Targeted incentives to register employees, Croatia
Employers are awarded grants to employ specific groups who are threatened by unemployment and at risk of turning to undeclared work. In particular, the grants enable young people without relevant experience or education to gain work experience or relevant training, and this enhances their employability.
Increasing employment has been a key target of the Croatian government. Data from Eurostat show that, in 2011, the youth unemployment rate in Croatia was at 35.8%, one of the highest in Europe. In the third quarter of 2011, the long-term unemployed in Croatia accounted for more than half of the unemployed youth.
The consequences of these trends and the lack of employment opportunities for young people are low productivity levels, poverty and social exclusion (Bejaković, 2010). Young people with no work experience or relevant education have particularly low levels of employability and are therefore exposed to unemployment (Bejaković, 2010). For these reasons, the government has created incentives for the employment of young people, as well as other targeted groups.
The main objective of these incentives is to increase employment within certain unemployed groups. However, the designed policies also indirectly facilitate legalisation of people in the aforementioned groups who are currently working on an undeclared basis.
Incentives have been put in place to employ and register those over 50 years of age, young people with no work experience, the long-term unemployed and people with disabilities. The employment of individuals from these groups warrants the awarding of grants to employers to help finance their work. Incentives are also provided for those who are unemployed and want to become self-employed. However, those from hospitality and the trade industry are excluded from receiving such grants because these sectors are already well developed in Croatia. Grants for the craft industry are €2,500 where as those for merchants are €3,250.
Lessons and conclusions
Achievement of objectives
In the period from 1 January to 31 March 2009, this co-financing measure supported the employment of 1,003 young unemployed persons (460 of whom were women) without working experience (Bejaković, 2010).
Obstacles and problems
The duration of contractual obligation for each group is 12 months so it is unknown whether employers will keep the individuals registered for longer than this period.
However, in Croatia, young people participated in the majority of other active labour market measures such as up-skilling, requalification, education and public works making them more employable in the future (Bejaković, 2010). In 2009, a total of 3,025 people were included in the training (Bejaković, 2010).
There is obvious transferability between demographic groups; however the adoption of such policies in a number of other countries conveys the overall potential of transferability. Adjustments should be made depending on the type of undeclared work and the groups with the highest unemployment ratios.
Croatian Employment Service (Hrvatski zavod za Zapošljavanje Središnji Ured)
Bejaković, P. (2010), European Employment Observatory (EEO) review: Youth employment measures, 2010 – Croatia, Institute of Public Finance.