1. 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

2. 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.

3. 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

4. 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!

5. 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

6. Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. Comparison of youth unemployment rates, 15-24 years, 2001- 2011 (%)

7. Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. Activity rate of youth, 15-24 years, 2001- 2011 (%)

8. A caveat: Average Comparison of youth unemployment rates, 25- 29 years, 2011 (%)

9. Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia. Comparison of youth unemployment rates, 25-29 years, 2001- 2011 (%)

10. 2. “Despite” factors The most commonly cited barriers for youth unemployment are all present in Slovenia: – employment protection legislation, – minimum wages, and – unemployment benefits

11. 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. 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). average

12. Comparison of minimum wage to average wage ratios, Slovenia and EU (2010)

13. Note: The EU average includes only those EU countries that have statutory minimum wage. Comparison of minimum wage to average wage ratios, Slovenia and EU (2000 - 2010)

14. Net replacement rate of unemployment benefits (1999-2009) Note: Transition NMS are Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania and Slovakia.

15. Unemployment survival probability by age groups, Slovenia, 2011

16. 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 part- time work among young people – Conducive demographics

17. Differences in Relative Wages and Productivity by Age, 1992-2001 Matija Vodopivec, “Equal Pay for Equal Work? Wage and Productivity Differentials during Slovenia’s Transition.” Forthcoming in Eastern European Economics.

18. Differences in Relative Wages and Productivity by Education, 1992-2001 Matija Vodopivec, “Equal Pay for Equal Work? Wage and Productivity Differentials during Slovenia’s Transition.” Forthcoming in Eastern European Economics.

19. 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.

20. Temporary employment as % of total employment, 15-24 years, Slovenia and EU (2001- 2011)

21. Record high higher education enrollment rate (20-24 olds), 2009 Average

22. Favorable demographics Outflow from schooling to the labor market was reduced from 26, 000 in 1995 to below 24,000 in 2010

23. 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)