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Unemployment rate hits new high
21 Feb 2013 Beata Balogová Business
THE LEGION of Slovakia’s unemployed swelled to almost 15 percent in January, the highest level since 2004. The government of Robert Fico blames the gloomy numbers on the slowing wheels of the economy, while the opposition blames the government for measures that it says negatively affect the flexibility of the labour market, including the recently revised Labour Code.
The unemployment rate in January climbed to 14.8 percent, 1.11 percentage points up year-on-year, according to data released by the Central Office of Labour, Social Affairs and Family (ÚPSVaR). Labour offices throughout Slovakia in January recorded 399,367 jobseekers available to take up a new job immediately, a rise of 9,256 people compared to December. The number of jobseekers increased by 29,400 compared to the same period last year.
In total, there were 435,438 unemployed people registered at the labour offices, a figure that also included those who are not eligible to start work immediately, the TASR newswire reported.
In December 2012 almost 400,000 people were jobless, pushing the unemployment rate up by half a percentage point to 14.4 percent.
“I still insist that the development of the economy and not the Labour Code is what impacts employment,” said Labour Minister Ján Richter in an earlier interview with The Slovak Spectator. “I want to underscore this also with the fact that not all countries in the eurozone have adopted new labour codes, and unfortunately the unemployment rate throughout the eurozone is getting close to 12 percent.”
In response to the gloomy numbers, Slovak Finance Minister Peter Kažimír acknowledged that the situation with Slovakia’s labour market is serious and, in accord with Richter, added that the key reason is the overall macroeconomic situation.
“Unfortunately, a drop in demand in the countries where our clients come from results in fewer orders for our firms,” Kažimír said, as quoted by the TASR newswire. “This consequently translates to lower demand in the labour market, whether in the form of layoffs or not creating new jobs.”
However, the leader of the Slovak Democratic and Christian Union (SDKÚ), Pavol Frešo, said that unemployment in Germany, which is Slovakia’s main partner, has been dropping. The growth of unemployment in Slovakia, according to Frešo, is caused entirely by the measures of the government of Robert Fico, the SITA newswire reported.
Frešo listed as examples the cancellation of the flat tax, the hiking of taxes and payroll taxes as well as less flexibility in the newly revised Labour Code, adding that the economy is returning to the state it was in 10 years ago.
Prešov Region has posted the highest unemployment rate, at 20.92 percent, followed by Banská Bystrica Region with 20.56 percent and Košice Region with 19.3 percent, while Bratislava’s first district managed to retain the lowest unemployment rate, at 4.51 percent, according to ÚPSVaR data.
The country’s central bank, the National Bank of Slovakia (NBS), on January 29 scaled back its growth estimate from December 2012 from 1.6 percent to 1.3 percent for 2013, suggesting that the prediction was influenced overall by two factors: moderately slower growth in foreign demand, which impacted the country’s export performance, and worse-than-expected indicators in the domestic economy. Shortly thereafter, the Finance Ministry whittled its forecast down to 1.2 percent, explaining that the “debt crisis in the eurozone over the past months has unfavourably impacted the economies of our main trading partners and increasingly concerns Slovakia as well”.
Even though Slovakia’s economy, despite the contraction in neighbouring countries, maintained growth at 0.7 percent year-on-year in the last quarter of 2012, as reflected by the flash estimate of Slovakia’s statistics authority released on February 14, 2013, the labour market shows less optimistic results, indicating that employment in the fourth quarter dropped by 0.4 percent, while year-on-year the drop stood at 0.5 percent.
The Finance Ministry’s Financial Policy Institute (IFP) admitted in its late January release that 2013 holds gloomier prospects for the labour market, suggesting that 2012’s economic growth was fuelled mainly by increasing productivity and did not bring many new jobs.
“Moreover, fiscal consolidation, too, will impact the labour market this year,” reads the IFP prognosis, adding that the number of employed people might drop by 0.5 percent. “A more significant increase in employment should come together with faster growth of GDP in 2014.”
Unemployment should reach pre-crisis levels – somewhere around 12 percent – in 2016, the institute assumes. Nevertheless, in 2013 the jobless rate should remain at 14 percent.
While market observers acknowledge that the economy is taking its toll on the labour market, they also say that the market is showing even worse results than the impact of economic activity itself.
“In the first month of the year unemployment usually grows, yet unemployment grew even after [factoring] seasonal influences,” said macroeconomist with VÚB Banka Andrej Arady, adding that in January 9,580 people became jobless, which is 500 more than in the same month last year.
The slowdown of economic activity is behind the significant growth of the number of jobless, according to Arady, but he added that labour market data has for several months been weaker than economic activity.
“We attribute this discord partly to the changes in the laws, which increased the cost of labour and restricted employees to less flexible positions, which sped up the spill of the slowing economy into the labour market already last year,” Arady wrote in a memo.
Arady assumes that the most significant number of layoffs has already occurred.
“It is not possible to blame the crisis forever,” Ján Dinga, from the Institute of Economic and Social Studies (INESS), a think tank, told The Slovak Spectator in an earlier interview. “It is not just the crisis but, in particular, high costs in the form of taxes and compulsory contributions, which the government increased as of the beginning of 2013, which are behind the insufficient creation of jobs by employers.”
According to Dinga, administrative barriers, along with the revised Labour Code and the minimum wage, are reducing the opportunity to hire people, especially those with lower qualifications.
“The removal of administrative barriers and a reduction in the burden of income and payroll taxes on labour is fully within the power of the government and there is no reason why the government could not support creation of jobs,” said Dinga.
Richter, however, argued that Slovakia’s economy as well as its labour market is open, which means that, considering the fact that its economy is intertwined with other economies, these influences are very serious.
“Unfortunately, we will not be able to prevent some people from being laid off in the future, based on how the economy will perform and the health of some businesses’ sales,” said Richter in an interview for the Career and Employment Guide 2013. “But the government must have the ambition to address new jobs.”More from Business
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