IntroductionIntroduction

• Labour marketLabour market (LM) (LM) reforms – the pillar of reforms – the pillar of economic reforms (in EU and elsewhere)economic reforms (in EU and elsewhere)

• Renowned economists: The manifest on Renowned economists: The manifest on unemployment; Reforms – Now! Courage to unemployment; Reforms – Now! Courage to Reform!Reform!

• UnemploymentUnemployment (U) (U) in EU in EU and USA since the and USA since the 1980s and how to explain the differences1980s and how to explain the differences

• Do Americans prefer work and Europeans Do Americans prefer work and Europeans leisureleisure

• The answer is in incentives for work. These are The answer is in incentives for work. These are lower in EU – higher taxes, income lower in EU – higher taxes, income redistribution and generous welfare state which redistribution and generous welfare state which spoils people and artificially increase their spoils people and artificially increase their expectationsexpectations

LM and Slovenia in the EULM and Slovenia in the EU

• The transition – undo of the previous revolutionThe transition – undo of the previous revolution

• Why to talk about the reforms after so big Why to talk about the reforms after so big changes so quickly? The main paradox for manychanges so quickly? The main paradox for many

• ““Youngsters” with some not very much Youngsters” with some not very much appreciated knowledge of the economics and appreciated knowledge of the economics and their apology for reformstheir apology for reforms

• The response of the politicians: from a The response of the politicians: from a negligence to the hesitationnegligence to the hesitation

• The legislation has been late with mild changes The legislation has been late with mild changes only or absent (the collective bargaining law)only or absent (the collective bargaining law)

• No respect for modern labour economics at allNo respect for modern labour economics at all

LM and Slovenia in the EU, cont.LM and Slovenia in the EU, cont.

• Some characteristics of the LM in Slovenia Some characteristics of the LM in Slovenia in the last decade: in the last decade: – The normalization of the unemploymentThe normalization of the unemployment– A large difference between registered and ILO A large difference between registered and ILO

unemployment – declining recentlyunemployment – declining recently– Grey economy/LMGrey economy/LM– Early retirement and buying of social peaceEarly retirement and buying of social peace– Low employment of the elderlyLow employment of the elderly– The chaotic LM of the young and the transition The chaotic LM of the young and the transition

from school to workfrom school to work– Student work and unemployment of the Student work and unemployment of the

graduatesgraduates– Increasing number of foreign workersIncreasing number of foreign workers

LM and Slovenia in the EU, cont.LM and Slovenia in the EU, cont.

• Widespread illussion: social partners can Widespread illussion: social partners can guarantee welfare, peace and harmonyguarantee welfare, peace and harmony

• The reality: the buying of social peace on The reality: the buying of social peace on the account of the future generationsthe account of the future generations

• In the society which had been self-managed In the society which had been self-managed for decades almost no one has noticed that for decades almost no one has noticed that major trends in modern developed world are major trends in modern developed world are differentdifferent

• The reform committee: 3 LM measures: to The reform committee: 3 LM measures: to activate unemployed; to activate unemployed; to ↑ efficiency of the active ↑ efficiency of the active LMP; to ↑ LM flexibility/to facilitate employmentLMP; to ↑ LM flexibility/to facilitate employment

• Right direction but partial and insufficient measuresRight direction but partial and insufficient measures

THE LISBON STRATEGY AND THE LISBON STRATEGY AND LABOUR MARKET REFORMS LABOUR MARKET REFORMS

IN SLOVENIAIN SLOVENIA

Prof. Janez MalačičProf. Janez Malačič

Faculty of EconomicsFaculty of Economics

University of LjubljanaUniversity of Ljubljana

The LM reform paths and good The LM reform paths and good practices in EUpractices in EU• There are large differences in U in EU member There are large differences in U in EU member

states despite the overall high U levelstates despite the overall high U level

• Considerable U decline in Spain/Finland, Considerable U decline in Spain/Finland, GB/The Netherlands, Denmark/SwedenGB/The Netherlands, Denmark/Sweden

• The decline has been the result of well The decline has been the result of well designed and efficiently managed reforms of designed and efficiently managed reforms of the employment legislation and the LMPthe employment legislation and the LMP

• The reforms should The reforms should ↑ ↑ flexibility and flexibility and adaptability with lower employment adaptability with lower employment legislation protection, more efficient LMP and legislation protection, more efficient LMP and ↑↑ incentives for work incentives for work

• Policy types: Anglo-Saxon, Scandinavian, Policy types: Anglo-Saxon, Scandinavian, South European, Mixed, etc.South European, Mixed, etc.

LM reformsLM reforms

• The position of the labour economists: their The position of the labour economists: their LM reform design is far more profound and LM reform design is far more profound and wide than politicians and general public are wide than politicians and general public are able to accept and realize in the political able to accept and realize in the political processprocess

• The agreement of the economists: incentives The agreement of the economists: incentives for work are central. They speak about the for work are central. They speak about the alternatives between work and social alternatives between work and social transfers and also about compromising transfers and also about compromising between incentives and equalitybetween incentives and equality

• The reforms should focus on LM regulation, The reforms should focus on LM regulation, active and passive LMP and active and passive LMP and ΔΔ welfare state welfare state

• The use of serious research workThe use of serious research work

IZA proposals for GermanyIZA proposals for Germany

• 7 main proposals (divided in 30 detailed 7 main proposals (divided in 30 detailed measures):measures):– Removing work disincentivesRemoving work disincentives– Reforming the U insurance systemReforming the U insurance system– Reorganizing active LMPReorganizing active LMP– Towards decentralized bargaining proceduresTowards decentralized bargaining procedures– Stepping towards LM flexibilityStepping towards LM flexibility– Education as key to the LMEducation as key to the LM– Meeting demographic challengesMeeting demographic challenges

Some comments for Slovenia: Unions Some comments for Slovenia: Unions and the demographic situationand the demographic situation

• IZA proposal for unions:IZA proposal for unions:

• 1. Abolishing the general validity of wage 1. Abolishing the general validity of wage agreementsagreements

• 2. Redefining the favourability principle2. Redefining the favourability principle

• 3. Giving priority to internal company 3. Giving priority to internal company agreementsagreements

• Slovenia: IZA proposals more than neededSlovenia: IZA proposals more than needed

• Unions in the constitution and legislationUnions in the constitution and legislation

• Unions’ ministerUnions’ minister

Some comments for Slovenia: Unions Some comments for Slovenia: Unions and the demographic situationand the demographic situation

• IZA addressing demographic challenges:IZA addressing demographic challenges:

• 1. Systematic funding of social insurance1. Systematic funding of social insurance

• 2. Taking a pension reform a step further2. Taking a pension reform a step further

• 3. Raising the legal retirement age3. Raising the legal retirement age

• 4. Creating competition in health and long-4. Creating competition in health and long-term care insuranceterm care insurance

• 5. Introducing a point system for 5. Introducing a point system for immigration immigration

Some comments for Slovenia: Unions Some comments for Slovenia: Unions and the demographic situationand the demographic situation

• Slovenia: Do we have the demographic Slovenia: Do we have the demographic crysis?crysis?

• My answer is YESMy answer is YES

• The lowest-low fertilityThe lowest-low fertility

• Ageing of the population and the active Ageing of the population and the active populationpopulation

• Changing nature of modern migrationChanging nature of modern migration

• IZA proposals are more than needed. IZA proposals are more than needed. However, they are hardly sufficient However, they are hardly sufficient

ConclusionConclusion

• Without LM reforms the goals of Lisbon Without LM reforms the goals of Lisbon strategy are out of reachstrategy are out of reach

• LM reforms should manage the LM reforms should manage the interdependence of LM legislation, LMP, interdependence of LM legislation, LMP, education and training and the changes of the education and training and the changes of the welfare statewelfare state

• The LM reforms should be fine tuned with the The LM reforms should be fine tuned with the findings of modern labour economicsfindings of modern labour economics

• More research work and political and general More research work and political and general public trust in this work are neededpublic trust in this work are needed

• LM reform postponement would bitter the LM reform postponement would bitter the medicine and increase its intakemedicine and increase its intake