Labour markets, human capital and inequality

Economic Survey of the Slovak Republic 2009: Raising flexibility during the catch-up phase

 

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The following OECD assessment and recommendations summarise chapter 2 of the Economic Survey of the Slovak Republic published on 9 February 2009.

 

Contents

 

Wage flexibility needs to be maintained

Wage flexibility across regions and sectors enhances the economy’s ability to adjust to cyclical shocks and promotes smooth adaptation to changes in economic structures. In 2007, the Slovak government abolished the consent of the employer as a condition for legal extension of wage settlements to firms which do not participate in collective wage bargaining. Although firms can apply for exoneration under certain conditions and the number of extensions has been low, this measure may hinder sufficient wage flexibility and may be damaging to employment. Legal extension should therefore be abolished. Alternatively, the conditions for exoneration should be eased and the authorities should make generous use of their powers to grant exoneration. Another way to safeguard wage flexibility is to ensure that the minimum wage is not set too high relative to the median wage. Although minimum wages in the Slovak Republic    which are set by agreement among the social partners    are still low by international standards and a high share of employees has earnings below the average wage, they have tended to increase relative to median wages. Further increases in the minimum wage should be implemented only insofar as they do not have negative impacts on employment opportunities. Moreover, decisions on the minimum wage level should take into account advice from an independent expert commission, as happens in several other OECD countries.

 

Minimum wage to median wage ratio

Per cent


Source: Ministry of Finance.

 

Productivity growth in services needs to be raised

The level of labour productivity is well below the euro area average in most service sectors, suggesting a large catch-up potential, but productivity growth has been rather limited or even negative in recent years. Despite notable progress in making the regulatory framework more competition-friendly, further action is needed in this area to raise growth and facilitate adjustment to shocks. The government has acknowledged the need for further reforms and has made improving the regulatory framework and the entrepreneurial environment a priority in its Modernization Programme Slovakia 21. To strengthen competition in the liberal professions, entry conditions should be eased and conduct regulation should be liberalised, but required standards of professional qualification should be maintained. In addition, the government should extend the points of single contact that exist for other small enterprises also to entrepreneurs of the liberal professions. Furthermore, a wider use of ICT could lead to important productivity gains. Removing obstacles to the spread of e-business and swiftly implementing e-government services would have high returns. Such moves would also have important spill-over effects on other sectors by improving the quality and cost effectiveness of public services.

 

Percentage of enterprises' total turnover from e-commerce, 2003-07
As a percentage of total enterprise ¹ turnover

 


1. All, without financial sector (10 employed persons or more).
2. 2006 for Austria, France and Iceland.
Source: Eurostat

 

How to obtain this publication

 

The complete edition of the Economic Survey of the Slovak Republic 2009 is available from:

The Policy Brief (pdf format) can be downloaded in English or in Slovak language. It contains the OECD assessment and recommendations.

 

Additional information

For further information please contact the Slovak Republic Desk at the OECD Economics Department at eco.survey@oecd.org.

The OECD Secretariat's report was prepared by Felix Hüfner and Isabell Koske under the supervision of Andreas Wörgötter. Research assistance was provided by Béatrice Guerard.

 

 

 

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