Young people in the Labour
Market – Slovenia in the EU
Perspective
Milan Vodopivec
(with Suzana Laporšek)
Prepared for the Conference “Managing
Macroeconomic Imbalances,” Ljubljana, June
2012
How to explain comparatively low youth
unemployment in Slovenia?
A puzzle:
Despite rigid employment protection
legislation (EPL), high minimum wages, and
generous unemployment benefits, Slovenian
youth unemployment rate (15-24) is
significantly below the European one.
How to explain comparatively low youth
unemployment in Slovenia?
The mystery solved:
– The transition increased the “net worth” of
the young (the difference between the increase
in relative productivity and relative wages)
– A tax loophole in labor regulation, coupled
with free education, artificially raises
demand for youth. (One implication: artificially
large higher education enrollment rate.)
– Conducive demographics
1. Comparison of youth LM statistics
• Compared to EU countries, Slovenia’s youth
labor market (15-24 olds) is distinguished by
• low youth unemployment rates,
• high activity rates.
• But there is a caveat: not-so-good statistics
for 25-29 year olds!
Comparison of youth unemployment
rates, 15-24 years, 2011 (%)
Slovenia is among six EU Member States with the lowest unemployment
rate of young people in the age group 15-24 years.
Average
Comparison of youth unemployment
rates, 15-24 years, 2001- 2011 (%)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
Activity rate of youth, 15-24 years, 20012011 (%)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
A caveat:
Comparison of youth unemployment rates, 2529 years, 2011 (%)
Average
Comparison of youth unemployment
rates, 25-29 years, 2001- 2011 (%)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
2. “Despite” factors
The most commonly cited barriers for youth
unemployment are all present in Slovenia:
– employment protection legislation,
– minimum wages, and
– unemployment benefits
Employment protection legislation (EPL)
index, late 2000s
• Slovenia is still characterized with rather rigid employment protection
legislation compared to the rest of the EU countries.
• Especially high protection is observed in the field of regular employment.
average
Note: EPL index is calculated according to the OECD Version 3 methodology. Its value ranges from 0 (flexible employment legislation) to 6 (rigid
employment legislation).
Comparison of minimum wage to average
wage ratios, Slovenia and EU (2010)
Comparison of minimum wage to average
wage ratios , Slovenia and EU (2000 - 2010)
Note: The EU average includes only those EU countries that have statutory minimum wage.
Net replacement rate of unemployment
benefits (1999-2009)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
Unemployment survival probability by
age groups, Slovenia, 2011
3. Factors responsible for low
youth unemployment
– Increased “net worth” of the young (the
difference between the increase in relative
productivity and relative wages)
– A tax loophole in labor regulation, coupled
with free education
High proportion of temporary and parttime work among young people
– Conducive demographics
1.9
1.9
1.8
1.8
1.7
1.7
1.6
1.6
Productivity Differential
Wage Differential
Differences in Relative Wages and
Productivity by Age, 1992-2001
1.5
1.4
1.3
1.2
1.1
1
0.9
1.5
1.4
1.3
1.2
1.1
1
0.9
0.8
0.8
1992
1993 1994 1995
Age 30-39
1996 1997
1998 1999 2000 2001
Age 40-49
Age 50+
1992 1993 1994 1995 1996
Age 30-39
1997 1998 1999 2000 2001
Age 40-49
Age 50+
Omitted group: Individuals less than 30 years old.
Matija Vodopivec, “Equal Pay for Equal Work? Wage and Productivity Differentials
during Slovenia’s Transition.” Forthcoming in Eastern European Economics.
4
4
3.5
3.5
3
3
Productivity Differential
Wage Differential
Differences in Relative Wages and
Productivity by Education, 1992-2001
2.5
2
1.5
1
2.5
2
vq
1.5
1
0.5
0.5
1992
1993
1994 1995
1996 1997
Completed elementary school
High school
4-year college
1998
1999 2000 2001
Vocational school
2-year college
1992
1993
1994
1995
1996
Completed elementary school
High school
4-year college
1997
1998
1999 2000 2001
Vocational school
2-year college
Omitted group: Individuals with uncompleted elementary school.
Matija Vodopivec, “Equal Pay for Equal Work? Wage and Productivity Differentials
during Slovenia’s Transition.” Forthcoming in Eastern European Economics.
Part-time employment as % of total employment,
15-24 years, Slovenia and EU (2001- 2011)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
Temporary employment as % of total employment,
15-24 years, Slovenia and EU (2001- 2011)
Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.
Record high higher education enrollment
rate (20-24 olds), 2009
Average
Favorable demographics
• Outflow from schooling to the labor market
was reduced from 26, 000 in 1995 to below
24,000 in 2010
4. Concluding remarks
• Idiosyncratic factors at work that explain low
youth (15-24) unemployment rate
• Reducing labor market segmentation remains
a priority
• Minimum wage should be kept at a
reasonable level
• Tax-exemption for students should be
abolished (as well as tuition-free higher
education)