PRIME Minister Robert Fico and Labour Minister Ján Richter are touting the success of a €70 million government plan for tackling youth unemployment by noting it has created 11,000 new jobs in less than a year. But some observers are less optimistic and question the sustainability of those jobs once state subsidies go away.
In November 2012 the Slovak government allocated the funds with two key projects. The first targeted the private sector, focusing on job-creation in the transport sector and at small and medium-sized enterprises. The second focused on community-based jobs in municipalities.
“It turned out we can create jobs for young people,” Fico said on November 8, as quoted by the SITA newswire.
Richter added that the average age of young people who have found work through the projects was 23.5 years, while they were registered with the labour offices for 13.65 months on average. Most of the employed young people were graduates from secondary professional schools and vocational schools who found work in trade, industrial production and ICT. The employers were mostly small and micro-sized enterprises, Richter said.
The minister added that the success of the projects will soon be reflected in jobless statistics, which should decrease by 7,000 among people younger than 29. At the end of October 130,631 people younger than 29 were without a job, according to the statistics of the Central Office of Labour, Social Affairs and Family (ÚPSVaR).
The opposition Christian Democratic Movement (KDH) is not as optimistic. The statistics show that by the end of September the number of young jobless was only by 1,000 people lower than a year before, said party chairman Ján Figeľ, as reported by SITA.
Moreover, in five of eight Slovak regions the number of young jobless has increased as compared with last September, said KDH MP Miloš Moravčík. KDH official blames new payroll taxes for slowing hiring, and say that without such taxes there would be no need for state subsidies.
Other critics have said they consider the subsidy too high.
Analysts doubt the projects
According to the scheme passed last November, employers can receive a contribution between €434 and €522 per month per each job created, depending on the sphere of their business. The period during which successful applicants receive the money ranges from six to 12 months, with the condition that they must maintain the new job for together 18 to 21 months, depending on the sphere of their business.
The salaries within the scheme should exceed the minimum wage. While the state covers pay up to the minimum wage, any sums above this are financed by employers. The exact amount will depend primarily on the qualifications of the new employees.
The ÚPSVaR divided the money among the local labour offices based on their unemployment rate. Each labour office subsequently picks the applicants based on the amount the employee will earn, the number of people an employer wants to hire and the nature of the work agreement, according to the Sme daily.
Ján Dinga, analyst with the Institute for Social and Economic Studies (INESS), said the government youth employment stimulus projects are overpriced and ineffective.
Spending €70 million to create 11,000 jobs means that the government spent nearly €6,400 per job, he explained, adding that this amount might cover the labour costs of an employee with a minimum wage for more than a year.
“The government subsidises the extremely overpriced jobs on one hand, and on the other hand burdens the economy with high taxes and payroll taxes, due to which the private sector does not create enough jobs,” Dinga told The Slovak Spectator, adding that “pouring another hundreds of millions into governmental programmes therefore represents wasting public money”.
Michal Páleník from the Employment Institute agrees that the subsidy for employers is high, but admits it is hard to say how much they should get to stay motivated to offer jobs to young people. He also questions the sustainability of jobs in some special cases when, for example, the company employs a woman who becomes pregnant during this period, or when an employee leaves a job and goes abroad.
EU targets youth joblessness
Youth unemployment is a major issue at the European level. Part of the money allocated for 2014-20 will go toward an EC initiative called Youth Guarantee, according to which EU member states with more than 25-percent youth joblessness should ensure that all young people up to the age of 25 receive a quality offer of employment, continued education and an apprenticeship or traineeship within four months of leaving formal education or becoming unemployed.
The EU also presented its new Erasmus+ programme for education, training, youth and sports for the years 2014-20, starting in January 2014, for which it allocated €14.7 million. It will focus on boosting skills and employability, and modernising education, training and youth work abroad, according to the EC website.
The Labour Ministry says it wants to continue similar projects and use the money allocated within the European Commission’s Youth Guarantee initiative, spokesman Michal Stuška told The Slovak Spectator. The European Parliament has cleared €6 billion from its budget framework for 2014-20 to target youth unemployment. Slovakia, where youth unemployment stands at 34 percent, the sixth highest in the EU, stands to draw some €200 million.
Regarding the Youth Guarantee programme, the Labour Ministry has already drafted the national plan for its implementation, which includes the list of legislative changes Slovakia has to pass in the areas of professional education or supporting the work with young people, as well as planned projects to help young people get qualifications or set up their own business, Stuška said. The initiatives will focus mostly on people aged 15-25, he added.
Páleník says that the employment of young people should be part of other projects. For example, if the company plans an investment project, “there should be a guarantee that it will employ some young people, some old people, and some disabled people”, Páleník told The Slovak Spectator.
If the companies do not meet such requirement, he proposes to offer the employers a relatively small subsidy that will motivate them employ people full time and with an unlimited working contract.
