SLOVAKIA is not currently a leader in economic competitiveness or in the quality of its business environment within the EU but it does top the ranking in an area that it is not very proud of – the proportion of its citizens who have been unemployed for a year or longer. Some individuals in Slovakia have now been jobless for over 20 years – a marked change from the situation under communism, when being without work was a punishable offence. It is clear that many attempts to deal with the problem have been ineffective and that there is really no fast or cheap solution.
The Employment Institute, a non-profit organisation based in Bratislava, is putting forth some new ideas to combat Slovakia’s long-term unemployment problem, while admitting that there is no ‘silver bullet’. But it emphatically argues that the problems caused by long-term unemployment are an urgent matter for Slovak society to focus on and that all of its institutions bear some responsibility for finding and implementing remedial efforts.
Slovakia’s level of long-term unemployment, defined as being out of work for 12 months or longer, was 9.2 percent in 2010 and topped the rankings within the European Union, with Eurostat reporting that the average long-term unemployment rate across the EU27 was 3.9 percent.
The Central Office of Labour, Social Affairs and Family (ÚPSVaR) recorded 384,220 people as being unemployed in August, and 185,001 of these had been unable to find a job for 12 months or more.
“Because Slovakia ranks among the countries with higher long-term unemployment, the Ministry of Labour, Social Affairs and Family perceives this situation as a problem for the whole of society,” ministry spokesperson Mária Račková told The Slovak Spectator.
Martin Kahanec, scientific director of the Central European Labour Studies Institute (CELSI) in Bratislava, believes long-term unemployment in Slovakia has developed from a mismatch in labour supply and demand that was caused by the workforce’s education and skills and its geographical distribution failing to keep pace with the changing structure of the economy over the past two decades.
“Workers who did not adapt and did not obtain newly-required abilities and skills are finding jobs only with great difficulty,” Kahanec told The Slovak Spectator. “The increased competition for jobs also led to marginalisation and exclusion of endangered groups in the labour market, especially Roma but older people as well.”
He added that after multiple unsuccessful attempts to find a job, some of these individuals lost their working skills as well as their motivation to look for another job.
A significant proportion of those who are long-term unemployed in Slovakia have a very low chance of success in the standard labour market, according to the Employment Institute, because their very low level of labour productivity is not interesting to most employers. The institute believes that for this group to have success in finding jobs, some type of positive discrimination is needed. It has presented the idea of a so-called ‘inclusive market’, with ‘inclusive enterprises’ which means two separate but parallel markets for services and employment, i.e. standard and inclusive. The institute states that its version of positive discrimination is not accomplished through government subsidies but rather by creating sufficient demand for certain types of services, and hence employment providing those services.
The institute introduced its inclusive market scheme this past summer and is now seeking support for the idea from the state government and other institutions.
The institute proposes the development of inclusive enterprises to employ those who have been unemployed for a long time, people who have been released from prison, and those individuals who are currently economically inactive for one reason or another. These inclusive enterprises would compete to supply services procured by state and public organisations.
Michal Páleník, the director of the Employment Institute, told The Slovak Spectator that the idea of inclusive enterprises incorporates market principles and contrasted this with the current approach to supported employment, for example via so-called social enterprises, in which a company receives a per capita subsidy to employ an unemployed or disadvantaged person.
“Orders are allocated based on the market principle as inclusive enterprises will compete for them, with the condition that the social goal is also met,” stated Páleník, adding that this scheme is workable only if there are enough services allocated by the government that inclusive enterprises can compete for within standard public procurement procedures.
“Here it is important to realise that when an unemployed person gets a job, the state saves quite a bit of money,” Páleník added. “In the inclusive market, when the [government] order is for €1,000, 70 percent of this amount is immediately returned to the general budget in the form of collected taxes and mandatory insurance premiums as well as unpaid, and thus saved, social benefits.”
Páleník’s conception is that the state would encourage state and public institutions to allocate their orders for certain services to suitable inclusive enterprises that employ individuals with lower levels of education who may have poor working habits and lower skills.
In preparing its proposals for Slovakia the institute was inspired by similar employment schemes in Italy and France but Páleník stressed that the target groups in those countries are a bit different and are smaller and more concentrated.
“Slovakia is different in that the target group in half of the country is very big,” Páleník told The Slovak Spectator.
For this scheme to work Páleník said both labour legislation and public procurement legislation must be modified, adding that having enough orders for the inclusive enterprises and maintaining their cash flow at a sufficiently high level will be the most difficult task. He said certain current projects such as reconstructing castles or building flood defences could easily be transformed into inclusive enterprises.
“One issue is to make the legislative changes and the second issue is to persuade the public sphere that this [long-term unemployment] is a problem not only for the Labour Ministry but for the whole public sphere and that the Labour Ministry alone has no chance to solve it and all others must get involved,” stated Páleník, adding that if each ministry and state organisation was involved and provided orders and work opportunities to the long-term unemployed, the number in that category would fall significantly over a few years.
The Labour Ministry views the inclusive market idea as one possible concept to tackle long-term unemployment and Račková said the ministry is currently reviewing the proposal to assess its benefits and risks.
Kahanec of CELSI sees several strong aspects to the inclusive market idea but also pointed to parts that he views as problematic.
“On one hand it creates a systematic demand for services from the long-term unemployed while maintaining market principles in this market,” said Kahanec. “This gives a precondition for creation of jobs for the long-term unemployed. On the other hand, it can lead to inefficient public procurement and can segregate the long-term unemployed outside the standard labour market.”
The Labour Ministry is already using a number of tools to reduce long-term unemployment, with Račková specifying that state assistance for launching a business and covering commuting costs are among the most-used active labour market measures. She added that the ministry also gives employers financial incentives to employ job seekers and is also providing support for jobs in carrying out anti-flood measures and resolving extraordinary situations. The ministry also supports so-called activation activities through which the ministry seeks to maintain the working habits of those who are receiving material-need benefits or those who are long-term unemployed.
“But the Labour Ministry is currently analysing the effectiveness of these instruments,” Račková said. “On the basis of the findings the ministry will decide whether to reassess individual instruments or cancel them.”
17. Oct 2011 at 0:00 | Jana Liptáková