Unemployment and education remain the focus

High unemployment rates, even as they fall slightly, remain a persistent problem.

(Source: SME)

Though unemployment fell by more than 1 percentage point during 2014 and new jobs came from lower levels of growth, employers remain cautions, citing slower than originally expected economic recovery in Europe as well as the Russo-Ukrainian conflict as source of their concerns.

The average jobless rate calculated by the Central Office of Labour, Social Affairs and Family (ÚPSVaR) based on the unemployed who are ready to take a job, the so-called registered unemployment rate, amounted to 12.79 percent in 2014 and decreased by 1.32 percentage points compared to 2013. The average unemployment rate is nearly as low as it was in 2010, according to Labour Minister Ján Richter.

“Certainly various steps we offered within the projects to help young unemployed below 29 years of age, but also regional measures, helped to achieve this,” Richter told the press, as quoted by the TASR newswire.

Human resource professionals see different reasons behind the positive development. Luboš Sirota, general director at McROY Group, pointed to the relatively significant growth of employment which occurred in spite of the milder economic growth.

“This was because the market benefited from layoffs from previous periods,” Sirota told The Slovak Spectator. “Many companies, by optimising their personnel costs pre-stocked, by which they responded to the rise in income and payroll taxes as well as changes in the Labour Code. Because in 2014 it was not possible to increase labour productivity at such a pace as during the previous period, the growth of productivity brought with it automatically also the creation of new jobs.”

Despite the falling unemployment rate, it remains high compared to other EU countries. The seasonally adjusted jobless rate in the eurozone stood at 11.4 percent in December 2014, while the EU 28 average was even lower: 9.9 percent. Slovakia’s jobless rate was the sixth highest at the end of 2014, with only Greece, Spain, Cyprus, Portugal and Croatia reporting higher rates.

Martin Krekáč, chairman and owner of Jenewein Group and senior partner of Amrop, when commenting on the most significant trends on the labour market in 2014 cited continued stagnation.

“Proposed policies do not include needed systemic measures, which would make the labour market more dynamic,” Krekáč told The Slovak Spectator. “This factor along with the continuing uncertainty and unpredictability on the global market are causing employers to behave overcautiously.”

Economists see several reasons behind the consistently high unemployment in Slovakia. They include the structure of Slovakia’s economy, labour optimisation, high payroll taxes and the low level of education and discrimination excluding the Roma population from the labour market.

Andrej Arady, macro economist with VÚB bank, specified that the structure of Slovakia’s economy is dominated by industry. The economic growth between 2003 and 2013 was driven by sectors with a high growth of labour productivity and thus there was no need to create new working positions. Industrial production made up 39 percent of the economic growth between 2003 and 2013, but the number of work places fell by 9 percent.

In respect to the persisting high jobless rate it looks like that Slovakia has not moved anywhere as the jobless rate remains about 14 percent on average over the last 20 years, according to Zdenko Štefanides, chief economist with VÚB.

”But something has been changing here and it is that work positions are being generated this year [2014] and that they are generated quite quickly, either if we compare quarter to quarter or year on year,” Štefanides said, adding that the number of work positions during the third quarter of 2014 was 1.4 percent higher compared to the same quarter of 2013.

The jobless rate decreased too, when it went down from the peak at the beginning of 2013 by more than 2.5 percentage points.

“Thus is happening something positive and this is the fact that while the economy did not create too many work positions so far, even though we grew quickly, now, even though we are not growing so quickly, work positions are being created,” Štefanides said. “This is a bit peculiar phenomenon, but the fact is that it occurs not only in Slovakia but also globally.”

The Financial Policy Institute (IFP), a think tank of the Finance Ministry, sees the low level of education and discrimination excluding the Roma population from the labour market as another reason for the high jobless rate in Slovakia. While the share of the majority society with jobs is about 60 percent, for Roma it is only between 15 and 17 percent.

“One of reasons of exclusion of Roma from the labour market are missing skills and low level of education,” the IFP writes in its analysis. “But also the extensive discrimination on the labour prevents higher employment.”

According to the IFP, if the Roma population achieves average results of the majority population on the labour market, the general unemployment rate would decrease to 11 percent.

“Even though this is still far from acceptable levels, without integration of the Roma into the work process the general unemployment rate will not decrease in a more significant scale in the future,” the IFP’s analysis reads.

Outlook for 2015

Economists expect the Slovakia’s economy, even when its growth is not so robust in 2015, will continue to create jobs, but at a bit slower pace than in 2014. The IFP prognosticated in its economic outlook updated in February 2015 that about 14,000 new work positions will be created, especially in services. At that pace, the unemployment rate would fall to 12.9 percent in 2015 and further down to 10.5 percent in 2018.

More employed people is also the aim of the National Strategy of Employment passed by the government in late November 2014. Its main goal is to increase the employment of people aged between 20 and 64 years to 72 percent, while it stood at 65.4 percent during the first half of 2014. The key sector should be industrial production, but also employees in trade and services should keep their jobs.

Thus, according to the Labour Ministry it is necessary to secure during upcoming years a sufficient number and a suitable structure of the workforce in all sectors of the national economy.

Dual education

Hopes are pinned on the law on vocational education, with the planned effectiveness as of September, introducing elements of dual education into the current system.

This law creates conditions under which employers could join the education process and provide students with practical training. The bill, which is just being discussed in the parliament, has raised discussions, for example, about certification of workplaces. Education Minister Juraj Draxler, believes that these questions can be solved during the parliamentary discussion as the certification scheme is a minor matter.

“The important thing is that this law bringing a stronger interconnection of the school and practice creates a framework so employers take on students and acquaint them with often very expensive and modern technologies,” Draxler told The Slovak Spectator. “Thus after finishing the secondary school they can work with these expensive technologies and firms do not need to retrain them at high costs.”

Adoption of the law on dual education is only one of Draxler’s goals as the challenge in terms of the education system is that even though Slovakia’s education system keeps generating good results, it still runs based on an old model set up during the previous communist regime.

“It is too focused on producing an averagely educated student, but we put less stress on having also some of excellent quality,” Draxler told The Slovak Spectator. “There is space for improvement already at the level of elementary school, but more so at the level of secondary and especially at the level of universities.” 

Better education and more interconnection between schools and work skills should help companies secure an inflow of qualified labour and avoid the situation that occurred before the economic crisis: even though the unemployment rate was quite high, some companies had problems filling specialised positions.

Generation Y

Another challenge the Slovak labour market faces is the arrival of the so-called Generation Y, or Millennials. Unlike previous generations, people born between the early 1980s and the early 2000s are refusing overtime or working during weekends and national holidays. They are ambitious, prefer working in teams, share their successes and care about their work-life balance more than their parents or grandparents did.

“These people do not live to work, but work to live,” said Sirota. “They are more self-confident, assertive; they are more interested in working conditions, wage, benefits, education, flexibility, possibilities of a home office and so on.”

Sirota noted that they do not have any fundamental problems to travel for better working conditions and career challenges.

“This is true especially in case of talented and creative people with high qualifications, meaning those that companies need the most,” said Sirota. “The result is that the global fight for talent will grow.”

But Igor Šulík, managing partner of Amrop, points out that also members of Generation Y are exposed to a demanding challenge when they want to harmonise their expectations with the expectations of those for whom they want to work.

“Both sides face a challenge how to correctly understand the thinking of the other side,” Šulík told The Slovak Spectator.

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