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Unemployment hits new troubling high

The Slovak National Labour Office February 20 reported the highest ever unemployment rate in the country's history and one of the worst on the continent: 20.81%. The disposable unemployment rate (people available to take up work immediately), which analysts say is the most reliable guide of joblessness, stood at 19.79% for the first month of the year - a similar record high and a jump from 17.8% in December.
The news came only seven weeks after the labour office temporarily scaled down a public works programme which had given jobs to about 65,000 people and, analysts say, had been responsible for cutting a soaring unemployment rate from 19.4% in July last year to 16.6% in September.
But although analysts were surprised by the high rate, government and National Labour Office representatives said they had been expecting the figure following the seasonal cutback to the public works scheme to 9,980 positions available. They also issued a warning that while the programme will next spring provide for 35,000 jobs, it is not expected to have a big impact on the unemployment rate in 2001.


Labour Minister Peter Magvaši. Analysts have said the government has to develop 'active' labour policies.
photo: Spectator archives

The Slovak National Labour Office February 20 reported the highest ever unemployment rate in the country's history and one of the worst on the continent: 20.81%. The disposable unemployment rate (people available to take up work immediately), which analysts say is the most reliable guide of joblessness, stood at 19.79% for the first month of the year - a similar record high and a jump from 17.8% in December.

The news came only seven weeks after the labour office temporarily scaled down a public works programme which had given jobs to about 65,000 people and, analysts say, had been responsible for cutting a soaring unemployment rate from 19.4% in July last year to 16.6% in September.

But although analysts were surprised by the high rate, government and National Labour Office representatives said they had been expecting the figure following the seasonal cutback to the public works scheme to 9,980 positions available. They also issued a warning that while the programme will next spring provide for 35,000 jobs, it is not expected to have a big impact on the unemployment rate in 2001.

"Corporate sector restructuring is now being carried out and many companies are bankrupted [or going into bankruptcy]," said Lýdia Výborná, spokesperson for the National Labour Office. She added that "the disposable unemployment rate might even reach 20.79% this year".


Unemployment offices across the counrty, like this one in Bratislava, will stay well-frequented this year, experts say.
photo: Ján Svrček

The Public Works programme started in August 2000, providing employment for people who had been out of work for more than one year. Under the programme many people perform manual labour, such as cleaning town and village streets and repairing buildings, and in winter months many of these positions are closed because of weather conditions, forcing the cutback.

The Labour Office spent 1.4 billion crowns on the programme up to the end of last year and plans to spend 1.5 billion crowns in providing 35,000 jobs this year.

But despite repeated government praise for its own scheme since its inception last year, labour experts have said that the programme has had little real effect on employment, and that the government should invest more money into "active" labour policies as opposed to "passive" injections of cash into welfare payments.

"They should look more at the current needs of the corporate sector and adjust the education system [to cater for firms' human resource demands] as well as retraining courses [for currently employed people], not just passively invest into the unemployed," said Ľudovít Ódor, an analyst with ČSOB bank.

GDP increase and low real wages helping

However, analysts are agreed that while the Labour Office's projections for unemployment this year seem pessimistic, the sound fundamentals in the economy would influence the jobless rate positively in 2002.

Ján Tóth, an analyst with ING Barings, said he believed the year 2001 would be one of economic stabilisation in which the unemployment rate would stay around its current levels with accelerated GDP growth this year, driven by higher industrial exports and domestic demand, expected to keep any further rises in the jobless total under a lid, balancing the redundancies from bankrupt firms.

"A more positive impact on the unemployment rate will be seen next year," he said. "Companies are this year expected to hike their exports, which would force them to increase their capacities and hire more people."

GDP growth for the year 2000 has been estimated at between 1.8% and 2.2%, and analysts' expectations for the year 2001 vary between 2.8% and 3.4%.

Lower real wages were, according to Tóth, another source for generating new jobs. He explained that four austerity packages since the current government came to power in 1998 had pushed up prices of regulated products such as gas, power, water and transport, and, combined with 12% inflation last year, had contributed to a decrease in real wages, something that companies could profit from.

"The decrease in real wages over the last two years [real wages decreased 4.9% in 2000 and 3.1% in 1999 - ed. note] allows businesses to employ more people and boost production in their factories, because they don't spend so much money on employee salaries," Tóth said.

FDI the driving force?

Foreign direct investment is the driving force behind generating new jobs, many economists say. But statistics in Slovakia haven't yet supported that assertion. FDI into Slovakia was around $1.5 billion last year - its highest yearly total ever - but unemployment has now also reached a more unattractive peak.

According to Štefan Condík, the head of the Labour Section at the Ministry of Labour, Social Affairs and Family, brownfield investors (investors acquiring an existing operation rather than starting a new one) generally tend to decrease rather than increase the number of their employees.

"Taking into consideration that more foreign companies are expected to buy into existing Slovak companies, and bearing in mind that Slovak Railways [the country's largest employer with more than 40,000 employees] are expected to decrease their workforce gradually, further rises in the unemployment rate cannot be ruled out," he said.

But officials at labour offices in some of the regions with the highest reported unemployment rates said that the figures had already reached a nadir and could only improve.

Jana Marková, director of the Rimavská Sobota district labour office in eastern Slovakia, which reported the highest unemployment rate of all Slovak regions - 37.6% - said the chances for higher unemployment in her district were slim.

"All companies in our district that could collapse have already collapsed. We've reached the bottom, and I cannot imagine that the situation could worsen," Marková said.

ING's Tóth suggested that the government should try hard to get more greenfield investors starting up new operations and hiring local people. "Such investors definitely generate more jobs [than brownfield]," Tóth said.

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