From the time of the velvet revolution in 1989, the unemployment has risen a lot and now reaches 19% in Slovakia. At the same time there are great disparities among regions in Slovakia. Could you describe the policy or measures taken by your ministry in order to tackle these problems?
We have to return back to 1990, to the times of the former Czecho-Slovak Federative Republic. The Slovak part experienced since the very beginning a larger increase in unemployment than it was in the Czech Republic. Of course it is due to specifics of the Czech and Slovak republics. The primary thing that is not very much discussed is that since 1990 there has been a sharp increase in the number of people in the productive age. This has been the result of a very strong population boom that Slovakia experienced between 1973-80. There was a difference in this between the Czech Republic and Slovakia. This is quite a significant difference, during those ten years the number of productive people has risen by more than 11 %. In the Czech Republic it was zero, it means that the number of people in productive age was stable. In Hungary there has been a decrease by -4%. In Poland it was an increase of more than 7%. So, over these 10 years the supply of labour has risen by 11% in comparison with 1990. Of course on the other side, the transition of the economy very naturally was releasing people. So the scissors has been opening. On one hand the amount of labour force has been rising and on the other hand the demand for labour has been decreasing. Very naturally it was the result of transitional steps which could not have been taken otherwise. But the unemployment is not a competition and we have to base our assumption on a fundamental human issue that there are human resources here which in respect to some funds as e.g. pension fund creates better position than they have in Hungary of Czech Republic.
However, there seems to be a problem of labour mobility in the country and also the difference between the nominal wages and social support is not so significant. What are today the incentives to make people look for a job outside their home town?
This mobility can be divided into two levels. The first one would be a daily mobility, so what would be the distance that would still allow me to commute daily to work and the second level is this permanent mobility when I quit my permanent residence, my area where I live and search for another one, where is a better situation on the labour market. The first one is linked to the costs of the fares to commute to work and not only with the time that it takes me to get to work. Because from a time point of view it still seems quite acceptable to commute one hour, one and a half hour to work if the wage clearly corresponds to this. And the second one relates to my income as my daily cost of living. The first one which would go up to one hour, one hour and a half, that would be commuting to 40-45 km. It should be said here, that this was very normal in the past and people were commuting to work but as the costs of travel were liberalised, which, however, was right but the increase of these costs was much quicker than was in increase of wages. So the effectiveness of commuting has decreased from 40 to 15 km which formally has decreased the mobility of labour. That is linked to the price of labour and that is linked to competitiveness of our producers. This should be seen in this perspective, in these kind of relations, we cannot look at it from the point of view of psychology, whether a person is able to commute or not. And if we speak about a permanent mobility, this is finding problems with having increasing possibilities to search for housing under relatively cheaper and simpler conditions. So the first level of mobility is very much connected with the competitiveness of our economy and the second one is linked to the flat market in those areas where there is a good situation on the labour market.
What have you implemented so far or what would you suggest in order to reduce disparities between the regions?
Firstly I would like to say that we have projects on employment for regions where currently the level of unemployment is higher than 25%. Where by law there is a possibility to provide a certain subsidy for creation of job opportunities during the period of one to two years. So we are creating conditions for certain stabilisation of economy of such an employer who works in the area with high level of unemployment even under such conditions that the person would hire additional employees and possibly have lower productivity. So it means that during those two years the employer should be able to establish himself well on the market, to stabilise his programme, to find the sales opportunities and financing. The second programme that we have been running already for the second year is the programme of employing young people. This programme is linked to what I have already mentioned here but has certain specific features. Since 1990 the number of young unemployed people has been rising, last year we managed to stabilise the situation and this year the number is decreasing and we have already noticed the interest of employers to employ young people. This is quite a change in the way of thinking of employers.
In which sectors mainly?
In industry especially. Because e.g. in the
banking sector it has been since the beginning.
This has been achieved mainly by the fact
that we have introduced lessons in the last
year of high schools and universities where
we teach them how to look for jobs. And if
they do not succeed to find the job after
they complete their studies we work with these
young people for the period of six months.
So to put it more simply, I would say that
we are training these people for a particular
employer. It means that the employer many
times does not know who of these young people
he will recruit, it is unknown to him, he
does not have the time to discuss with the
young person and to train him or her. Because
time is money. So via this institute of the
National Labour Office we are preparing these
people for a certain employer. In such a way
that during the last three months the particular
young person already works for a particular
employer and they mutually test each other.
And it shows that during the first half of
this year the success of this process was
64%. So to put it more bluntly, we are making
these transitions from school to employment
smoother and fluent for young people. And
already this year the number of school leavers
who could not find a job after six months
has decreased by one third. It seems that
very probably we have found the method how
to work with this group of people. But there
are other groups which are as if showing at
the moment and these are women over 45 and
men over 50. Here we have to adopt other measures
than in the previous category. And I return
back to the difference between the price of
the labour and the social assistance. I think
this is kind of a cliché that is being
used here and it is not very well understood
what has been achieved since 1999 here. Firstly,
a new act on minimum wage was adopted where
there is a mechanism that the net minimum
wage has to increase more quickly than the
growth of the cost of living. Because in 1999
the net minimum wage was lower by 300 Slovak
Crowns that the subsistence minimum that is
not taxed. Clearly this difference between
the two cannot be risen overnight because
it is linked to the competitiveness of our
producers. Today a net minimum wage it is
by about 18% higher than a subsistence minimum.
Secondly, because the subsistence minimum
is the basic criterion for the social protection
benefits we have introduced stricter criteria
for entitlement to social assistance benefits
due to unemployment where there is used existence
minimum, which represents a half of the subsistence
minimum. So if in 1999 there was about 8,9%
receiving this existence minimum, today it
is 53%. So if I then sum it up that there
has been an increase of the minimum wage and
the decrease of the real benefits, so we have
changed it significantly over the past three
years. And on the other hand our constitution
binds us to secure existence minimum and it
is one warm meal per day, adequate clothes
and adequate shelter. And if there is such
a high level of unemployment so very probably
this influence is very marginal one and the
reasons are elsewhere. |
Today, the social insurance system is facing significant difficulties. It represents the 2nd highest budget for the Gvt. Proposal of social insurance reform has been approved by the Cabinet. Can you provide our readers with a brief overview of the pension system and the social security reforms to be implemented?
In 1999 we did the reform of the social insurance system where we drafted a policy document and we prepared a time schedule saying what has to be done in order to move from the social security towards social insurance, how to tackle the demographic development that Slovakia will face in the second decade of 21st century, how to create institutional building for that. This policy document was passed by 125 deputies out of 150 which is not very usual. None of them voted against, 6 abstained which I understood as a significant victory, not for me but for the Slovak society because the issue of pension reform that is not a reform that can be accomplished by only one term of office. We have submitted a policy document on which both opposition and coalition has agreed so there has a been created a kind of social consensus. Also the social partners, that means trade unions and employers agreed with the reform. We have submitted it to public discussion, we did big poll using 36 000 people and the key pillars of this transition were not challenged. The life, however, brings these little nuances so there has been a whole society agreement on the strategy. And the act stipulates the basic skeleton of the social insurance because now we still have social security and this act will be passed during this government. We have ambitions to pass the act on the second pillar as well which nothing else but a funded, capitalisation system. What we have already done, we have passed the amendment to the complementary pension insurance which has significantly increased the function of this optional creation of the pension fund. And fourthly, I should believe that in January we will finally sign the agreement with the World Bank on creation of the information system which would allow us in the future to monitor the clients accounts. So we have prepared the schedules of the steps in the legislative area as well as in the institutional area. Because to pass an act which could not be implemented or only partially implemented that would be a pity or a loss.
What is actually the amount of the loan that you are expecting from the World Bank?
If I am not mistaken it should be reaching about 60 million USD.
You have been very active concerning the SPP privatisation. You have said that you were opposed to the 49% privatisation of this company recommending 24% in order to boost your pension fund reform. Can you enlighten us on your recommendation?
We would need one complete discussion for this issue. But the building of this second funded pillar is related to creation of the assets of this fund. In 2003 we do not need 55 billion SK in money I need it in good shares and if I take into consideration that currently in Slovakia there is not good capital market where I could use these 55 billion SK for purchasing these shares. Of course I can use it for purchasing these shares on some other market but at higher transaction costs. So I am supporting the opinion to have these good SPP shares because it is clear that the yield from these shares will be eventually increased by the fact that the transit from Russia to Western Europe will be only increasing. Gas prices will be stable over the period of at least 30 years. We assume that in 2015-18 the value of this fund should be equal to one GDP of the Slovak Republic. But we could be speaking long about this.
In order to get to know you more personally we would like to know what is your professional background, experience and what motivated your accepting your current responsibility?
On the Internet web page there is my C.V. but of course also the Internet is cold as well and behind each sentence within the C.V. there are lot of activities, event and many losses and victories. By education I am a technician, I studied metallurgy, I did my PhD in physical metallurgy. I started as a research worker in the studies of metal substances, I became a manager, I was the manager of the only factory producing motorcycles in Slovakia. 90% of our production we exported at the time to so called capitalist countries. 15% of production was exported to USA, to demanding markets, I was to be able to produce motorcycles for Nevada, Virginia, Florida. I was also the manager of the project for the development and launching of the production of the jet engine, but this is my young years. In 1993 when the association of industry appointed to the position of DG in National Insurance Company, the predecessor of the current Social Insurance Company. At that time this was a more significant entry for myself into the area of social insurance and I am sad that already in 1993 my predecessors did not develop the thoughts, did not built on them, that we have managed only in 1999. We would have been much further now. In 1994 I was the minister of economy and then I joined the MP s and in 1998 I became the Minister of Labour Social Affairs and Family, not as a philosopher, sociologist but as an economist and the person working in industry who understands what social relations mean in life.
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V.I.P. INTERVIEWS 
