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

LM and Slovenia in the EU The transition – undo of the previous revolution The transition – undo of the previous revolution Why to talk about the reforms after so big changes so quickly? The main paradox for many 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 “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 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) The legislation has been late with mild changes only or absent (the collective bargaining law) No respect for modern labour economics at all No respect for modern labour economics at all

LM and Slovenia in the EU, cont. Some characteristics of the LM in Slovenia in the last decade: 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

LM and Slovenia in the EU, cont. Widespread illussion: social partners can guarantee welfare, peace and harmony Widespread illussion: social partners can guarantee welfare, peace and harmony The reality: the buying of social peace on the account of the future generations 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 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 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 Right direction but partial and insufficient measures

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

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 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 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 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 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. Policy types: Anglo-Saxon, Scandinavian, South European, Mixed, etc.

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 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 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 reforms should focus on LM regulation, active and passive LMP and Δ welfare state The use of serious research work The use of serious research work

IZA proposals for Germany 7 main proposals (divided in 30 detailed measures): 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

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

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

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

Conclusion Without LM reforms the goals of Lisbon strategy are out of reach 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 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 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 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 LM reform postponement would bitter the medicine and increase its intake