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Ministry's jobless plan plots new labour course

A NATIONAL Action Plan for Employment, unveiled by the Labour Ministry last week, has drawn praise as a credible starting point in the fight against record unemployment.
But prognoses for the Slovak labour market remain grim, according to Labour Office figures and economists.
The blueprint, which has yet to be approved by cabinet, defines 34 measures to be introduced on the labour market, including strategies to improve people's chances of finding employment, developing businesses and improving the ability of the workers to respond quickly to demand.

A NATIONAL Action Plan for Employment, unveiled by the Labour Ministry last week, has drawn praise as a credible starting point in the fight against record unemployment.

But prognoses for the Slovak labour market remain grim, according to Labour Office figures and economists.

The blueprint, which has yet to be approved by cabinet, defines 34 measures to be introduced on the labour market, including strategies to improve people's chances of finding employment, developing businesses and improving the ability of the workers to respond quickly to demand.

"The government has done a very positive step in coming up with an action plan. Until now they haven't done anything. This will be a basis for the next government to work on," said Mário Blaščák, an economist at Ľudová banka.

Slovakia's jobless rate has deeply scarred some areas of the country, and is becoming politically unsupportable, analysts said. January unemployment hit 20.89 per cent, a record high for the country, with more than 500,000 people out of work.

More than 20,000 workers are expected to be laid off this year in mass layoffs as firms restructure, with more than 5,000 jobs in the Žilina region due to be lost by mid-year, the Labour Office has said (see story this page).

Some parts of Slovakia have unemployment touching 36 per cent, with regional joblessness peaking in Košice at just over 27 per cent, according to Labour Office statistics at the end of last year.

Although the government is about to pour Sk90 million into high-unemployment regions this year, only a long-term economic plan for restructuring the entire economy can bring jobless rates down, some economists argue.

"The government must come up with a mid to long-term plan for the economy, involving deciding what pillars to base the economy on and fostering industries which create a higher added value.

"Take the example of VW Slovakia - many parts for the cars are imported, the cars are just assembled here and then exported again. It must be ensured that in production in industry the sub-parts and components are produced in Slovakia," said Blaščák.

Many labour experts have urged the government to consider unorthodox means to lower what is one of the highest unemployment rates in Europe. One of the measures proposed by the Labour Ministry plan would allow someone taking on a low-wage job to continue to draw some social or unemployment benefits. The same measure would apply to people in part-time jobs.

The government believes that almost one third of people registered as unemployed already work illegally, and concedes that the way unemployment benefits are distributed under the current system can encourage people not to seek work. The maximum amount an unemployed person can receive in benefits often rises above a post-tax wage in some low-paid jobs.

Many people reportedly prefer to draw benefits as well as take jobs for under-the-table cash, which in turn allows companies to avoid paying the social security and tax costs of employing someone.

The problem is also that the foreign direct investment (FDI) the country has attracted has not led to the creation of new jobs. FDI has swelled state coffers and brought new management and western corporate ideals to former state firms, but subsequent restructuring has seen staff laid off.

Slovenské telekomunikácie, sold to German telecoms giant Deutsche Telecom in summer 2000, has announced plans to lay off more than 2,000 workers by the end of this year. A large number of workers are expected to be made redundant in the banking sector following the privatisations of the three largest state banks, VUB, SLSP and IRB.

"There are two main factors behind current unemployment levels - the continued restructuring in the corporate sector connected with privatisation and the approach of the government towards investment.

"Foreign investors can keep production levels as they are with fewer workers. There are reports of 4,000 people being laid off in the banking sector after recent privatisations, and the industrial sector is worse," said Blaščák.

"The government has been successful in attracting investment in some ways, but not in others. There is a big difference between privatising a company like Slovenské telekomunikácie or Slovenský plynárenský priemysel and building a new company like Volkswagen Slovakia. The structure of investment hasn't really helped employment."

The Mikuláš Dzurinda administration has already introduced a number of measures to lower joblessness, including lowering corporate taxes in an attempt to fuel growth in the corporate sector and create more jobs, as well as a public works scheme. But both have failed to bring down unemployment.

"The public works scheme is only a seasonal solution and it is impossible to sustain employment for those people involved in it. And while there has been a large fall in taxes the entrepreneurial sector hasn't reacted much because the cost of employing people is still so high," said Blaščák.

With the failure of national employment strategies to date, there have been calls for local governments to play a larger part in setting labour policies and identifying employment trends and labour market needs in their region.

Last year's parliamentary approval of the devolution of a number of central government powers to eight new regional governments is expected to go some way to achieving this.

In addition, the Ministry of Construction and Regional Development announced February 13 that as part of a government development aid program for high-unemployment districts, Sk90 million ($1.9 million) is to be allocated to various regions this year to boost local economies and create new jobs.

The ministry selected 29 districts for the state-aid plan. The Košice region was allocated the largest share of funds, almost Sk30 million, while the smallest sum of Sk6.6 million will go to the Žilina region.

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