A Decade After the Economic Crisis, Slovenia Moves from Unemployment to Staff Shortages (Feature)

By , 15 Jan 2019, 15:00 PM Business
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STA, 12 January 2019 - The economic and financial crisis in Slovenia, which started in 2009, brought a significant growth of unemployment, with the number of the unemployed more than doubling to almost 130,000 at the beginning of 2014. The situation on the labour market has been improving lately, with shortage of certain staff actually becoming a problem.

The number of registered unemployed persons was up steeply in 2009 and peaked at the beginning of 2014 at almost 130,000, which was around double of that before the crisis.

It was in 2014 when the number finally started to decline, with the improvement on the labour market accelerating in 2016 and 2017 and continuing in 2018, with the number standing at 78,534 at the end of the year.

Projections for the coming years speak about an additional improvement, with the number of registered unemployed expected to drop to the pre-crisis level by 2021 barring major negative shocks.

Staff shortages are now a growing issue, along with unemployment among those aged 55+

There is a large number of structurally and long-term unemployed people in Slovenia and hard-to-employ people, whose activation requires additional active employment policy measures.

Given the circumstances, a large number of companies have already started reporting shortages of adequately trained staff, which is becoming a limiting factor in the implementation of their strategies.

The number of the active working population is also growing again, and the employment rate exceeded the pre-crisis level in 2017. The total number continued to increase in 2018 to reach 1.022 million in the third quarter, a 23-year record.

Although the total employment rate is somewhat higher than the EU average, Slovenia fares much worse when it comes to the employment rate in the 55-64 age category despite an improvement in recent years.

In 2017, it stood at 43% or 14 percentage points below the EU average. Slovenia is meanwhile recording better progress in the under-25 category, but its rate is still at roughly half of the EU average.

         Employment  Registered        Survey

         rate (%)    unemployment (%)  unemployment (%)

2008        73.0         6.7               4.4

2009        71.9         9.1               5.9

2010        70.3        10.7               7.2

2011        68.4        11.8               8.2

2012        68.3        12.0               8.9

2013        67.2        13.1              10.1

2014        67.7        13.1               9.7

2015        69.1        12.3               9.0

2016        70.1        11.2               8.0

2017        73.4         9.5               6.6

* The figures are annual averages

Source: Statistics Office, Employment Service

Pay in Slovenia after the crisis

Growth of wages slowed down in the crisis years and came to a stop in 2012 and 2013. Wages started to grow again noticeably only in 2017 and 2018, when the growth of gross wages exceeded 3%, with the trend expected to continue and grow even stronger in the coming years. Domestic and foreign macroeconomic analysts are stressing that the growth of wages will not significantly exceed the growth of productivity and undermine the competitiveness of the economy.

Data for the period as of 2008 also show that the growth of wages was higher in the private than in the public sector. While in the public sector the crisis was fought with lay-offs, there were no dismissals in the public sector, with the number of employees even increasing in certain activities. Civil servants did contribute their share by accepting austerity measures, which are only now being gradually abolished.

Related: Economic crisis that produced a "lost decade" in Slovenia

In the years after 2013, contributing significantly to the real purchasing power was a low inflation, which was noticeable again only in 2017 and last year, when it reached 1.4% according to preliminary estimates.

What also marked the crisis years was a raise of the minimum wage of more than 20% in 2010, which enraged the employers, who blamed the rise in the unemployment rate in the coming years on this measure. Trade unions were meanwhile noting that the minimum wage was still below the minimum costs of living and that all bonuses were calculated into it.

In the recent years, the minimum wage has been increasing more gradually, standing at EUR 843 gross last year. This year it will increase to EUR 886 and in 2020 to EUR 940 gross under the latest legislative changes, which also regulate the elimination of bonuses from the minimum wage as of 1 January 2020.

      Inflation (%)  Average net wage*      Average gross wage*

                     in EUR   growth in %   in EUR  growth in %

2008     2.1         899.8       7.8        1,391.4       8.2

2009     1.8         930.0       3.3        1,439.0       3.4

2010     1.9         966.6       3.9        1,494.9       3.9

2011     2.0         987.4       2.1        1,524.6       2.0

2012     2.7         991.4       0.4        1,525.5       0.0

2013     0.7         997.0       0.6        1,523.2       0.0

2014     0.2       1,005.4       0.8        1,540.2       1.1

2015    -0.5       1,013.2       0.8        1,555.9       1.0

2016     0.5       1,030.2       1.7        1,584.7       1.8

2017     1.7       1,062.0       3.1        1,627.0       2.7

* Annual average

Source: Statistics Office

Added value and productivity

In addition to the demographic trends, one of the key challenges for long-term development and economic competitiveness of Slovenia are growth in productivity and added value in the economy, to which growth of wages and well-being are tied. In this segment, the economic crisis brought stagnation and even a slight decline, while in comparison with the EU average, productivity in the Slovenian economy in 2018 was still lower than in the pre-crisis 2008.

Gross added value per employee was up in the 2008-2017 period, but is still well below the EU and eurozone averages, at 63% of the EU average and 57% of the eurozone average.

Related: Banks were at the center of the financial crisis in Slovenia

Increasing productivity and added value is a challenge both for the economy and economic policy. Businesses have set an ambitious goal of reaching EUR 60,000 in added value per employee, EUR 50bn in exports and an EUR 2,300 average wage by 2025, which is why they except measures from the state ranging from the tax police to the immigration policy.

Among the necessary measures both in the economy and institutions, they have pointed to measures for growth of investments in new production capacities and new technologies and digitalisation, a growth in investments in research and development, which as a share of GDP dropped from 2.6% in 2013 to 1.93% in 2017.

Labour productivity, % of EU average

       Per employee   Per hour worked

2008       83.5           83.8

2009       79.9           79.0

2010       79.4           78.2

2011       80.6           80.3

2012       80.0           79.8

2013       80.3           78.9

2014       81.2           78.9

2015       80.5           77.9

2016       80.5           79.7

2017       81.0           81.5

Source: Statistics Office

Gross value added, in EUR

      Per employee  EU average    Eurozone average

2008     34,759        55,079          61,492

2009     33,694        52,917          60,581

2010     34,107        55,506          62,638

2011     35,594        56,951          64,164

2012     34,854        58,247          64,834

2013     35,643        58,850          65,863

2014     36,893        60,247          66,991

2015     37,758        62,818          68,678

2016     39,091        62,418          69,398

2017     40,136        63,276          70,861

Source: Eurostat

All out stories on the Slovenian economy can be found here

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