering a competitive environment that encourages individuals to strive for excellence needs fair and merit-based financial compensation. Only by promoting an inclusive and just society based on industriousness, hard work, and meritocracy can Romania uplift its citizens and nurture a prosperous future for all.
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