The movement towards market economies in Central and Eastern Europe and the former Soviet Union requires significant changes in labor markets. This includes linking wages to productivity, providing social goods like housing and education separately from wages, and creating safety net institutions to replace socialist policies. The transition to a market economy initially led to lower output, employment, and wages, with layoffs and unemployment emerging. However, as these economies adapt to new market incentives, it is expected that these costs will be offset by growth, more jobs, and higher incomes. Managing the costs of unemployment during this transition is crucial for the success of economic reforms, requiring strategies like re-training workers and creating new jobs. Socialist economies must decide how to distribute the benefits and costs of these adjustments among workers, employers, and society.