Primary source of financing by the end of this year are EU funds
The Government is currently working on a scenario for the next budget year and accordingly we are preparing redesigned support measures that should take effect early next year, Josip Aladrović, Minister of Labour, Pension System, Family and Social Policy, told Diplomacy & Commerce. He adds that the Government of the Republic of Croatia will not leave employers and their workers to struggle with the consequences of the pandemic on their own, but will do everything in their power to protect them. The Government is placing special focus on the young people.
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The crisis caused by the COVID 19 pandemic is in its full capacity and seems to be at its peak. This has been going on for months, which has somewhat emptied the state treasury. How many opportunities and capacities does the Government of the Republic of Croatia have to continue to support those who need it, and how much will we have to look for some new models of action in that direction?
Measures to preserve jobs and the workers are our primary focus in the coming period, and EU funds will be the primary source of funding until the end of this year. We redirected funds from the existing financial perspective in order to get the most out of them and, as much as possible, preserve the Croatian economy, which was on an upward trajectory before the crisis. In the future period, we can count on HRK 7.5 billion from the SURE program, as well as funds from the EU React program, the Recovery Fund and the next financial perspective. We are counting on these funds to start arriving at the end of the year.
Let me remind you that right at the beginning of the crisis, in just two weeks in March, we paid out aid to more than half a million workers, while in April that number rose to almost 600,000 workers and 100,000 employers. It is the largest for the economy with public funds in the history of the state. Everyone who needed help eventually got it, and this will continue in the future. By continuing to apply measures to preserve jobs and the measure of support for the reduction of working hours, we want to protect workers and the labour market, and provide support to entrepreneurs who suffer from the crisis to plan their business operations easier. The measures are concrete and, as far as possible, provide some form of security, stability and predictability.
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The Government announced new redesigned support measures. What do they mean and for whom are they intended? There are several spheres of industry and catering and branches of the economy that should be covered by this?
Globally, the economy is trying to return to “normal” in a way, but some sectors will face consequences for many years to come – the travel sector, catering, sporting events and the entertainment industry. The Government is currently working on a scenario for the next budget year and we are preparing redesigned support measures accordingly, which should take effect early next year. What I can promise is that we will not leave employers and their workers to fight the consequences of the pandemic on their own, but we will do everything in our power to protect them. We are especially focusing on young people, who have yet to enter the labour market and who need to be provided with a future and perspective, because investments in human and intellectual capital of the society will be key to creating a better and fairer economy. In this context, we certainly plan to continue to maintain fiscal relief for young people employed for an indefinite period. It is a successful measure that has already been used by 140,000 young people, and with which we help them ensure job security so that they can plan their careers in the long run and achieve their life goals. We will also continue with the internship measure, which will incite permanent employment of inexperienced young people. Since the implementation of these two measures has started, youth unemployment has halved in just a few years, from 24.6 percent in 2016 to 13.2 percent in 2019, which is why we are continuing in that direction.
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How much will they change and by when can those to whom the measures are addressed expect them? The crisis may last.
A certain dose of uncertainty is still present and the crisis will not go away overnight. We in the Government are aware that things will never be the same as before the Corona – the sooner people accept it, the sooner they will be able to adapt to new circumstances. I want to emphasize that it is not just about the measures that need to be created for people, but it is up to the people themselves to make certain changes, primarily in their mindset. Here I am primarily referring to flexibility, and I do not mean regulatory flexibility, which is a separate topic, but our personal readiness to go beyond our established frameworks and expectations when looking for a job in a situation where every job is important. It is a common practice throughout Europe for people to travel daily to work, which is often in another city, which is a rare occurrence in our country. A person living in Pula should be ready to move to Zagreb or Split for a good business opportunity, or to travel from Varaždin to Zagreb every day for work.
The measures that we will present at the end of the year are primarily aimed at the sectors most affected by the crisis. I will repeat, our focus is on young people who are facing a very gloomy employment perspective in the next few years due to the economic recovery and who are looking for their first job, but also workers whose jobs will be digitized and who will need to be retrained. Also, with the new measures we introduce, we will try to facilitate access to the labour market for all creative people who we want to encourage to create added value independently and who we want to stimulate to introduce much-needed changes in our economy.
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Another topic of interested parties in the previous period were the amendments to the Labour Law. Your position and the Government’s position is that the number of fixed-term contracts should be reduced, but also that the termination of contracts for an indefinite period should be made more flexible. How far have you come in negotiations with the interested parties and when can the adoption of the mentioned changes be expected?
Negotiations are in progress, and we expect specific proposals for changes soon. Regardless of the pandemic, the fact remains that six full years have passed since the reaching of the applying Law, and in that period, circumstances on the labour market have changed drastically. Our goal is to use the new law to set a real and quality framework to incite entrepreneurial activities and reduce administrative burden on labour, with maximum protection of workers’ and entrepreneurs’ rights. As part of this, we want to increase the share of employees employed for an indefinite period, in order to provide workers with greater financial stability and the possibility of better planning of household budgets and financial obligations. Croatia is at the top in Europe in terms of the share of fixed-term contracts in relation to permanent contracts, which is a problem because this additionally contributes to instability of the economy. This is a consequence of certain shortcomings of indefinite employment contracts for employers who employ, especially in the part of defining the probationary period and dismissal, which is why some of them resort to fixed-term employment. This then puts workers in a position where they cannot exercise part of the rights enjoyed by workers with indefinite contracts, for example it is more difficult for them to get a bank loan. Therefore, the intention of the new Labour Law is to reduce the number of workers exposed to excessive conclusion of consecutive and short-term employment contracts and increase the number of workers with indefinite employment contracts, which should be more flexible and which must serve as a guarantee of excellence of the worker on a job he performs for the employer. There we have misconceptions of some unions claiming that flexibilization will lead to a new wave of economic exodus to Ireland, Germany and other countries. This is not true, as evidenced by the example of Ireland, which has the most flexible labour legislation of all European countries, and where a large number of our workers are located. Contract flexibility is not a crucial factor in worker satisfaction, but there are a number of other factors such as wages, general wellness of society, the quality of the education system that influence the decision on economic migration.
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Negotiations on minimum wage with the Trade Unions are in progress. Have the positions approached and what outcome can we expect? In that context, what will be the dynamics of wage increase next year?
One of the goals of the Ministry of Labour was to protect the level of wages in the entire economy during this crisis, and I think we have succeeded in that and we plan to continue to do so in the future. It is in this context that the Government has decided to increase the minimum wage in 2021 by HRK 150, or by 4.6 percent, and it will amount to HRK 3,400 net. The unions are aware of the general economic situation and understand that this is an increase that is realistic given the moment.
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The budget revision is also expected, after which the payment of Christmas bonuses has been announced. What amount are we talking about and who can expect these bonuses?
Christmas bonuses and the increase of base by four percent as of New Year will be paid as agreed, to 250,000 employees in state and public services.
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The topic that divided the public was the regulation of work on Sundays. What is the position of the Government of the Republic of Croatia in this regard?
We are negotiating with the social partners on all open issues concerning the labour market and we are pleased to have launched a quality dialogue, and work on Sundays is one of the topics on which we have yet to reach a consensus. The Government’s position is that it is necessary to find a quality balance between working and non-working Sundays, while respecting the rights of workers to their weekly rest but also the needs of certain sectors of the economy such as tourism and trade.
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The year 2020 is specific for many things, but we hope that 2021 will be more “normal”. What are the plans and priorities of the Ministry in 2021?
With all the mentioned plans such as helping the economy through possible continuation of measures to preserve labour measures and active employment policy measures, given the political and economic context in which we find ourselves, despite the weaknesses and vulnerabilities of parts of our economy, we have preserved economic activity and a preserved labour market. Looking ahead, we see a better tomorrow, because every crisis brings certain opportunities. The first is certainly funding from the European Union under the Recovery Plan in the amount of nine billion euros, which opens up great opportunities for small, open and agile economies. The amount is primarily intended for the new European Green Agreement and development programs for the ICT sector, which is profiling itself as one of the most propulsive sectors in the country. At the operational level, it is crucial to direct European funds to sectors that create great added value and to a greater extent to the private sector. Almost at the same time, great opportunities are opening up for us in the new multi-annual financial framework, especially in the segments of education, employment, social inclusion and incentives for young people. Also, at the Government level, we intend to relax the regulatory framework in order for assets of pension funds to become more active on the market, in terms of a more long-term financial monitoring of sustainable projects aimed at development of the entire economy. This means that we are entering a new phase of cooperation between the state and pensioners, which should aim to empower small and medium enterprises, especially the already rather well-developed start-up scene, but also to enter joint stock companies, and why not also to finance transport infrastructure.
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What are you most proud of what you have done so far at the head of the ministry, and which segment of activity is the most demanding for you?
Estimates warn that this is the biggest crisis in the past 100 years, because of which all those who have a task to create policies for a new and better society bear special responsibility on their backs. This is in itself demanding, especially when the scope of action includes the preservation of jobs, pensions and care for more than 26,000 users of the social system, who represent the most vulnerable groups in our society and who need special protection.
I am proud of the very fact that such a large system is functioning in the time of COVID-19 epidemics, and I am particularly proud of every job we managed to preserve and the fact that we did avoid a shock at the labour market after all. Every crisis is also an opportunity, an opportunity for the non-agile to be more agile, for those out-dated to become up-to-date, for less flexible to become more flexible and for the slow to become faster. How Croatia will use this opportunity depends on all of us. The human, intellectual and technological capital we possess is promising, but we must raise its efficiency to the highest possible level in order to use all our potentials.