Directorate-General for Employment, Social Affairs and Inclusion 2017 Country Report for Slovenia – Key findings concerning Labour Market and Social Developments Ljubljana, 10 March 2017 Michel Servoz Directorate-General for Employment, Social Affairs and Inclusion

Positive labour market trends continued in 2016… Overall More people entered into the labour force than exit. Activity and employment rates increased, while unemployment rate decreased further Situation of young people improved LTU is still well above pre-crisis levels Structural challenges How to keep older workers in employment for longer. How to get the long-term unemployed back into work. Key message: The economic recovery has been accompanied by job-creation and labour market conditions improved quite substantially. Note that employment rate at The increase in employment and the decrease in unemployment seen in 2015 continued in 2016. More people have entered employment than exited, and the unemployment rate has decreased (purple line). Young people that have been disproportionally affected by the crisis (Red line). Youth unemployment reached the peak in 2013; but young people were also the ones whose employment prospects improved the most with the economic recovery. However, shortages of labour can be expected in the future. However, there are some structural challenges that remain and were already identified in the recommendations to Slovenia in the last 2 years. These are the persistently high levels of long-term unemployment and low participation rates of older and low skilled workers. Source: European Commission

But (1) activity rates of older workers remain low, Activity rate of older workers continues to be among the lowest in the EU Only 18 % of those aged 55-59 who were employed in 2009 were still employed when aged 60-64 in 2014. Retention rate of older workers is the lowest among all OECD countries. Reasons: Employers' perception/ lack of flexibility Higher unemployment benefits for older workers Lower skills Potentially positive outlook Demand for older workers is expected to increase as labour shortages are expected. Key message: The activity rate of older workers is among the lowest in the EU as it is shown on the graph. Although their activity rate is increasing - presented by the blue line - the distance to EU average which is demonstrated with grey colour is large. The gap for low-skilled, which is not shown, is a bit smaller. In this context, further efforts are needed to enable people to stay longer in the labour market, Older workers face many obstacles in staying active on the labour market Employers' perceptions play an important role. Employers doubt the capabilities of older workers and see them as more expensive and less flexible workers. Older workers may often not be attractive to employers due to their lower skills and the high seniority bonuses in Slovenia. Older workers are approximately 15 % more expensive for employers than other workers. (In addition to the basic salary, employers often have to pay more for them due to the seniority component of the salary system. In the private sector this commonly represents 0.5 % of the salary for each working year (although it may be agreed to be lower in collective agreements). Entering retirement via the unemployment insurance system has become increasingly common in recent years, with large spikes coinciding with anticipated pension reforms. Today, around 30 % of old-age pension recipients enter retirement via this route. The unemployment insurance system allows people to retire as much as four years and one month earlier. In Slovenia, the duration of unemployment benefits increases sharply with work experience and age. For workers over 55 years, with an insurance period of 25 years, the duration of unemployment benefit is set to 25 months as soon as nine months of contributions were made in the past 24 months. After this period unemployed older workers can receive pension and disability contributions for up to 2 years prior to fulfilling retirement conditions. This period will be reduced to 1 year as of March 2018. Seasonal employment can be sufficient for older workers to re-establish benefit eligibility, and thus incentives to seek permanent employment are weakened. I do acknowledge that Slovenia actively seeks to encourage employment of older workers, with in the past measures reducing temporarily labour costs. In December 2016, the government adopted a policy paper and an action plan. The policy paper 'Older Workers and the Labour Market in Slovenia' forms a basis for discussion with social partners and may, to some extent, address the challenges of demographic trends. (Changes were made to the protection of workers prior to retirement if their contract is terminated, to severance grants upon retirement, to the seniority component (dodatek na delovno dobo) of the salary, and the level, duration and conditions of unemployment benefits and social insurance contributions). In view of the rising labour demand and labour becoming increasingly scarce, there is an opportunity to increase the labour market participation of older workers. This is also relevant in the context of the current discussion on the future pension reform. [Defensive] Why is the Commission's assessment of the implementation CSR for Older Workers only "limited"? Only 18 % of those aged 55-59 who were employed in 2009 were still employed when aged 60-64 in 2014. In December 2016 the government adopted a policy paper 'Older Workers and the Labour Market in Slovenia' together with an action plan. The policy paper forms a basis for discussion with social partners and may, to some extent, address the challenges of demographic trends. Implementation of the plan is a key to improve activation of older workers. Up now (date of the publication of Country Report), this remains only a plan. No changes in legal acts or similar actions have been taken. Source: European Commission

and (2) Low-skilled face higher risks of unemployment Skills and Education Slovenian education system performs well overall PIAAC survey shows that skills of 55-64 year-olds are comparatively low (compared to the OECD average and to young Slovenians). Long term Unemployment: More than 40 % unemployed are older than 50 nearly half have been unemployed for 2+ years (37.1 months on average) Upskilling, reskilling, lifelong learning and better targeted ALMP measures could improve employability The Slovenian education system performs well overall; Slovenia has already surpassed the Europe 2020 targets in education. Young people do not drop out of school early and more than 40% get a higher education diploma. However, some inefficiencies in higher education exist. whereas Adult skills are more problematic, especially for Older and low-skilled workers. Participation in lifelong learning in 2015 was high compared to other EU countries (11.9 % vs 10.7 % in the EU). However, it remains low among older workers and the low-skilled. Variations in adult skill levels are large with the lowest proficiency among the older people. The OECD Survey of Adult Skills (PIAAC) showed that about one in four Slovenes aged between 16 and 65 has poor literacy and numeracy skills The skills of 55-64 year-olds are low both compared to the OECD average and to young Slovenians, creating one of the widest gaps across OECD countries. Also as a result of inadequate skills, these groups face higher risks of unemployment (which can become LTU). Therefore, upskilling, reskilling and lifelong learning policies could improve their labour market participation. Another lever could be better targeted active labour market policy (ALMP) measures, as older and low-skilled workers continue to be underrepresented in these measures. (In 2015 the structure of ALMPs participants was as follows: 41.2 % young people, 47.6 % long-term unemployed, 17 % lower educated people and only 13.9 % older workers (50+) - Some groups may overlap). Source: European Commission

Social conditions have stabilised, but Elderly are at highest risk of poverty Overall Social conditions have slightly improved since 2013 but the elderly have the highest risk of poverty or social exclusion in Slovenia also due to the low employment rate of older workers. % Risk of poverty and social exclusion Social conditions stabilised in 2014 and improved since. The social protection system performs its function relatively well. Elderly face the highest risk of poverty. Inequality in Slovenia is low compared to other EU member states. This is partially the case because the Slovenian social protection system performs rather well. Overall, the rate of people at risk of poverty and social exclusion (AROPE) decreased but remains above the EU average for elderly. AROPE rate decreased to 19.2 % in 2015, while the rate for older people (65 and above) was 20.2 % (EU average: 23.7 % and 17.4 %, respectively). The poverty gap for this age group remained high and stood at 18.1 % (EU average: 16.5%). The rate is particularly high for older women over 65 years. The elderly have the highest risk of poverty and the rate in this age group is among the highest in the EU (above the EU average before and after social transfers (including pensions), which is also due to the low employment rate of older workers, An ageing population, the low employment rate of older workers and issues with adequate pensions are expected to put additional pressure on the income of elderly in the future. On the other hand, Slovenia has one of the lowest levels of income inequality in the EU. The February 2017 (entry into force) amendment of the Social Assistance Benefits Act of 2010 will have a positive impact on the old-age income, however for a limited proportion of elderly population. Source: European Commission

Hvala! Conclusion To sum up, the situation on the labour market and social conditions are improving thanks to the reform effort Slovenia has been undertaking for several years now. But this trend can only be maintained if the reform effort continues. Thank you for your attention