The Slovak labour market is greatly affected by the current economic crisis. After three years of real GDP growth at 5 to 10%, in fixed prices from 2002 to 2008 (peaking at 10.5% at 2007), there was a decline of 4.8% in 2009, and an increase of 4% in 2010. This decline affected mostly employment; wages generally did not decrease.
During production increases, employment in Slovakia was rising 2 to 3% annually; this was followed by a 2.53% and 1.38% decrease in 2009 and 2010. The labour market in 2009 was in a very different situation than in 2008: shortage of possible employees in 2008 was replaced by increasing unemployment in 2009.
The role of the education system
Slovakia’s education system is divided into 3 groups. Elementary school is 9 years (plus 1 year mandatory pre-school), from 6 years of age. Elementary schools are not specialized and are run by municipalities.
University education usually lasts five years. University study is formally divided into bachelor (3 years) and magister (another 2 years), but the vast majority of students study for 5 years at the same school. The number of secondary school students is steadily rising and reaching almost 100% of secondary school-age population (15,5 to 18,5 years old). The number of university students is steadily rising too. The share of university students of the total population of 19,5 to 23,5 years old has risen from 27,7% in 2000 to 60% in 2009.
Slovakia has a very low proportion of employees with elementary education. According to Eurostat, it is around 5%, which is well below other comparable countries (Germany 11%, Czech Republic 6%, Austria 14%). Due to this, unemployment rates amongst lowly educated people are highest in Slovakia: 43%.
The role of economic cycles and GDP growth
Slovakia is an extremely open economy with exports accounting for 85% of GDP, which is the sixth highest figure in EU. This figure was at similar values since 2005, with the exception of year 2009.
The Slovak GDP initially decreased after the change of regime in 1989. During the 1990s, there were periods of both increasing and decreasing output. After 2000, there was a reliable increase up until the current crisis. The years from 2002 to 2004 showed an output increase of 4,6% to 5,1% and the years from 2005 to 2008 of 5,8 to 10,5%. This was followed by a decrease of 5% in 2009 and slight increases of 4,2% and 3,3% in 2010 and 2011 respectively.
The role of demography
Demography plays a major role in youth unemployment. As in most other countries, Slovakia had a baby boom generation after World War II, even though this rise of births came in the fifties and not later forties. After 1974, there was a pro-child policy, which lead to an increase of births. Between 1974 and 1980, there were around 99000 children born each year. After 1980 there was a great decrease, with lowest in 2002 with only 50 000 born.
These cycles in the demographic development put great pressure on all aspects of the economy: retirement schemes, education systems as well as the labour market. The late seventies baby boomers appeared on labour market between 1995 and 2005.
The role of labour laws
The Slovak labour code defines labour relations within Slovakia. The role of collective bargaining is significant in large and medium sized companies but not so important in small companies. Since unemployment is very high in some regions, informal relations play an important role.
The share of temporary contracts is low. Only 7% of employees had temporary contract in 2011, which is half the EU average. Young people, however, have a higher proportion of temporary contracts: 17,8%, which is still only half the EU average of 44,3%. The proportion of part time work, at only 3,9%, was one of the lowest in the EU in 2010 (only Bulgaria had lower percentage). The EU average is just below 20%.
Self-employment is a rising phenomenon in Slovakia. The number of self-employed people has risen to 16%, which is 6th highest figure in the EU. In 1998, the value was 5%. There is a big debate on whether these self-employed do really represent entrepreneurship or are just normal jobs outsourced as self-employment.
Measures to prevent youth unemployment
Several measures to tackle unemployment were taken, neither of them has reliably been successful. Under the law which sets out current labour policies, youth and recent graduates are considered to be a vulnerable group. Vulnerable groups are defined in law 5/2004 on labour services.
Graduate placement is at maximum 6 month long and 20 hours a week (parttime job). During the placement, the graduate works for an employer and receives a subsidy at the level of the “living minimum” (currently around EUR 190 per month, as comparison the net minimum wage is around EUR 275). During this period, the graduate does not have an employment contract and is still registered as unemployed. This placement is mostly used by secondary school graduates. The fixed amount of the “salary” is most attractive in less developed regions and does not attract highly educated unemployed. The real effects of graduate placement is questionable. Exact statistics are missing, but several studies indicate a very low effect on permanent job chances or higher skills for the young person.
Self employment benefit
Self employment benefit, is an active labour market policy measure. Anybody registered at a labour office for at least 3 months can apply for this benefit. Applications must include a business plan for the enterprise and applicants will receive training before starting. The amount of this benefit varies between regions: for regions with higher unemployment, the benefit is higher. Currently the maximum value is around EUR 4,000 (around five times the average wage), and the minimum is around EUR 2,600 (around 3.4 times the average wage). Around 15,000 out of the now 400,000 stock of registered unemployed receive this benefit annually.
Subsidized placement is a currently discussed measure to employ young people. It is different from graduation placement as it entails a standard employment contract. The employer will receive a subsidy to employ a young person. As of now, there is no definitive version of this measure. The goal of this measure is to make the labour supply of young people cheaper. As no new demand for goods or services is created by this measure, the real effects are questionable.
“Inclusive market” is a tool proposed to tackle unemployment of low educated people in less developed regions. Young people are a secondary goal of the measure. Apart from other tools, “inclusive market” increases demand for goods and services produced by currently long-term unemployed and does not subsidize or decrease the price of labour. Positive discrimination is hence not by subsidies but rather by sufficient demand for services. The target population of the “inclusive market” are those who had failed to find a job (or are not given the chance to find any) in the open market for 1 or 2 years because of their lack of working experience. The total volume of the target population in Slovakia amounts to 300.000 people. The “inclusive market” should be adjusted in a way that 50.000 job opportunities could be created for those from the target population. The “inclusive” employees can work on these scheme for up to 2 years.