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Jobless rate remains stubbornly high

Vladimír Mečiar and his cabinet promised Slovak voters back in 1994 that they would wrestle the unemployment rate, then 13.7%, down below 10% during their four year reign. But with three months remaining in the current Mečiar administration's term in office, the jobless rate is still way over 13%. Moreover, analysts claim that if the government was not cooking its books, the actual figure would be higher than it was in 1994.
In many ways, the high unemployment figures are an anomaly in a country with otherwise strong macroeceonomic results. But analysts say that corporate profits are not being ploughed back into the ailing labour market, while government policy remains focused more on soothing the effects of unemployment rather than on addressing the causes.

Vladimír Mečiar and his cabinet promised Slovak voters back in 1994 that they would wrestle the unemployment rate, then 13.7%, down below 10% during their four year reign. But with three months remaining in the current Mečiar administration's term in office, the jobless rate is still way over 13%. Moreover, analysts claim that if the government was not cooking its books, the actual figure would be higher than it was in 1994.

In many ways, the high unemployment figures are an anomaly in a country with otherwise strong macroeceonomic results. But analysts say that corporate profits are not being ploughed back into the ailing labour market, while government policy remains focused more on soothing the effects of unemployment rather than on addressing the causes.

According to the Slovak Statistical Office (ŠÚSR), the unemployment rate was 13.3% at the end of March, a figure which translates into 369,048 people without jobs. Although these numbers represent little change from 1994, the Mečiar government has been claiming over the past four years that the jobless rate is declining.

The government has begun to employ new tactics to create the impression of progress on unemployment. Last December, the ŠÚSR changed the methodology it used for registering the number of jobless people and thus for calculating the unemployment rate. According to the new methodology, only people who are immediately available for work are considered unemployed.

"The difference in the results derived from the two methods fluctuates only from 0.5 to 0.8%," said Pavel Tomasta, chief analyst at the National Labor Office. In real figures, however, this means between 14,000 and 22,000 jobless people who do not appear in unemployment data.

"I understand that some Western European countries use this method," said Ivan Mikloš, President of MESA 10, an independent economic think tank. "But it is wrong to compare the present figures with figures from previous years. Politicians from the ruling coalition especially like to point to a decline in unemployment, which really exists only statistically."

Strong GDP, no new jobs

Economic analysts have long recognized that Slovakia's strong GDP growth rate (6.5% in 1997) has not brought unemployment down. This anomaly, they say, is caused by three factors: the scarcity of newly-created jobs, regional imbalances in GDP growth rates, and the decline in financial support for active labor market policies.

"There is relatively high economic growth [in Slovakia], but it is not reflected in the creation of new jobs," said Juraj Renčko, an analyst at the Slovak Academy of Sciences' Forecasting Institute. "Slovak industry is simply not able to absorb so many new employees."

Another important factor is that almost 50% of the country's GDP is created in the densely populated areas that comprise the three largest cities: Bratislava, Košice, and Banská Bystrica. Most of Slovakia's regions have one large factory which produces either weaponry, textiles or leather products.

Still in the throes of industrial transition, most of these companies are struggling with financial problems and are fighting to survive. Because of that, they are able neither to create new jobs nor to support employment in the region; this corporate instability poses an imminent and ever-present threat of creating what trade unionists refer to as "hunger valleys".

"It would be better at times for these companies to go bankrupt and pay off their employees, so that a new investor could come in with a new production program," said Juraj Ševcech, Employment and Labor Market advisor at the Slovak Confederation of Trade Unions. Ševcech added that often, help from the government arrives only "when everything is already burning down".

Even in these crisis situations, Renčko claimed, taxpayers' money is not used in the most effective way possible. "I think that companies that are bailed out will not wake up to a better business, and in my opinion it is just money thrown away", he said.

Band-aid measures

The Labor Office was created at the beginning of 1997 as an independent public institution charged with supervising both active (job creation) and passive (payment of unemployment benefits) policies on the labor market. But while in 1996 more state money was spent promoting active measures, in 1997 more than half of the available funds were spent on unemployment benefits.

"In 1998, even more money will be used for paying unemployment benefits," Tomasta said, adding that the final amount will be close to 5 billion Sk. "In the first four months [of 1998], we have already spent two billion Sk on unemployment benefits."

Beginning last December, the maximum unemployment benefit was raised to a figure 1.8 times that of the 3,000 Sk minimum wage. "The new law enables people [simultaneously] to receive unemployment benefits and the money the company pays them when they are laid off," Tomasta said, adding that the hike in unemployment benefits left the Labor Office with only three billion Sk to create new jobs.

Even measures to redistribute wealth are passive in focus. By law, Slovak employees donate four percent of their salaries to the Slovak employment fund, which basically represents the operating budget of the Labor Office. Bratislava, where unemployment hovers around 3%, contributes 25% of the budget.

"Most of the finances from this budget are redistributed to the [rural areas] of Košice and Prešov regions, where the unemployment rate in many parts of the region is higher than 25%", said Tomasta.

Assessing blame for the gloomy situation on the labor market gives rise to furious finger pointing. Mária Janušová, director of the employment policy department at the Social Affairs Ministry, said that more responsibility for job creation should be placed on entrepreneurs and businesses. "Corporate employers should not only worry about their profits, but also partake in the creation of new jobs," she said.

But trade unions lay the blame for the scarcity of jobs squarely on the government's doorstep. "The government is not trying to come up with long term solutions for unemployed people," said Ševcech. "This government was unable to finish industrial restructuring."

Tomaston agreed, saying the Labor Office was not the body to make decisions about where to invest and how to help companies with their problems. "The government has a only a short horizon," Tomasta said. "It plans on short term basis. But we cannot exchange our position for theirs, and suggest where investments should be directed." He said, however, that his office would try to take the initiative in a plan to concentrate financial resources from ministries, investors and other players who affect unemployment or the macroeconomy.

Renčko said that he "wish[ed] politicians good luck in bringing the unemployment rate under 10%," and predicted that the jobless rate "will not fall below 12% in the next four years, even if we assume reasonable circumstances for economic development."

"In order to bring unemployment down to 10%, good economic and political decisions must be made," said Mikloš, but warned that "these changes will not be politically popular."

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