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The following OECD assessment and recommendations summarise chapter 3 of the Economic Survey of Slovenia published on 1 July 2009.
Labour force participation should be increased while reducing labour market dualism
The labour market situation has improved markedly over the past years, with the unemployment rate falling below its estimated natural rate and the employment rate rising to a level above the OECD average before the financial crisis hit Slovenia. The improvement in the labour market is partly owed to the recent buoyant growth but also to important structural reforms: reductions in the labour tax wedge, a tightening of the eligibility for unemployment benefits and the introduction of active labour market programmes. Nevertheless, several challenges remain which require further reform efforts.
The unemployment rate has fallen below its natural rate, the NAIRU1
1. Non-accelerating inflation rate of unemployment.
The authorities should refrain from taking counter-cyclical measures during the crisis that have a long-lasting negative impact on labour market functioning. As mentioned previously, subsidising shorter working weeks should not continue beyond the crisis. Also, the ratio of the minimum wage to the average wage is still high by international comparison and should not increase and, preferably, be reduced further.
The labour force participation rate of the elderly is still very low by international comparison, despite some recent improvements. To raise participation rates, the pension system needs to be reformed further by increasing the retirement age, removing incentives for early retirement and facilitating gradual exits from the labour force. To ensure that those who wish to work longer also find appropriate jobs, a continuous upgrading of skills is essential and an evaluation of adult education programmes should be conducted.
Employment rates of the young and the old are below the OECD average
Difference from OECD average, per cent, 2007
Source: Eurostat database (2009), Labour Force Survey, May.
To increase employment rates of the younger age cohorts, the length of tertiary studies needs to be reduced by strengthening incentives for rapid graduation. Important steps in this direction could include making the eligibility for student benefits contingent on an annual minimum study progress or introducing tuition fees together with student loans with repayments contingent on earnings after graduation.
Hiring and firing costs should be eased for regular work contracts to ensure that workers do not get trapped in temporary forms of employment and hence avoid increasing labour market dualism. This should be done once the economy recovers as easing employment protection during the crisis is not an appropriate option.
How to obtain this publication
The complete edition of the Economic Survey of Slovenia is available from:
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations. (It can also be downloaded in Slovene, see link below, but does not contain all the charts available in the English version.)
Policy Brief v slovenščini je dostopen tudi v PDF formatu. Povzema oceno in priporočila OECD, ne zajema pa vseh grafov z zgornjih spletnih strani.
For further information please contact the Slovenia Desk at the OECD Economics Department at email@example.com.
The OECD Secretariat's report was prepared by Margit Molnar and Colin Forthun under the supervision of Pierre Beynet. Research assistance was provided by Desney Erb.