TAIEX Workshop on Employment and Social Protection

Preservation of jobs during reorganization and privatization of enterprises in Slovenia

Magda Zupančič

Kiev, 18-19.February 2016

OUTLINE OF THE PRESENTATION

LABOUR MARKET TRENDS IN SLOVENIA

SOCIALLY RESPONSIBLE RESTRUCTURING

PRIVATISATION AND LABOUR MARKET IN SLOVENIA

REGULATION OF THE SLOVENE LABOUR MARKET

INNOVATIVE MEASURES FOR HIGHER EMPLOYABILITY

EU CONTEXT

NEXT STEPS…

Conclusions and recommendation

ABOUT SLOVENIA? • Location in Europe:

Central Europe - Mediterranean Europe Area: 20.273 km2 The highest peak : Triglav (2.864 m) Length of Slovenian Adriatic coastline: 43.157 m (~ 43 km) Population: ~ 2.000.000

SLOVENIA….

SLOVENIA AND THE LABOUR MARKET

Slovenia experienced two major restructuring phases:

1. 1990s

• Independence from ex-YU and lost trade partners

• Privatization process and massive redundancies

1. A period after 2008/2009

• delayed crisis, due to internal shocks and export decrease

• Privatization process, linked with internal financial crisis

• Structural changes

• Lost competitiveness

• Dependence on EU economic trends (open economy)

SLOVENIA (Source: OECD) Unit 2009 2011 2012 2014

GDP per capita USD

current PPPs

27 488 28 513 28 441 29 969

Employment rate in population aged 15-24 % 35,3 31,5 27,3 26,8

Employment rate in population aged 25-54 % 84,8 83,1 83,3 81,9

Employment rate in population aged 55-64 % 35,6 31,2 32,9 35,4

Incidence of part-time employment % 8,3 8,6 7,9 9,6

Self-employment rate: total employment % 16,2 16,8 16,2 18,6

Unemployment rate: total labour force % 5,9 8,2 8,9 9,7

Long-term unemployment: total unemployed % 30,1 44,2 47,9 54,5

Imports of goods and services % of GDP 55,4 68,5 69,1 68,7

Exports of goods and services % of GDP 57,2 70,4 73,3 76,5

SLOVENIA AND THE LABOUR MARKET (1)

Structural changes affected:

• Slow adaptation to new economic circumstances

• Shift towards services ( mismatches in the labour market)

• Lost competitiveness due to new, demanded markets…

Negative impacts on labour force….

• Unemployment of huge cohorts of low skilled, mostly mid-aged workers

• Loss of skills and competences of highly educated ones due to restructuring (metal, machine industries….)

• Increasing vertical and horizontal mismatches

SLOVENIA AND THE LABOUR MARKET (2)

Different policy approaches in time…

In 1990s:

• Early retirement schemes options

• Smooth transitions from unemployment to inactivity and retirement (social and economic long –term impacts)

• Prolonged passive, not active safety nets

• Since 2008/2009:

• Stricter pension reform with focus on efficient ALPM

• 2 temporary Acts, based on restructuring and redundancy needs

• New, innovative services for redundant and endangered workers

• Increase in long term unemployed, older, younger workers

• Targeted measures (on specific target groups)

WHY TO INVEST INTO PEOPLE? • Fast activation of workers in need reduces social and economic

costs for the society

• Ageing of populations cross Europe

• Productivity of individual is a function of investment into HC

• Skills if not used, are obsolete for young as well for older workers

• No crowding-out between generations-a need to avoid early retirement schemes

• Corporate social responsibility increases competitiveness (motivation, higher productivity effects)

NECESSARY INVESTMENTS into:

Life-long learning

Workability Competent and

Health and safety at work skiled workforce

Work enviroment

FOCUS ON SOCIALLY RESPONSIBLE RESTRUCTURING

• ALMP activation still in restructuring phase (before entering open unemployment)

• Introduction of life-long career guidance for all

• Tailor-made ALPM, increase in number of counsellors

• Intensive focus on public works expension

• Intensive investments into skills upgrading!

• Stronger connections between labour market institutions, economy and educational institutions

• Stress on activation of individuals (to remain closer to the labour market)

• Need for sustainable economic consolidation ( no economic growth with negative long-term social consequences)

FOCUS ON SOCIALLY RESPONSIBLE RESTRUCTURING (1)

Comprehensive structural changes needed: LM policy reforms

Redesigned welfare system

Friendly business environment

Investments’ attractive fiscal policy

Industrial policy

• LM policy reforms

• First internal, than external flexibility measures

• Support to SMEs to invest into training of employees

• PES modernisation (career guidance)

• Targeting low skilled, long-term unemployed ones

PRIVATISATION AND LABOUR MARKET IN SLOVENIA

• A need to establish a balance between security and flexibility to cope diverse economic cycles

• A need of supportive business environment (labour taxation, less rigidities, less labour costs) + one stop shop

• Product market regulation too restrictive (state involvement)

• Labour costs adjustment (minimum wage vs average wage!)

• A need of future oriented management (why to privatise?)

• A strong insight into labour force supply and real economy needs

New capital by more intensive FDIs needed:

Boosting innovation

Higher job creation

R&D and transfer of know-how

GDP TRENDS IN SLOVENIA (%) 2003-2014

Source: EUROSTAT

-10,0

-8,0

-6,0

-4,0

-2,0

0,0

2,0

4,0

6,0

8,0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GDP growth (annual data)

GDP growth (annual data)

EMPLOYMENT TRENDS IN % (2003-2014) Source: EUROSTAT

64,0

65,0

66,0

67,0

68,0

69,0

70,0

71,0

72,0

73,0

74,0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Employment rate (20-64)

Employment rate(20-64)

REGULATION OF THE SLOVENE LABOUR MARKET

Legislation

1. Changes in Labour Market Act (2013)

• Simplification of procedures for concluding employment contracts

• Increasing the flexibility on the labour market (internal flexibility)

• Reduction of labour costs for permanent contracts

• Reduction of employment contracts’ abuse (fixed term, agency work…) and duality in the LM

• Higher internal mobility options (according to the working process)

• Better reconciliation of private and professional life

• Higher level of protection as regards discrimination and mobbing

• Extension of rights for suspension of the labour contract

• Changes in dismissal rules

• Introduction of employment offer with another employer

• Shortening the notice period period

REGULATION OF THE SLOVENE LABOUR MARKET (1)

2. Changes in Act on Labour Market Regulation (2013)

• Provision of adequate safety net and more flexible labour market

• More focus on flexicurity principle (EPL index changes)

• Elimination of administrative barriers to employment

• Expansion of unemployment benefits for young people (under 30 years) but

• Decreasing generosity of unemployment benefits after 12 months (80 % during first 3 months, 60 next 9 months, later 50 % of the basis)

• Decrease in segmentation

• Better access and activation of all relevant target groups

• Possibility of registration at PES while still in employment

• No obligatory information on available vacancies needed any more (at PES)

REGULATION OF THE SLOVENE LABOUR MARKET(2)

3. Two crisis Acts (temporary Acts)

Act on Partial Subsidising Full-Time Jobs (2009-2010)

• Mentioned for companies with reduced business by 30 % at least

• Enabled companies to reduce working hours (32 or 36 hrs/week)

• Companies received a subsidy per worker

• No rewards to management allowed

• No overtime work allowed, paid all SSC

Evaluation showed:

• A need of prior criteria for subsidy eligibility!!

• A decrease in business activity can be a result of :

1. Not adequate management

2. Indebtedness, lack of investments

3. …

The Partial Reimboursement of Compensation Pay Act (2009-2010)

• Enabled companies to assign workers to temporary waiting for work

• Workers received 85 % of normal (gros) salary while not working (the government contributed 50 %, employer 35 %)

• Max 6 months time in 12 months of waiting time

• At least 20 % of waiting time had to be dedicated to training (ESF)

• Both Acts managed through PES

Evaluation showed:

• Training should be external and results independently assessed

• Support at identification of competences needed

• Future: A special Fund for restructuring needed?

REGULATION OF THE SLOVENE LABOUR MARKET(3)

INNOVATIVE MEASURES FOR HIGHER EMPLOYABILITY Workers are attracted to more practical work experienced measures

instead of formal training

Public works proved to be efficient bridge to permanent work

Work trial better accepted than formal training

On the work trial:

• Programme shows high attractiveness and motivation by participants

• Adapted to vulnerable economic situation

• In 2009/2010 showed 72 % exit into employment

• Most participants enters employment immediately after work-trial

Self-employment:

• Survival rate in 2 years span 85 % ( in 5 yrs 52 %)

• Supported by conselling and information (upgrade of the programme to choose the right candidates)

INNOVATIVE MEASURES FOR HIGHER EMPLOYABILITY (1)

• Changes to apprenticeships schemes (candidates for graduation)

• Subsidies

• Job search assistance (Workshops, fairs…)

• Start.up incentives ( training and counselling)

• Training programmes for unemployed

• Mentoring schemes and job rotation

• “Investment in people” project (increase in competitiveness)

• Promotion of employment for LTU (vulnerable groups!)

• Life-long career orientation programme

• On-the job training programmes (up-skilling)

• Employer subsidies for temporary laid-off employers (temporary)

• Reduction of labour costs for certain vulnerable groups/new hires

CHANGES OF DURATION/GENEROUSITY OF BENEFITS

INNOVATIVE MEASURES FOR HIGHER EMPLOYABILITY(2)

• White jobs ( ageing of population and long-term care)

• Green jobs (perspective sectors)

• Renewed public works ( obligatory training, local approach)

• Social entrepreneurship! (Act on social entrepreneurship)

Labour market oriented measures:

• self-employment ( not dependent- self-employment!)

• Job creation/ subsidies (but evaluated!)

• Focus on target groups ( older, low skilled, young…)

• Training of employed for higher productivity/competitiveness

• Counseling- most effective still during employment and job search

• Linking industrial policy/priority sectors to develop and employment and educational needs

• Good cooperation with employers and feedback to labour market demands

EU CONTEXT Slovenia has a strong support as regards:

• Exchange of good practices

• Stronger monitoring of labour market outcomes (neutral)

• Evaluation of economic policy impacts on social and employment situation

Country specific recommendations (CSR) focused on:

• Increased flexicurity (changes in legislation)

• Higher efficiency of PES and further labour market reforms requirements, especially

• EPL adjustments to cope the restructuring and economic crisis more efficiently (faster transitions, avoiding LTU)

• Reduced segmentation (precarious jobs appeared in time)

INTERACTIONS

Employment -purchasing power-increase in production-economic growth

LESSONS TO LEARN

• Due to ageing of the population, early retirement schemes should be avoided

• Focus on fast and individualized ALMP to decrease social and economic costs (trade-offs visible)

• All restructuring measures should be temporary and evaluated

• Need to link rights and responsibilities of individuals

• If the economic situation does not allow job creation, invest into skills and competences of working force

• Subsidies should be carefully chosen (dead-weight effect)

• Labour market institutions can influence the labour market adaptation process, but

• EPL changes do not tell about quality of jobs

• Synchronization of economy, labour market and educational policies are very important

• Bad decision in past caused low employment rate of elderly and increase in mismatches and replacement rates