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Introduction

Introduction. Labour market (LM) reforms – the pillar of economic reforms (in EU and elsewhere) Renowned economists: The manifest on unemployment; Reforms – Now! Courage to Reform! Unemployment (U) in EU and USA since the 1980s and how to explain the differences

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Introduction

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  1. Introduction • Labour market (LM) reforms – the pillar of economic reforms (in EU and elsewhere) • Renowned economists: The manifest on unemployment; Reforms – Now! Courage to Reform! • Unemployment (U) in EU and USA since the 1980s and how to explain the differences • Do Americans prefer work and Europeans leisure • The answer is in incentives for work. These are lower in EU – higher taxes, income redistribution and generous welfare state which spoils people and artificially increase their expectations

  2. LM and Slovenia in the EU • The transition – undo of the previous revolution • Why to talk about the reforms after so big changes so quickly? The main paradox for many • “Youngsters” with some not very much appreciated knowledge of the economics and their apology for reforms • The response of the politicians: from a negligence to the hesitation • The legislation has been late with mild changes only or absent (the collective bargaining law) • No respect for modern labour economics at all

  3. LM and Slovenia in the EU, cont. • Some characteristics of the LM in Slovenia in the last decade: • The normalization of the unemployment • A large difference between registered and ILO unemployment – declining recently • Grey economy/LM • Early retirement and buying of social peace • Low employment of the elderly • The chaotic LM of the young and the transition from school to work • Student work and unemployment of the graduates • Increasing number of foreign workers

  4. LM and Slovenia in the EU, cont. • Widespread illussion: social partners can guarantee welfare, peace and harmony • The reality: the buying of social peace on the account of the future generations • In the society which had been self-managed for decades almost no one has noticed that major trends in modern developed world are different • The reform committee: 3 LM measures: to activate unemployed; to ↑ efficiency of the active LMP; to ↑ LM flexibility/to facilitate employment • Right direction but partial and insufficient measures

  5. THE LISBON STRATEGY AND LABOUR MARKET REFORMS IN SLOVENIA Prof. Janez Malačič Faculty of Economics University of Ljubljana

  6. The LM reform paths and good practices in EU • There are large differences in U in EU member states despite the overall high U level • Considerable U decline in Spain/Finland, GB/The Netherlands, Denmark/Sweden • The decline has been the result of well designed and efficiently managed reforms of the employment legislation and the LMP • The reforms should ↑ flexibility and adaptability with lower employment legislation protection, more efficient LMP and ↑ incentives for work • Policy types: Anglo-Saxon, Scandinavian, South European, Mixed, etc.

  7. LM reforms • The position of the labour economists: their LM reform design is far more profound and wide than politicians and general public are able to accept and realize in the political process • The agreement of the economists: incentives for work are central. They speak about the alternatives between work and social transfers and also about compromising between incentives and equality • The reforms should focus on LM regulation, active and passive LMP and Δ welfare state • The use of serious research work

  8. IZA proposals for Germany • 7 main proposals (divided in 30 detailed measures): • Removing work disincentives • Reforming the U insurance system • Reorganizing active LMP • Towards decentralized bargaining procedures • Stepping towards LM flexibility • Education as key to the LM • Meeting demographic challenges

  9. Some comments for Slovenia: Unions and the demographic situation • IZA proposal for unions: • 1. Abolishing the general validity of wage agreements • 2. Redefining the favourability principle • 3. Giving priority to internal company agreements • Slovenia: IZA proposals more than needed • Unions in the constitution and legislation • Unions’ minister

  10. Some comments for Slovenia: Unions and the demographic situation • IZA addressing demographic challenges: • 1. Systematic funding of social insurance • 2. Taking a pension reform a step further • 3. Raising the legal retirement age • 4. Creating competition in health and long-term care insurance • 5. Introducing a point system for immigration

  11. Some comments for Slovenia: Unions and the demographic situation • Slovenia: Do we have the demographic crysis? • My answer is YES • The lowest-low fertility • Ageing of the population and the active population • Changing nature of modern migration • IZA proposals are more than needed. However, they are hardly sufficient

  12. Conclusion • Without LM reforms the goals of Lisbon strategy are out of reach • LM reforms should manage the interdependence of LM legislation, LMP, education and training and the changes of the welfare state • The LM reforms should be fine tuned with the findings of modern labour economics • More research work and political and general public trust in this work are needed • LM reform postponement would bitter the medicine and increase its intake

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