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Croatia National Report Croatia National Report Improving knowledge on the impact of Central- and Eastern European social partners on competitive labour market reforms facing the global crisis, VS/2016/0368 CASE STUDY: CROATIA Author: István HORVÁTH, Dr. , ELTE Faculty of Law, Department of Labour Law and Social Law www.ceelab.eu Sole responsibility lies with the authors, the publication reflects only the author’s view and the Commission is not responsible for any use that may be made of the information contained herein. This publication was prepared in the framework of the project “CEELAB – Improving knowledge on the impact of Central- and Eastern European social partners on competitive labour market reforms facing the global crisis, VS/2016/0368” The project is co-funded by the European Union, in frame of the program VP/2016/004 „Improving expertise in the field of industrial relations” 1 National Report Croatia National Report Croatia Overview The reference period covered in this report is 2007 to 2017. This period is marked by two distinctive events that have influenced and shaped Croatian labour and social policies in the last decade. The first concerns the onset of the global financial and economic crises in 2008. The effects of the crises started in Croatia around 2009-10 and provoked negative movements in the labour market: a decrease in employment and an increase in unemployment. However, the negative trends in the labour market, as well as the economic and financial situation in Croatia were not directly connected to the global economic and financial crisis, since the Croatian economy is relatively small and isolated, and also suffers from inherent structural deficiencies. The second event concerns the accession of the Republic of Croatia to the EU on 1 July 2013. The benefits of the free movement in the internal market have prompted a wave of emigration of the Croatian labour force, despite the fact that a certain number of EU Member States have kept their labour markets closed to Croatian citizens for the first two, or five years following accession. It is estimated that in the period between 2013 and 2016, around 230,000 people emigrated to EU countries.1 Generally, employment legislation has not been responsive to the situation in the labour market. The unemployment rate, which has been steadily growing since 2009 and which reached its peak at 17.3 % in 2014, has been on a declining course since. Even though the new Labour Act was adopted in 2014, it would be wrong to ascribe the drop in the number of unemployed to its entry into force. The lower unemployment rate is probably more connected with economic and industrial growth (primarily seasonal employment in tourism) and the aforementioned emigration, than the legislative changes. The observed period was also marked by political instabilities, culminating in 2016, when early elections were held because the Croatian Parliament adopted a vote of no-confidence against the 13th Government, which had only been in office for five months at that time. The political scene in general and the work of the current 14th Government in office is characterised by uneasy coalitions and heavy political trade-offs, which make any attempt to develop a coherent and comprehensive approach to any policy field virtually impossible. Methodology The research was conducted in two phases. The first phase was based on desk research method. It consisted of gathering information on basic labour market indicators and national legislation. Based on the results of the first phase, a questionnaire for the social partners was developed and applied in the second phase of the research. The methodology in the second phase was therefore based on written replies to the questionnaire formulated by the researchers. 1 See Draženović I., Kunovac M. and Pripužić D. (2018) Dynamics and Determinants of Migration - The Case of Croatia and Experience of New EU Member States, Croatian National Bank, https://www.hnb.hr/documents/20182/2101832/24-dec-drazenovic-kunovac-pripuzic.pdf, p. 12. The authors point out that the official statistics from recipient EU Member States shows that the number of emigrants is up to three times higher than the official Croatian records show. The official Croatian statistics are significantly lower, because they capture only officially reported emigration, but they nevertheless show that the number of emigrants has more than doubled since 2013 (from 15,262 emigrants in 2013 to 36,436 emigrants in 2016). See Statistical Information 2018, https://www.dzs.hr. 2 Croatia National Report The biggest information gaps are in the field of social dialogue – trade union density and the coverage of collective agreements, as well as the operation, prevalence and influence of the workers’ councils, because there are either no official statistics or the monitoring tools are just starting to develop. 1. Economic Crisis in Croatia 1.1. General Considerations The Croatian economy entered a period of recession in 2008. The biggest drop of GDP was recorded in the first quarter of 2009 (a drop of 6.7% compared to the same period in 2008). After an initial Government denial that Croatia was in recession, the first counter-measures appeared in the second half of 2009, with the budget amendment and introduction of the so- called crisis tax (on salaries, pensions and other income above HRK 3,000 (EUR 407) the rate of this tax was 2%, above HRK 6000 (EUR 815) it was 4 %), as well as an increase in the rate of VAT. In April 2010 the Government presented the Economic Recovery Programme, aimed primarily at reducing public sector expenditure, reforming the income tax system, reducing the number of parafiscal charges and reducing the number of public service employees by 5%. Although the decrease in GDP in the following years was lower than in 2009 and 2010, many economists warned that stagnation following a sharp decline was not surprising, and that the slowing of the negative trends was more due to income from tourism, than the reform efforts. In the period between 2010 and 2014 the ambitious reform programme essentially turned into a series of budget amendments to preserve macroeconomic stability. The first signs of recovery started in 2014, when annual GDP growth of 0.3% was recorded, after 12 consecutive quarters in which GDP had been on a downward slope. The continuous GDP growth and the slow path to economic recovery started to also positively affect the labour market from 2015 onwards. The average number of unemployed peaked at 345,112 in 2013. By 2017, this number had fallen by 44 % (the average number of registered unemployed in 2017 was 193,967). ILO unemployment rate, % 20 15 10 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 The biggest problem in the labour market, apart from the low activity rate (around 51%), relates to the skills shortages and mismatches between the labour supply and demand. Even seasonal employment in tourism decreased by about 10% in 2017 compared to 2016,2 and there are labour shortages mostly in accommodation and the food service industry, which has prompted many employers in the tourism sector to demand higher quotas for foreign (non- EU) workers. Part of the explanation why the decrease in unemployment since 2015 has not led to an increase in employment lies in the growing trend of emigration. 2 Croatian Economic Outlook No. 71, September 2017, Institute of Economics, Zagreb, https://www.eizg.hr/userdocsimages/publikacije/serijske-publikacije/ceo/CEO_71_September-17.pdf. 3 National Report Croatia 1.2. Opinion of the Social Partners 1.2.1. What are the consequences of the economic crisis that emerged in the national and sectoral level of your member organizations from 2007? a) Trade Unions' responses: - Matica hrvatskih sindikata –Association of Croatian trade unions – MATICA: A reduction in wages and standard of living for all the employees in the public sector from which they still haven’t recovered. - Hrvatska udruga radničkih sindikata – Croatian Association of Workers’ Trade Unions – CAWTU: In economic crises our members (trade unions) barely managed to hold on to their members. One of the consequences of the crisis was the loss of jobs, primarily those for which the workers had employment contracts on an indefinite term, and mostly those workers who are members of trade unions. In addition, employment on a definite term or through the intermediation of agencies (temp agencies) prevailed, which decreased the opportunities for newly employed persons to join the trade unions. The intention was to include (in-calculate) the burden of the crises, in collective agreements, as usual, and therefore in that period the priority was to insist on a (more) equilibrated division of that burden. - Savez samostalnih sindikata Hrvatske - Union of Autonomous Trade Unions of Croatia - UATUC: In the private sector, the crisis has directly led to a decrease in the number of members, especially in such sectors as construction and the metal industry, where a lot of cases are registered, which resulted in the automatic loss of a great many members. This was difficult to make up for, despite the activities of the trade unions operating in those sectors to organize and find new members. That had an impact on the number and the structure of the members at the national level, where the influence of the crisis hit more trade union headquarters that have a significant part of the members in the private sector (such as UATUC), than those that operate dominantly in the public sector (where no significant loss of jobs occurred). - Nezavisni hrvatski sindikati - Independent Trade Unions of Croatia - ITUC: The cuts in pay and in other material rights, the increase in employment on definite terms, the increase in the employment of agency workers and frequent abuse of students' work, the increased number of workers that work but are poor (working poor), dismissals because of the collective redundancies, insolvency/bankruptcy procedures, the strike on collective bargaining and trade unions, emigration of Croatian citizens in search of better working conditions and pay.
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