Spectator on facebook

Spectator on facebook

Unemployment rise spurs welfare reform

Slovakia's unemployment rate in March set a new record of 17.6%, and Labour Office officials say they expect the figure to rise over 20% before the end of the year. The government, meanwhile, has announced cuts to the nation's unemployment benefits scheme, saying that Slovakia will not meet its 1999 budget targets if the burden on social welfare is not eased.
Figures released by the Slovak Statistical Office on April 20 showed that the total number of unemployed people as a fraction of the workforce had jumped to 17.6% from 17.4% in February and 16.4% in January. The average rate for 1998 was 13.9%.
In the 1999 state budget, the Slovak government promised to keep unemployment under 15%, but analysts and state officials now say that figure may be exceeded by a wide margin.


Angry workers protest outside the premises of Martinmetal, a troubled north Slovak machinery company.
photo: TASR

Slovakia's unemployment rate in March set a new record of 17.6%, and Labour Office officials say they expect the figure to rise over 20% before the end of the year. The government, meanwhile, has announced cuts to the nation's unemployment benefits scheme, saying that Slovakia will not meet its 1999 budget targets if the burden on social welfare is not eased.

Figures released by the Slovak Statistical Office on April 20 showed that the total number of unemployed people as a fraction of the workforce had jumped to 17.6% from 17.4% in February and 16.4% in January. The average rate for 1998 was 13.9%.

In the 1999 state budget, the Slovak government promised to keep unemployment under 15%, but analysts and state officials now say that figure may be exceeded by a wide margin.

"We may have unemployment of 20% by the end of this year, but we'll have to wait and see how effective the government's measures to reduce the rate will be," said Martin Barto, head strategist for state bank Slovenská Sporiteľna (SLSP).

Barto explained that the rate increase was largely due to companies shedding inessential workers as Slovakia entered a period of economic slowdown.

Elena Senderáková, an official at the National Labour Office, agreed that the latest figures were cause for concern. "This is the first time that unemployment has gone up in March," she said. "Unemployment normally increases in the winter months of January and February and then stabilises in March."

Given the unusual upward trend, Senderáková agreed with Barto that unemployment could reach 20% by the end of the year. Moreover, she said, if the wave of workforce cuts in the engineering and heavy industry sectors materialises, as some economic analysts have predicted, the nation could enter the next millenium with an unemployment rate of 22%.

In a bind

Rising unemployment, and the increasing social benefits that must be paid out, has threatened to derail the Slovak government's drive for fiscal austerity. The 1999 state budget aims to cut the fiscal deficit from over 5% of GDP in 1998 to under 2% this year.

But statistics revealed by the Labour Ministry last week showed that the number of people requesting social welfare had risen 27.3% in 1998 over the previous year, to hit 222,655 people at the end of December. The average monthly benefit paid out per person was 3,182 Sk ($75), up 31.6% year-on-year. The ministry said that 87% of people receiving social welfare were unemployed.

At its April 14 session, the cabinet of Prime Minister Mikuláš Dzurinda agreed to revise the nation's system of social and unemployment benefits to reduce 1999 budget expenditures.

Labour Minister Peter Magvaši announced at a press conference on April 15 that the government planned to amend the employment law this year to allow serious cuts to be made in the social and unemployment benefits scheme.

According to Magvaši, the cuts should lower the current maximum monthly unemployment benefit from 5,400 Slovak crowns ($125) to 4,500 crowns or even as low as 3,900 crowns. Magvaši said that the depth of the cuts would be determined after negotiations with trade unions. The lower limit for unemployment benefits would remain at the current 3,000 crowns per month, he added.

Unemployed persons currently receive 60% of their former salaries, to a maximum of 5,400 crowns a month, for up to twelve months.

Reducing corruption

Despite the shocking unemployment figures, some observers questioned whether they really reflected reality. The results of a poll conducted by the Labour Office in conjunction with the Statistical Office and released on April 9 indicate that 170,000 out of the 470,000 people registered as unemployed - almost 25% - actually have jobs.

Pavol Tomasta, director of the analysis and statistics section at the National Labour Office, said that these results proved that Slovakia's social welfare system needed a drastic overhaul to eliminate corruption. In an interview with the daily paper Práca, Tomasta said that a 1997 amendment to the Employment Law, pushed through parliament by the government of former Prime Minister Vladimír Mečiar, had dramatically relaxed rules governing eligibility for unemployment benefits and had led to the current abuses of the system.

"It's not unusual for a company to formally dismiss its entire staff," Tomasta said. "The workers then register at the labour office and collect aid for 12 months while working for the company at the same salaries as before. Social parasitism in this area is rapidly growing."

Tomasta continued that the National Labour Office did not have the power or finances to fight such kinds of corruption on its own, and welcomed the cabinet initiative to slash benefits and limit eligibility as an effective way of deterring scammers.

But Martina Lubyová, an labour analyst with the Slovak Academy of Science, said that cutting the number of people eligible for unemployment aid would simply increase the number of people dependent on state-provided social benefits. "The money saved on unemployment aid due to the cuts will have to be paid out by the state in social benefits, and this money will have to come from the budget," Lubyová said.

Social welfare abuse was an economic problem, she continued, and could only be solved by dialogue between the state and trade unions.

Labour Minister Magvaši, for his part, said that the new law would set more stringent rules for collecting social welfare as well as unemployment benefits, adding that the cabinet aimed to fight abuses of both systems as well as to make them more affordable for the state. According to Magvaši, eligibility restrictions should raise the number of rejected applications for social benefits from the current 8.9% to 20%.

"Every social welfare system is dependent on the performance of the state economy," Magvaši said in defence of the proposed cuts. "Since [the Employment Law amendment in] May 1997, there have been signs that the economy is declining, but nothing has been done [to adjust social spending]."

Top stories

Third anti-corruption march drew thousands Photo

The only demand that has been met to date is the abrogation of Vladimír Mečiar’s amnesties by parliament.

The anti-corruption march

Ballet legend Sergei Polunin will be guest of SND

The world-renowned personality of contemporary ballet will present two choreographies at the Slovak National Theatre in September.

Sergei Polunin

Voters don’t understand self-governing regions

Rules for regional elections change, which may bring some surprising victories.

One of the biggest fights is expected in Banská Bystrica Region.

Sagan rewrites history Video

Cyclist Peter Sagan becomes the first man to win three consecutive world championships. He allegedly did not expect it and was easy with the idea he would not win.