FRIEDRICH-EBERT-STIFTUNG – A NEW GROWTH MODEL IN EU-CEE gard) introduced something like this in 2015, targeting a minimum wage of 60 percent of the median wage. This has had promising early results, albeit clouded by Brexit effects(Sandbu 2020; Eurofound 2020). – Make it easier for workers to change jobs: Various preconditions are necessary in order to make sure that those who lose their low-productivity jobs due to auto­mation do not end up as long-term unemployed and that higher-productivity jobs are created. These include enough demand for firms to feel comfortable about investing to expand and a financial system that works for the real economy(Sandbu 2020). A key element is that workers should be able to move easily between jobs and sectors. Again, the Nordic economies provide a clear positive example, with Sweden, Denmark, and Finland having the highest rate of job churn in the EU. The nine countries with the lowest job churn are all in EU-CEE except for Greece; only the three Baltic coun­tries are above the EU average. – Active labour market policies: Facilitating this churn will require high adult cognitive skills(where all of EU­CEE except the Czech Republic scores below the OECD average, OECD 2016), which necessitates more invest­ment in education in general. It will also require active labour market policies, including increasing employ­ment rates among older workers and women. The costs of hiring(but not firing) must be kept low. Re­training schemes must be extensive, well-funded, tied to the needs of the modern(digital, automated) econ­omy, and provide sufficient income support to cater for longer periods of retraining. – Don’t worry too much about the impact of higher wages on foreign investors: It could be argued that FDI will flee EU-CEE in this scenario. However, these risks are probably overstated. FDI decisions are long­term in nature, and from the perspective of Western investors, EU-CEE countries have plenty of advantages beyond just relatively cheap labour, including high la­bour quality, good infrastructure, proximity to FDI sources in Western Europe, and the existing sunk costs (Grieveson 2018). 5.6 USE THE LEVERS AVAILABLE TO REDUCE VOLATILITY AND SPREAD THE GAINS The various transitions outlined above have the potential to be economically and socially disruptive at the global level. Some measures feel like a lot to ask, especially of older people in EU-CEE who have already experienced one wrenching socioeconomic shock in their lifetimes. This is why it is especially important to use the policy options available to reduce the volatility of the transition and make sure that the gains are distributed properly across the pop­ulation this time. As generally open economies(and ex­tremely open, in some cases), EU-CEE countries could be disproportionately affected by the various transitions out­lined in this paper. In the coming years, EU-CEE countries should: – Make sure that transition risks and costs are borne by the welfare system and not workers them­selves: Labour markets in EU-CEE are increasingly liber­alised, the share of employees covered by a collective agreement has fallen across the region and is quite low by EU standards(Astrov et al. 2019). Unemployment benefits are limited and short in duration, albeit with some temporary adjustments in the current pandemic. Changing this should be a priority, with more compre­hensive welfare support to help workers through peri­ods of unemployment that the upcoming transitions will necessarily entail. Apart from wage and tax policies, adequate welfare institutions should provide for more equal opportunities of the population. This includes (public) housing, affordable quality health services, an appropriate elderly and child care system, public trans­portation, and other social aspects. – Change tax policy to fund these transition costs: High-quality provision of welfare and re-training pro­grammes require substantial funding. Taxes on robots themselves have also been proposed and should be considered. However, maybe the most obvious and use­ful step would be a move towards a progressive income tax. This is advisable anyway, considering the general extra costs of dealing with the current pandemic. Slova­kia and the Czech Republic already exited flat tax re­gimes in 2013, and others in EU-CEE which still have such a system should follow. This will increase govern­ment revenues and reduce inequality without harmful economic effects(Jovanovic 2020). – Targeting intranational disparities: Urban/rural dis­parities in economic structure and income levels within countries are problematic, and disenchantment among those who have not shared in the gains of big cities in recent decades contributes to support for populist par­ties. Targeting infrastructure investment towards more remote regions to help them integrate into production networks would help, as would more local transfers and regional development policies. In the 1980s in Western Europe, the decline of industry as a source of jobs was met with an assumption that as factories, mines, and shipyards closed, workers would move else­where to find work. As the economists Abhijit Banerjee and Esther Duflo have shown, this did not happen(Ba­nerjee/ Duflo 2019). During the current transition, poli­cymakers must accept that people will not move and that support should be targeted to help workers in the regions where they live. This includes training, setting up public research facilities that cater to the needs of local firms, transport and logistics, and IT infrastructure. – Provide the means for a good life to young fami­lies: Introduce large and high-quality public housing projects and offer inexpensive flats to young families. 54