FRIEDRICH-EBERT-STIFTUNG EMPLOYEE FINANCIAL PARTICIPATION 2 WOULD STRENGTHENING THE FINANCIAL PARTICIPATION OF EMPLOYEES BE UNWARRANTED IN VIEW OF RECENT PAY RISES IN ROMANIA? As the debate over increases in minimum wage or the role of the public sector shows, there is a risk that the proposal to pass legislation to increase employee income through employee financial participation will clash with popular economic discourse in various areas, all of which tend to focus on low productivity in Romania in relation to other European countries. The actual foundations for this line of argument are, however, extremely shaky. It is true that declining or stagnating productivity cannot offer a basis for wage increases. Nevertheless, in the case of Romania, this problem can only be addressed as an issue if one ignores basic data and, instead of a sober analysis of statistics, opts either for a political-moral critique, which is skewed in favour of employers, or a narrative(empirically unsupported) that links wage increases to the risk of a decline in profits, and, therefore, a reduction of investment and slower economic growth. The statistical reality of the relationship between remuneration and productivity has been analysed with statistical precision and analytical rigour by Stefan Guga in the FES-Syndex study(Guga 2020). The study confirms two things that would seemingly support the hegemonic discourse:(1) from the beginning of the economic recovery(2013) until 2019, Romania also displayed the same regional trend toward sustained wage growth and,(2) in the medium term(2013-2018), the growth rate for employees' remuneration in Romania was higher than the growth rate for productivity, with the Czech Republic and Romania leading the region. But if we go beyond this, scratch the surface and look at data at several other levels, it becomes clear that labour is remunerated below its real value in Romania. In short, the " decalogue" of productivity and pay is characterised by the following: ( 1) The long-term increase in remuneration was a form of recovery; over the last 20 years, productivity has grown faster than pay; the fact that this growth is not structural can be seen in the slowdown in this growth after 2017 and its reversal in 2019; on the whole, it is not the increase in the remuneration of labour, but that of capital which rose too rapidly in relation to the evolution of productivity. ( 2) The increase in remuneration did not impact competitiveness. Common sense tells us that productivity must be adjusted to the cost of labour and, if we do this, the labour force in Romania appears to be among the most productive in the European Union, with huge gaps in comparison to Western countries and even with other countries in the same region. While in 2018 productivity in Romania was 62.8% of the EU average, which is about two times lower than for those countries with the highest productivity(Denmark, France, Germany, Benelux), Romania is 2.5 times cheaper costs­wise, with only Bulgaria having lower costs(52.7%) ( 3) The increase in remuneration did not affect the pursuit of profit. The data clearly indicate that the greater increase in remuneration in relation to productivity was perfectly in line with growth in profits. ( 4) Do not confuse salary with remuneration; even if in the medium term increases in remuneration outpaced productivity, the portion of value-added accounted for by employees remains very low. Romania ranks below the other countries in the region, where remuneration has increased more slowly, but the portion accounted for by salaries and wages there is significantly higher. In countries like Germany, remuneration of employees increases at the same rate as productivity, but the portion accounted for by salaries and wages is considerably higher than in Romania ( 5) It is difficult to find countries with higher increases in productivity than Romania; the rate of growth in productivity in Romania has been the highest in the EU after Ireland. Moreover, it is much higher than the rate for other competing countries from the region, and it is much higher than in“western” countries(EU 15) ( 6) Productivity growth would be higher if employers were more competitive in domestic investment and reform; current levels of productivity growth are pushed down by the modest level of investment and organisational efforts made by employers in an economy based less on increasing capitalisation and the added value of goods and services and more on the labour force. ( 7) The level of productivity in Romania is underestimated. Estimates of average productivity are artificially reduced by 4