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EDITORIAL

Drawing cold comfort from dire economic straits

KOREAN carmaker Kia is having trouble hiring enough qualified workers to run its assembly lines in Slovakia, while PSA Peugeot-Citroen in Trnava has already hired workers from Romania and started scouring the countries of the Balkans for more: just a couple of news items from the first half of 2007 which might now seem slightly fantastical to crisis-affected readers.

KOREAN carmaker Kia is having trouble hiring enough qualified workers to run its assembly lines in Slovakia, while PSA Peugeot-Citroen in Trnava has already hired workers from Romania and started scouring the countries of the Balkans for more: just a couple of news items from the first half of 2007 which might now seem slightly fantastical to crisis-affected readers.

What for many seemed a pretty improbable development in a country which proclaimed itself the New Detroit is now becoming reality for anyone employed in the carmaking business: the industry is hurting and carmakers are cutting shifts and payrolls. PSA Peugeot-Citroen plans to lay off 190 employees and Kia has reduced production from planned three shifts per day to just one. Volkswagen, one of Slovakia’s biggest employers with 8,500 workers, confirmed on February 17 that it was halting production for 9 days.

While a year ago, the government was still toying with the idea of luring home Slovaks who had taken jobs abroad over the past decade, in order to fill some of the vacancies for skilled workers, today the story reads completely differently: many Slovaks will instead be forced home by the rampant economic crisis in most European Union countries. But instead of vacancies they may find themselves at the labour offices, registering as unemployed.

The world is looking at the crises it has experienced before and trying to extract some kind of lessons which could be learned and trying to avoid the mistakes of the past. Economists are searching for a formula that will help governments to produce the best antidote to the crisis and help economies get back on their feet.

But the downturn has created a completely new environment, posing tough challenges for both the employees losing their jobs and the employers firing them.

The International Labour Organization (ILO) said that the crisis will lead to a dramatic increase in the number of jobless, working poor and those in vulnerable employment. Global unemployment in 2009 could increase by between 18 million and 30 million workers compared to 2007, and by as many as 50 million if the situation continues to deteriorate, the ILO said in its Global Employment Trends report.

In Slovakia, an official estimate by the country’s labour authority suggests that about 16,000 people might lose their jobs, while according to a worst-case scenario as many as 50,000 people might join the army of unemployed.

Human capital experts have warned that firing employees first is an old instinct which works as a painkiller, and only delays the need for a real cure.

The government has been appealing to employers to try and maintain employment at any price. But it is now obvious that a lot of companies have no other solution but to cut their workforces.

Human resources professionals also say that employers might ultimately benefit from the crisis because their existing employees will become more loyal to the company, improve their working discipline and lower their wage expectations. They will also have easier access to the best hands and best minds.

There is an older generation of employees in Slovakia which has already experienced a time of massive uncertainty, when Slovakia was in transition to a market economy and hundreds of companies went bankrupt after being privatised - or plundered by people who received them overnight as a present for some political favour.

Many of these people are still on the labour market and some will now be very close to retirement age, but could yet experience another firing.

They, of course, can take little comfort from the prediction that the market could grow healthier and that only the fittest will survive.

Managers at all levels are now living in an era when they will have to choose wise employment policies: on the one hand they know that they cannot really supplement social institutions and keep employing people who don’t meet their standards, but on the other they need to be aware that their decision to lay people off must be well considered and work as a last resort, not be just a panicked reaction to lower-than-anticipated numbers on their balance sheets.

There are very few sectors that will remain immune to the present situation in which directors, managers and CEOs are having to normalise, consider, count and cut - and yet for many it will be the worst experience of their careers.

Everyone hopes that the world economy will heal, people’s trust returns, demand lifts - and that they might be able to delay the worst decisions. But the tables, numbers and predictions so far suggest that will not happen soon, at least not before they have to submit their 2009 second quarter results.

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