Nokia finds Romania's hidden labor force

By Justyna Pawlak

CLUJ, Romania (Reuters) - 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 eggplants.

It doesn't have a full-time doctor, a school-house or indoor toilets. Some 60 houses don't have running water. But it does -- still -- have 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 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 workforce. 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 centre and have a hundred thousand qualified students."

Even though unemployment is as low as three 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 euros 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 towards western European living standards and taps cash from the European Union, which it joined a year ago.

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 U.S. 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.