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Joint Assessment of Employment Priorities
 in the Slovak Republic

[date of signature]

In accordance with the provisions of the Accession Partnership, the Government of the Slovak Republic has prepared, with the European Commission, Directorate General for Employment and Social Affairs, a Joint Assessment of Slovakia's short-term employment and labour market policy priorities.  This document presents an agreed set of employment and labour market objectives necessary to advance the country’s labour market transformation, to make progress in adapting the employment system so as to be able to implement the Employment Strategy and to prepare it for accession to the European Union.  Progress in the implementation of these policies will be assessed regularly. 

Mr xxx | Mrs Anna Diamantopoulou

Minister of Labour, Social Affairs and Family, 
Slovak Republic

European Commissioner for Employment and Social Affairs

Introduction
In accordance with the provisions of the Accession Partnership the Commission is carrying out employment policy reviews in the candidate countries. The objective of these reviews is to examine, in collaboration with the appropriate authorities in each country, the extent to which candidate countries have made progress in adapting their employment systems so as to be able to implement the European Employment Strategy. 

The reviews aim to provide information, for the use of the candidate country and the Commission, on the following questions:

•	Are the labour market structures that are already in place appropriate to participation in the Single market?
•	Are labour market and employment policy institutions sufficiently developed to allow an early implementation of the employment strategy in line with the Employment Title of the Treaty?
•	Is the overall system in the respective candidate country moving towards a meaningful participation in the EU employment co-ordination process?
•	What are the priorities for human resources development strategy as a background for preparatory work for ESF or ESF type action planning and programming?

The starting point in the Employment Policy Review is to agree on a Joint Assessment Paper, whose focus is on the fundamental challenges in the field of employment. These challenges consist, first, in recognising that labour markets should reflect the needs of a dynamic market economy as part of a single market, in particular whether labour is mobile, adaptable and skilled. The second challenge is to have policies and appropriate institutions that support the development of a flexible labour market. This includes the need to promote a forward-looking approach to industrial restructuring to adapt to knowledge-based economies and to face the impact of demographic change.

The principal tasks of the exercise are summarised under four sections. Section 1 provides a brief description of the economic performance. Section 2 examines the overall labour market situation and the progress made in labour market transformation. Section 3 identifies major challenges and Section 4 draws together the overall conclusions from the review

1. Economic Background
After the social and political changes at the end of 1989, there was initial rapid progress with the reform of the Slovak economy, as a part of Czechoslovakia, into a functioning market economy capable of successfully competing with growing European and global competition. The substantial economic turmoil arising from the division of Czechoslovakia in 1993 temporarily halted the initial positive results of the transition process. Thanks to a restrictive monetary policy and a devaluation of the currency, a relatively stable macroeconomic framework was preserved. However, structural reforms, including privatisation and restructuring of the banking and enterprise sectors, were gradually slowed down.

From 1994 onwards, the Slovak economy recorded high GDP growth, even compared with other transition economies. Initially, the growth was mainly due to an increase in the utilisation of industrial capacity, after its temporary decline during the transformation recession between 1990 and 1993. However, soon this growth started to encounter obstacles and maintaining its dynamics required substantial investment. As a result of rising government deficits and too expansive monetary policy, combined with a steep increase in investment, economic growth became more and more unbalanced. Starting in 1996, the current account deficit increased to more than 10% of GDP, leading to a rapid build-up of gross external debt. Reflecting these difficulties, the growth of GDP slowed from over 6% in 1996 and 1997 to 4% in 1998 and less than 2% in 1999. For the year 2000, based on data for the first nine months of the year, GDP growth is also likely to have been approximately 2%.

Inflation was kept at a relatively low level compared to other transition economies in the 1994-1998 period. CPI inflation gradually fell from 11.7% in 1994 to 5.6% at the end of 1998. However, low inflation was only possible at the cost of a restrictive monetary policy in 1997-98 and postponing the increase of regulated prices, mainly in the energy sector. This delay distorted relative prices, resulting in the inefficient allocation of resources, and reduced the energy utilities’ profitability.

While the public finance deficit remained under control between 1994 and 1996 and did not exceed 2% of GDP, fiscal policy was substantially eased in 1997-98. The general government deficit reached more than 5% in 1998. Priorities were set incorrectly in fiscal planning, in particular the pace and extent of infrastructure construction projects exceeded the capacity to finance them from internal sources. In addition, the ineffective reform of the state administration was costly, and, despite its gradual transformation, the social security system continued to be easy to abuse and insufficiently targeted.

Despite an investment ratio of close to 40% of GDP, there was no real restructuring of Slovak industry because a large proportion of the investment was placed into infrastructure projects. The creation of the institutions of a functioning market economy and of an effective legal and judicial system that would ensure the enforcement of laws was neglected by the authorities. In addition, the chosen methods of privatisation did not generate strong and effective ownership of enterprises, leading to weak internal corporate governance. External governance mechanisms did not function either because pressure from creditors remained weak, due to the pervasive presence of politically influenced state-owned banks and the lack of a functioning bankruptcy framework. As a result, enterprise profitability deteriorated rapidly and rising bad debts threatened the survival of the banking sector.

By the end of 1998, the lack of structural reforms and the ensuing macroeconomic imbalances had become unsupportable in a deteriorating international environment after the Russian crisis. As a consequence, the fixed exchange rate regime had to be abandoned in October 1998, and the government that was formed at the end of 1998 launched a new economic programme. The two main lines of the programme were a reduction of excessive domestic demand, including the government deficit, in order to bring the balance of payments back under control, and an acceleration of structural reforms to make the economy more competitive.

The initial results in 1999 and the first half of 2000 have been positive. The reduction of the budget deficit and the sharp adjustment of administered prices have halved the trade and current account deficits in 1999, compared to 1998. Based on strong export growth, the trade and current account balances have continued to improve in 2000. Given the lower current account deficit and increased net foreign direct investment, the financing of the balance of payments is now on a more sustainable footing again. While, as noted above, economic growth slowed down as a result of a sharp contraction in domestic demand, in particular investment, it remained relatively strong – at almost 2% in 1999 – thanks to robust exports. Inflation increased in line with expectations up to 16.6% in March 2000, as a consequence of necessary administrative price and indirect tax adjustments. Due to the profile of these price increases in the past, inflation eased to single digit figures again in July 2000. From the second half of 1999 onwards, the exchange rate started to recover against the Euro again and stabilised in 2000, although occasional tensions linked to political uncertainty still occur.

The government has been steadily elaborating and implementing its structural reform programme. In particular, a new bankruptcy framework has been approved, state-owned banks have been recapitalised and are being privatised, and the privatisation of public utilities has started. This set of measures is creating an environment where enterprises are put under pressure to restructure, while the possibilities for attracting the financial means for restructuring are being improved by enhanced incentives for foreign direct investment and a better functioning banking sector.

Unemployment has been high from the start of transition and only declined marginally when economic growth accelerated from 1994 onwards. It started to increase again in 1997, even though at that time the economy still grew by 6.5%. When economic growth slowed down, unemployment increased rapidly and reached 18.9% in the first half of 2000. This was mainly the result of increased pressures on enterprises to cut costs by eliminating over-employment. Labour market trends are discussed in more detail in the next section.

A final notable feature of economic development has been the extent of regional imbalances, with the situation in the western part of the country, and in particular in Bratislava, being consistently more favourable than elsewhere. GDP per capita in Bratislava is over twice as high as in the country overall, whereas in Eastern Slovakia per capita GDP is only about three-quarters of the national average. While the Bratislava region has approximately 11% of the national population, it accounts for 27% of all incorporated businesses, for 19% of small enterprises, and for 51% of enterprises with foreign capital.

2. The situation on the labour market 

All data in this section, unless otherwise stated, relate to employment, unemployment and the labour force on the ILO basis, drawn from the Labour Force Survey.

Developments in employment
As in other transition economies, employment fell sharply after 1989, with an estimated cumulative decline of some 20% by 1994. Thereafter, rapid economic growth was initially reflected in a recovery in employment, with the number of jobs increasing by over 5% between the second quarter of 1994 and the same period in 1996. However, despite continued high economic growth, employment fell by 1% between early 1996 and early 1998; this jobs decline accelerated with the economic slowdown, with employment falling by more than 5% between early 1998 and early 2000. The level of employment in early 2000, at 2.08 million, was therefore marginally lower than in 1994. 

These trends have differed somewhat by gender. The initial increase in employment in 1994-96 affected men and women equally. However, male employment fell faster than female in the subsequent years. As a result, male employment in 1999 was 1% lower than in 1994, whereas female employment had risen by more than 3% over the same period.

The employment rate in the working-age population fell sharply from an estimated 70% in the late 1980s before stabilising at just under 60% in 1994. The rate rose marginally in the years after 1994, peaking at 62% in 1996 before falling back to just under 58% in 1999. At the peak, the male rate was 69% and the female rate was close to 55%. In 1999 these rates fell to 63% and 52%, respectively. The rates for both sexes in 1999 were therefore below the respective rates for the EU (males – 72%, females – 53%), and this gap is likely to have increased in 2000. In terms of age-groups, the largest difference between the situation in Slovakia and that in the EU relates to young persons aged 15-24, of whom only 31% are in employment as compared with 39% in the EU, and among older workers (with only 22% of those aged 55-64 in employment as compared with 37% in the EU). Overall employment rates for people aged 25-54 are close to the EU average, but this reflects different patterns for men and women, with the male rate significantly below and female rate significantly above EU levels.

i.e. total employment of persons aged 15-64 as a proportion of the population aged 15-64.

Structural shifts in employment
Sectoral trends
There has been substantial change in the sectoral pattern of employment since 1994. Between the second quarters of 1994 and 2000, with overall employment falling by approximately 20,000, agricultural employment fell by 72,000, industrial employment fell by 53,000 and services employment grew by almost 105,000. Agricultural employment has been falling continuously over this period. In industry, by contrast, an initial expansion between 1994 and 1998 has been more than offset by a sharp decline in 1999 and 2000. Services employment, having grown rapidly between 1994 and 1998, has continued to rise, but only marginally, in the last two years. At a more detailed level, most of the increase in services employment since 1994 has been accounted for by the distribution sub-sector, financial services, and the public administration; employment in education services has fallen significantly.

Including construction.

As a result of these trends, agriculture's share in total employment fell from 10% in 1994 to 7% in 2000; industry's share fell from 39% to 37%; and the services share rose from 50% to 56%. The broad sectoral structure of employment has therefore been on a gradual path of convergence with the pattern of the EU. Even by early 2000, however, the employment share in industry remained high by comparison with the EU industry-share (29%) standards, while the employment share in services is still relatively low (the EU services share is 66%). Within the services sector, the financial and business services – together with distribution, hotels and restaurants – remain particularly underdeveloped in employment terms relative to the EU.

Public/private distribution
A combination of privatisation of smaller-scale state enterprises, together with the establishment of new small businesses, saw the beginnings of change in the ownership structure of the Slovak economy in the early 1990s. By 1992, 28% of employment was in the private sector (including co-operatives). The start of large-scale privatisation in 1992 accelerated the increase in the private-sector share, which reached 60% in 1995. Thereafter, the growth of the private sector share slowed somewhat (rising to 64% in 1997), with the cancellation of voucher privatisation and the identification of "strategic" enterprises to be excluded from the privatisation process. Further increases in the importance of private-sector employment are now expected following the approval of a new law on large-scale privatisation in late 1999.

Self-employment/dependent employment
The share of the self-employed in total employment remains relatively low in Slovakia. In mid-2000, this group represented less than 8% of all those in employment. Of the total of 150,000 self-employed, about 50,000 also employed other workers; the remaining 100,000 were small entrepreneurs without employees. 

Part-time employment
The level of part-time employment is extremely low by international standards, and the share of part-time in total employment has fallen slightly in recent years. In early 2000, less than 2% of all those in employment were working part-time, as compared with almost 18% in the EU-15. The difference is particularly great in the case of women, with part-time jobs accounting for under 3% of female employment in Slovakia, and for over 33% in the EU. 

Regional trends
The country was reorganised into 8 regions in 1996 – Bratislava, Trnava, Trencin, Nitra, Zilina, Banska Bystrica, Presov and Kosice. Because of the reorganisation, comparable regional data are available only for years 1997-1999. Even over this short period, there has been significant divergence in employment trends. Between these two years, overall employment in the country fell by just over 3%. However, employment rose by almost 2% in Bratislava, and remained broadly stable in Trnava and Presov. All other regions experienced falling employment, with the sharpest declines (more than 6%) in Kosice, Zilina and Banska Bystrica. These developments have reinforced the extent of regional employment imbalances, so that Bratislava, with only 11% of the national population, accounts for 15% of all employment in the country. 

This different employment performance tends to reflect wide variations in the branch structure of employment – i.e. the extent to which regional employment is concentrated in growing or declining sectors of the economy.  In 1999, for example, the services sector accounted for almost 75% of all jobs in the Bratislava region, but for only 44% in Trencin. By contrast, only 15% of Bratislava employment was in manufacturing, as compared with 36% in Trencin. In general, those regions most dependent on manufacturing have experienced the sharpest employment declines in recent years.

The proportion of the working-age population who have jobs varies widely across regions. Bratislava has a relatively high employment rate of over 70%, but Kosice has a rate of just over 50%, and relatively low rates are also found in Presov, Nitra and Banska Bystrica. 

Labour force
The overall population has been broadly static in recent years – growing by less than 0.1% annually. However, the population of working age (15-64) has been growing rather more rapidly – by 0.6% annually – and is estimated at approximately 3.6 million (LFS basis) in 1999. There has thus been some upward pressure on labour supply from purely demographic influences.

Although comparable LFS data are not available for the period 1989-94, it is clear that labour force participation initially fell less rapidly than employment. By 1994, the activity rate had fallen to an estimated 69%. Participation has been broadly stable at about 69% in the years after 1994 – close to the current EU rate. Female participation is somewhat higher than in the EU (62% compared with 59%), while the male rate, at just over 75%, is below the EU level (78% in 1999).

For persons aged 15-64.

Trends in participation by age tend to reflect the pattern of stability in aggregate Slovak participation since 1994. The only exception to this pattern relates to persons aged 55-64, where male participation has been on a slight downward trend but female participation has been rising gradually. The age-pattern of participation differs markedly from that in the EU overall, particularly for women. Slovak women have relatively high participation in the age-range 30-54, but participation falls sharply, to well below EU levels, in the age-range 55-64. Male participation is close to or above the EU level over the age-range 30-59, but falls sharply – again to well below EU levels – at age 60-64. These differences in the older groups reflect differences in the official retirement age – which is set at 60 for men and at 55 for women in the Slovak Republic.

While participation varies across regions, the differences are much smaller than in the case of the employment rate, discussed earlier. The highest participation rate is in Bratislava, where over 75% of the population aged 15-64 was in the labour force in 1999. The lowest rate was in Nitra, at 66%. Cross-regional variation is somewhat greater for women (with a gap of 12 percentage points between the highest and lowest regions) than for men (where the gap is 7 percentage points). 

Overall, the combination of stable participation and a growing working-age population has meant that the absolute size of the labour force rose from 2.43 million in early 1994 to 2.57 million in early 2000. Assuming continued stable participation, demographic projections suggest that the labour force will go on growing, but at a slower pace than in the recent past, up to 2005-2010 before declining moderately thereafter. 

Education levels in the labour force are low but tending to rise gradually. Between 1994 and 1998, the share of the labour force with only primary education fell from 14% to 10%; the share with "lower" secondary qualifications was stable at 41%; the share with "complete" secondary education rose from 34% to 39%; and the share with tertiary qualifications fell from 12% to 10%. There have been some positive trends in recent years – for example, 62% of the workforce aged 20-24 have achieved "complete" secondary education. On the other hand, only 11% of the workforce aged 25–29 has achieved university education. Recent rises in the numbers going on to further education are likely to lead to some increase in the proportion of the workforce with higher qualifications in the coming years. 

Qualification levels in the workforce vary greatly by region. Over a quarter of the labour force in the Bratislava region have third-level education

Unemployment 
Overall trends
The unemployment rate had reached 14% by 1994 when the first official Labour Force Surveys were conducted. Thereafter, employment growth led to a decline in unemployment until 1996, when the average rate for the year was just over 11%. 
However, unemployment began to rise again from mid 1996, to 12.5% on average in 1998 and 16.2% in 1999. By early 2000 unemployment had risen to 18.9%. This increase reflects the continuing increase in the size of the labour force and the decline in employment, which accelerated form 1998 onwards.

Structural features
A significant proportion – just under half – of the unemployed are long-term (i.e. over one year). This proportion has shown relatively little variation in recent years – rising slightly as overall unemployment fell between 1994 and 1996, but falling in 1999 as rising overall unemployment was accompanied by increased inflows into short-term unemployment.

Unemployment is slightly higher among women (16.4% in 1999 on average) than men (16.0%). The gap between women and men has narrowed somewhat, reflecting the adverse employment trends for men in recent years. At current levels, the gender gap remains relatively low by EU standards. However, women appear to be more affected than men are by long-term unemployment.

The youth unemployment rate is also relatively high – at over 32% for those aged 15-24 in 1999, as compared with approximately 13% for the labour force aged over 25 years. Youth unemployment fell more rapidly than adult unemployment in the 1994-96 period, but has risen more sharply than the total since then. The youth unemployment rate is now significantly above the EU average (18% in 1999).

There is wide variation in unemployment by region, with the lowest rate (7.4% in 1999) being found in Bratislava and the highest (over 21%) in Kosice and Banska Bystrica. While unemployment rose in all regions between 1997 and 1999, the sharpest increases were in Zilina, Banska Bystrica and Kosice.

Unemployment also varies greatly by level of educational qualification. In 1999, the unemployment rate for persons with third-level education was approximately 5%, as compared with 34% for persons with only primary education, and between 13% and 19% for those with various forms of secondary education. Within the secondary group, unemployment varies both by type of studies (vocational/general) and by whether or not the secondary cycle was "completed"; the lowest unemployment is among those with vocational qualifications who have also completed general secondary education.

Ethnic minorities
There are two large ethnic minorities in Slovakia. Hungarians account for approximately 10% of the population, while estimates of the size of the Roma minority vary between 5% and 10% of population. Systematic data on relative labour-market outcomes for these groups are not available. However, it appears from the limited material in the background report that outcomes for Hungarians are broadly similar to those for the population overall. The situation of the Roma minority is very different. In 1997, for example, this group accounted for almost 20% of the registered unemployed. If this proportion can be assumed to apply equally in the case of survey-based unemployment, then a relatively conservative estimate would suggest that the unemployment rate among Roma in 1997 was at least twice the rate for the labour force overall.  Moreover, Roma make up the majority of the long-term and very long-term unemployed, and it is estimated that 80% of the Roma population live on state social assistance support.

1999 Regular Report from the Commission on Slovakia’s Progress towards Accession.

This estimate is based on assuming that Roma accounted for 20% of the unemployed and for 10% of the labour force in 1997. This would imply a Roma unemployment rate of 24% in that year as compared with the national average of 12%. In fact the Roma share of the labour force is likely to be lower than 10%, as this is at the upper end of the range of estimates of their share in population. Any reduction in the assumed Roma share in the labour force would of course lead to an increase in the estimate for the Roma unemployment rate and in the gap between this rate and that for the population overall.

Wage developments
At the overall level, average real wages (i.e. nominal wages deflated by the Consumer Price Index) fell sharply in the early 1990s, with a cumulative decline of 25% between 1989 and 1994. Thereafter, real wages rose by 22% between 1994 and 1998 before falling by 3% in 1999 and by an estimated 3.5% in 2000. However, much of this recent decline has been due to increasing consumer inflation as a result of increases in administered prices.   Real wages based on the overall GDP deflator went on rising in 1999, though at a slower rate than previously. Initially (in 1995-1997) the increase in real wages on this latter basis exceeded the growth of productivity. In each of the years since 1998, however, average real wages have lagged behind productivity growth.

Nominal wage growth fell from 13% on average in 1993-98 to 7.2% in 1999. The estimated increase in nominal wages for the year 2000 is 8.5%.

There has been some tendency for increased wage differentiation in recent years, although change has been slow. At the sectoral level, wages in agriculture have grown less rapidly than average, while service-sector wages have seen above-average growth. In 1999, the highest average wages by far were in financial services (at almost twice average earnings for the economy overall) followed by business services, public administration, and the energy/utilities sector. Lowest average wages were in hotels/restaurants, agriculture, and education. There has also been some change in the relationship between education/training levels and wages. Relative earnings have been rising for workers with higher education and for those with "complete" secondary education; those with incomplete secondary education and those with only elementary education have seen relative decline in their wage levels.
 
The average earnings of women for the period of Q3 of 2000 reached 74.5% of the average earnings of men. In comparing wage levels of men and women for the performance of the same work, or work of equal value, women earned, on average, 12.8 % less than men did. On the other hand, there were also cases where men earned, on average, less than women for the performance of the same work. The difference was 11.1%. 

Labour market policies
The main strategic policy document on employment is the National Employment Plan. A framework for the development of national employment planning was approved by the government in November 1999. An actual plan for the period to 2002 was discussed and agreed with the social partners in the Council of Economic and Social Agreement in September 2000, and the government approved this document by formal resolution in November 2000.

The Plan follows the four-pillar structure of the European Employment Strategy, while taking account of the specific conditions of the Slovak labour market. The Employability pillar contains 19 separate measures in relation to education and training, improvements in employment services in the context of an "activation" strategy for the unemployed, and measures in favour of the disabled and the long-term unemployed. The Entrepreneurship pillar sets out 8 measures designed to promote development of conditions and programmes in support of small and medium sized businesses, including provision of advisory services. These measures emphasise the responsibilities of regional and local authorities in the field of enterprise development. The Adaptability pillar comprises measures implementing modern forms of labour organisation and flexible scheduling of working hours, including monitoring of the impact of technical and technological progress upon employment. It draws heavily on the separate National Program of Increased Productivity and Competitiveness. The fourth pillar deals with measures to promote equal opportunities between men and women. (Other equal opportunities measures, particularly in relation to the Roma minority, are dealt with largely under the Employability pillar.)

A strong feature of the Plan is the government's commitment to a preventive strategies, enabling early identification of individual capabilities and needs of unemployed persons. Preferential support will be given to the employment of registered unemployed persons in the open labour market. The activities of the public employment service will be systematically evaluated, as will programs to integrate the registered unemployed into employment.

Labour market institutions 
The main ministry dealing with labour-market issues is the Ministry of Labour, Social Affairs and Family, although a number of other ministries also have an important involvement. Employment policy proposals formulated by the ministry (as with the National Employment Plan) are generally discussed and agreed with social partners in the Council of Economic and Social Agreement prior to submission to government for final approval.

The main executive body for the implementation of policies and programmes is the National Labour Office, established by legislation in 1997. It is a tripartite three-layer system, governed at national level by a 15-member governing board with a smaller, 9-member, supervisory board. There are 8 lower level boards at the regional labour office level and each of the 79 district labour offices also has a governing board. At each of these levels, the boards are made up of representatives of employees, employers and the government. The NLO is responsible for active labour market measures, including job brokerage, occupational guidance and information, occupational rehabilitation for disabled people, and the operation of employment and re-training programmes. (Private job-brokerage agencies are also permitted since 1997. Such agencies carry out job broking activities related primarily to temporary forms of employment.) The NLO also has responsibility in relation to passive measures – unemployment benefit payments, collection of contributions under the unemployment insurance scheme, collection of contributions for the Guarantee Fund (since May 1, 2000), and payment of compensation for wages not paid by insolvent employers to employees (since July 1, 2000). Finally, the NLO has responsibilities in the field of labour market information and statistics. It carries out monthly and quarterly statistical surveys on unemployment as well as analyses on labour market trends.  These activities are carried out within a framework set down the Ministry of Labour, Social Affairs and Family in a 1997 Document called “Minimal Contents, Scope and Periodicity of Statistical Surveys and Analyses of Labour Market”.

The NLO is funded through contributions within the unemployment insurance scheme and through supplementary allocations from general taxation. These funds are allocated through an annual approved by the National Council of the Slovak Republic. In 2000 the budgeted expenditures for labour market policy accounted for SK 7.7 billion. In addition, the NLO received SK 1.3 billion from a special State budget for the public works programme for long-term registered unemployed, as well as a subsidy of SK 214.5 million to a Guarantee Fund. 

In the year 2000, the NLO had a staffing level of just under 5,000, of whom 182 were in the national headquarters, 352 worked with the regional labour offices, and 4,448 were in district offices. Just over a quarter of the staff were front-line professionals in employment-service functions (1,220 job brokers and 201 consultants). Up to 1999, the allocation of staffing levels by district was determined by reference to the size of a district, its working-age population, and the number of unemployed. Since 1999 the allocation system has been refined to include structural aspects of the district's client population

3. Identification of main priorities for employment policy
3.1 Strategic issues
Employment and labour market policies must operate in the context of the overall economic development challenges facing Slovakia. This overall context is set out in detail in the Joint Assessment of Medium-term Economic Policy Priorities developed by Slovakia and the Commission and finalised in February 2000. 

That document set a medium-term goal "to create systemic conditions for accelerating growth … (so that growth of) … 3 to 4 percent in 2001 and 4 to 6 percent annually in the following period is achievable". Achievement of this objective would make it possible to reach an economic standard of approx. 50-55 percent of the EU average (based on purchasing power parity) by the time of Slovakia's accession to the Union. Given current economic imbalances, and the slow pace of past reform in Slovakia, moving towards this more favourable medium-term trajectory would require a decisive programme of short-term reforms, to which the government is committed. The main elements of this programme include: comprehensive reform of the financial and business sectors of the economy; macro-economic stabilisation through appropriate and co-ordinated fiscal and monetary policies; and administrative, institutional and legal reforms (including the elimination of corruption) to improve the business environment both for domestic economic actors and to support an extensive inflow of direct foreign investment. Clearly, it is essential that employment policies should be supportive of these overall reform efforts.

Joint Assessment of Medium-term Economic Policy Priorities of the Slovak Republic, February 2000.

Within this context, and drawing on the analysis in preceding sections, it is possible to identify the main current and prospective issues facing employment policy:

a)	Unemployment is already high at almost 19% in mid-2000 on an LFS basis. Although cyclical factors account for part of the recent rises in unemployment, there is clearly a strong structural element – even at its lowest point, in 1996, the unemployment rate exceeded 11%. The main structural features of unemployment are: a high level of long-term unemployment; very high unemployment among those with lower levels of education; high youth unemployment; wide regional variation in unemployment, and extremely high unemployment among the Roma minority.
b)	The employment rate had already fallen below the EU level by 1999, and the gap is likely to have widened significantly in the year 2000. Employment rates are particularly low for people aged 55-64, reflecting the early age of normal retirement. However, men aged 35-54 also have a low employment rate by international standards.
c)	Persistence of labour-market rigidities is evidenced by wide regional variations in employment rates, ranging from 70% in Bratislava to as low as 50% in Kosice; by the limited development of employment in the private sector and in services; and by the low incidence of flexible forms of employment such as part-time work and self-employment.  
d)	Previous delays in reform mean that the re-structuring now underway in the financial and enterprise sectors will continue to have an employment impact for some time to come. As a result, even with accelerating GDP growth, the annual increase in employment is unlikely to exceed 0.6% in the period to 2003. At the same time, the labour force is likely to go on growing by 0.7% per annum, so unemployment is likely to remain stubbornly high over this period.
e)	Education levels in the labour force are relatively low and have risen only gradually in recent years. Even among those who have completed secondary education, many have narrowly specialised qualifications that limit their occupational mobility.

Addressing these issues, while at the same time supporting the overall programme of transformation in the economy, has implications for two main elements of labour market policies in Slovakia:

•	Programmes and policies in the field of human resource development – initial and continuing education, training and retraining.
•	Institutions and programmes that affect the smooth functioning of the labour market – principally the wage formation process, the tax-benefit system, the public employment service and its active programmes, and the nature and role of the social dialogue in the employment system.

The approaches adopted in these policy fields also need to take account of both regional disparities in employment and unemployment and of the particular needs of disadvantaged groups.

The remainder of this section discusses some of the priority tasks in relation to these elements of employment policy.

3.2 Human resources development
Initial education and training
Current situation
Basic education in Slovakia lasts typically from age 6 to 15, and encompasses both primary education and junior-cycle secondary education. It is provided through a wide network of 2,482 basic schools (of which under 100 are private, mainly church, schools), attended by more than 670 thousand pupils. Since 1998, compulsory schooling has been extended to 10 years, from age 6 until the end of the school year in which the child has reached 16 years of age. Less than 3% of pupils fail to complete basic school before the end of their compulsory schooling. However, a further x% of pupils fail to continue on to secondary schooling, and thus leave school with only basic education completed. Recent reforms in primary education have concentrated on consolidation of the school network, and curriculum changes including the introduction of foreign languages and additional optional subjects. Despite these changes, concerns persist about the quantitative overload of teaching material, and an encyclopaedic orientation towards pupils' level of knowledge based on memorising without development of creative thinking

Secondary education is provided in three types of schools: gymnasiums (“grammar schools”), secondary technical schools and secondary vocational (apprentice) schools. The gymnasiums offer four- to five - year courses of general education, concluded by taking the school leaving examination (GCSE), and preparing students predominantly for tertiary education. Secondary technical schools provide four-year courses of study (with GCSE) aimed at preparing future specialists. Secondary vocational schools (2–3 year study leading to a "certificate of qualification" or COQ, and four-year study with GCSE) are focused on practical, job skill training mostly for manual occupations. At present, the vast majority of secondary students attend technical schools (37%) or vocational schools (44%), with only 17% attending gymnasium. It is estimated that, of those who enter secondary education, x% ultimately leave school having completed the GCSE, y% complete the COQ, and z% leave without gaining any additional secondary qualification. 

Since 1989, some ("eight-year") gymnasiums integrate primary and secondary education in a single unit. These are attended by almost 40 % all gymnasium students

Secondary vocational schools are almost all (96%) state-run, but non-state provision is relatively more important in gymnasiums (17% church, 8% other private) and in technical schools (9% private, of which 1% church).

There are 22 university-type institutions offering higher education in a total of 95 faculties. Of the total number of faculties, 43% are orientated to social sciences and services, 20% have a technical focus, 8,5% focus on natural sciences, 8.5% on soil management, 8.5% on culture and arts, 6.3% have a military and security orientation, and 5.3% of faculties are medically and pharmaceutically focused. 

Admissions to higher education have risen significantly in recent years (from 16% of all 18-year olds in 1990 to almost 26% in 1999) but remain low by international standards. Non-university post-secondary education is relatively undeveloped in Slovakia, with enrolment equivalent to less than 2% of all 18-year olds in 1997. Unemployment is high among those who leave school without transferring to third level, particularly leavers from secondary technical and vocational schools who have prepared for the performance of narrowly specialised occupations. 

Background Report Table A6.1

Issues and policies
The Government of the SR places education and training among its major continuing priorities, and has been developing a long-term “Concept for the Development of Education and Schooling for the Coming 15-20 Years” on the basis of which a strategic document has been designed, “The National Program For Education and Schooling in the Slovak Republic”. This document has been presented for public debate, and after comments emerging from the public debate have been incorporated, it will be submitted to the Government and the Parliament. Already a number of main issues have been identified as requiring action.

First, raising overall education levels will require an increase in the proportion of young people completing secondary education to GCSE level. In addition, within the secondary sector there is a need to increase the share of general education, with the objective inter alia of delaying the point at which young people must make decisions about future career and specialisation.

Second, the pace of the reform in secondary vocational training and preparation is slow, lagging behind the process of structural change in the economy. More than one-third of technical and vocational schools are of an industrial type, with courses focused on skill training for declining branches of industry. Former links between these schools and individual enterprises have been weakened by structural change in the economy, with only 2.7% of students now in preparation for a job in a particular enterprise. Vocational curricula show a low level of flexibility, failing to respond to the changing qualification requirements of the labour market, and the involvement of social partners in defining the content and the structure of courses is low. The absence of a modular system of education and training restricts the later mobility of students, both horizontal and vertical.

Finally, the proportion of young people continuing their studies at post-secondary level is low, and the demand for third-level education is far from being satisfied. 
 
A number of measures have been taken to increase the efficiency of management of the schooling system and the quality of education. An independent school inspection has been set up, first stage of secondary school network consolidation has taken place, the consolidation of the elementary school network has commenced, a draft law on financing education has been prepared and "The Concept for the Development of University Education for 21st Century" was approved by the Government. In addition, the National Employment Plan, which was approved by the Government in November 2000, includes measures focused on: 
•	strengthening co-operation between the school system and employers sphere  in preparing teaching syllabuses and plans of practical preparation in secondary schools,
•	collaboration of regional labour offices in consolidating the number of schools, and in decisions on branches of teaching and learning and the number of school graduates, through advice on employer subjects' requirements and on developments in the labour market,
•	guiding pupils in selecting their careers by including in the curriculum a subject of “career selection and development of enterprise”.

Looking forward, "The National Program for Education and Schooling in the Slovak Republic” presents a strategic vision of a more complex reform of the educational system. Among the main planned measures are: 
•	further restructuring and consolidation of the secondary school network, (particularly secondary vocational schools); secondary technical and secondary vocational/apprentice schools will be combined, to create a new type of secondary vocational school that will offer different levels of general and vocational training on a modular basis, and also provide post-secondary  and  associate degree awarding courses; social partners will  participate in the curriculum design of secondary vocational training, and a core content will be identified (around 60 % of  lessons, which will be supplemented with curriculum elements tailored to  local conditions)
•	increasing the proportion of students of four-year gymnasiums to 40 % of the relevant population year; the content of education at gymnasiums will be restructured and will focus on broadly conceived general education, eliminating overloading of the teaching content  and laying emphasis on the development of key competencies (problem solving, learning skills, communication skills,  competence to use information and communication technologies),
•	installing the GSCE as the dominant form of completing secondary education, with 2- and 3- year apprentice courses being offered only in response to demand from enterprises and trade licence holders,
•	vocational qualification training centres will be established to allow upgraded practical preparation of pupils,
•	the system of study courses and branches of learning will be streamlined, broad profile branches will be created, offering broadly conceived  qualification training,
•	by the year 2010, all schools will be connected to the internet and provision will be made to equip both students and teachers with information technology knowledge and skills
•	a new National Curriculum Board will be set up to assess and accredit education and training standards and programs.

A number of specific outcome targets have been set for the reform steps outlined in the National Program:
a.	increasing the number of students admitted to third-level colleges from the current 25% of the population year to 30 % in 2004, and 35 % in 2015, respectively, 
b.	by the year 2015, as many as 50% of the population  continuing in education beyond the secondary level (post-secondary education, upper technical schools, polytechnics, specialised colleges, universities),
c.	increasing the proportion of university graduates in the workforce to 2010 to 12% by 2010, and to 16 % by 2020 
d.	increasing the proportion of secondary school graduates with GCSE to 80 % of the relevant population year by the year 2010,

The reforms also aim to give equal access to education to children from socially less stimulating environments, and from the Romany population, and meet the educational needs of talented children and children with special needs (e.g. with health impairment).

Continuing education and training 
Current situation
Legislation on continuing education training provides that anybody showing interest in further education be allowed to supplement, extend, and deepen his or her knowledge, or to be reskilled.  Continuing education and training is offered by school educational facilities (elementary schools, secondary schools, colleges), training facilities within enterprises, and by a number of non-governmental and private training facilities. According to the estimates by the Ministry of Education, more than 50 % of all the training activities in 1999 were provided by secondary schools and the training facilities of enterprises, the remainder was offered by colleges, facilities of state administration bodies, cities and communities and professional organisations.

Continuing education and training is entered by employees, unemployed, adults and those that have not taken up the possibilities to be educated at schools. Funding comes from a variety of sources – fees paid by participants, employers' funds, designated subsidy from the state budget, the National Labour Office budget, where it relates to reskilling of job seekers, municipal budgets, and funds from foundations and other organisations. Currently, statistical data are not available on the total number of persons participating in further training. 
 
A number of measures have been undertaken to encourage participation in further training by those in employment. The Labour Code stipulates a general obligation for the employer to see to the deepening and upgrading of employees' qualifications, with particular reference to unqualified employees and those being assigned allocated to a new workplace or a new kind of work. In most circumstances, the employer may be eligible to receive a subsidy from the District Labour Office of 50% of the total training cost. An employee taking part in training is entitled to time off (with pay if the training is at the employer's initiative, otherwise without pay).

The District Labour Office is responsible for securing training for the unemployed. The cost of training of job seekers is fully borne by the District Labour Office, including the payment of training allowances, which are exempt from taxation. Training of the unemployed (reskilling) has shown a steadily declining trend. According to the data from the National Labour Office, there were 1,901 unemployed persons placed in training courses at mid-2000. The majority of the training courses is focused on information technology, accounting, administrative skills, blue-collar jobs, and management and enterprise training.  

Quality in continuing education and training is ensured through accreditation of establishments and activities (including reskilling courses). Responsibility for the accreditation lies with the Ministry of Education. 

Issues and policies
It is recognised that the current state of continuing education and training is unsatisfactory. Participation is relatively limited, and there is no overall lifelong learning strategy in place. The government is conscious of the need for a better legal framework for adult participation in education at all levels (initial, secondary and tertiary) and to define the roles of the social partners in financing further training.

Specific planned measures include:
•	further training incentives for both employers and employees, involving amendments to the Income Taxes Act, the Employment Act and the Further Training Act
•	introduction and dissemination of a modular system of further training, which can respond  in a flexible way to changes occurring in the demand for labour 
•	increasing the proportion of the unemployed placed in programs of active labour market policies (including reskilling) to 20 % and more of the total number of unemployed, 
•	redesign of reskilling programs for the unemployed to improve their relevance to the needs of the labour market and of specific target groups such as school leavers, other juveniles and the long-term unemployed.
•	creating an information system which will give information on existing training options and also advice on selecting a training path
•	A program of a longer-term (6 – 12 months) training for the registered unemployed is being prepared in which it is planned to place 50 thousand persons.

Assessment
The planned reforms in initial education and training are appropriate to the existing circumstances of Slovakia and to the challenges posed by the development of a knowledge-based society. However, the pace of implementation has been slow. Government action should therefore focus on speeding up the implementation of the already-agreed reforms.

Priority in the reform process should be given to:
•	reducing drop-out levels in basic and secondary education, to move rapidly towards the target of 80% completion of secondary schooling
•	curriculum reform and the development of a modular approach in secondary vocational education, to align it better with emerging labour-market needs.

There is significant overall under-provision in the field of continuing education and training, and a strategy for lifelong learning needs to be developed.

Under-provision is most marked in the case of training and retraining for the unemployed. The share of active labour-market programme expenditure going to training and human resources should be expanded substantially, if necessary at the expense of temporary employment ("public works") programmes.
 
3.3 Institutions
3.3.1. The process of wage setting
Current situation 
Wages are determined by free collective bargaining between employers and trade unions, usually at the sectoral level, but within the framework of a series of national-level agreements concluded in the Council for Economic and Social Agreement over the period since 1992. In smaller businesses, where trade unions are non-existent, contracts of employment are negotiated on an individual basis The collective bargaining principle was reinforced by an amendment of the Wages Act of 1999, which removed the Government's powers to guide the development of wages in the business sphere through legislation. Government however retains some influence through the negotiation of the national-level agreements. 

There is also a legally binding minimum wage, which, under a legislative amendment of 1999, is determined using an indexation mechanism with direct involvement of the social partners. The amount of the minimum wage is negotiated annually in the Council for Economic and Social Agreement of the SR, based on a proposal by the Ministry of Labour, Social Affairs and Family, taking account of the development in the average wage and changes in the official subsistence minimum for an individual. The proposal is then recommended by the Council to the Government for approval. Through the application of this mechanism, adjustments to the minimum wage have become more frequent. The current minimum monthly wage amounts to SKK 4,400 – equivalent to approximately 38% of average wages in the economy in the year 2000.

Legislation provides for the extension of the binding nature of higher-level collective agreements. The Ministry of Labour, Social Affairs and Family may establish by regulation that such a collective agreement shall also be binding on employers who are not members of the employers' organisation having concluded the agreement. The extension applies to employers in the same sector, and with similar economic and social conditions, as those employers, who concluded the original higher-level agreement. The requirement of "similar economic and social conditions" is applied in practice to ensure that the extension does not economically jeopardise the enterprises affected. In 2000, the Ministry of Labour, Social Affairs and Family issued 20 ordinances of extension, affecting 212 employers. 
  
Remuneration in the budgetary sphere as well as a number of "contributory" organisations (i.e. largely financed by public subsidy) is governed by legislation adopted in 1992 and amended at subsequent intervals. Changes in pay are first negotiated in the Council for Economic and Social Agreement before submission to the government. Final decisions on the scale of increase are set in the State Budget Act, taking account of available state budget resources. Since 1994, with the exception of the year 1997, pay increases in the budgetary and contributory spheres have lagged behind increases in the private business sector. A strengthened role for collective bargaining on salaries in the budgetary and contributory sphere is envisaged from 2002, when new legislation on state and public services should come into effect. Salary increases will continue to be dependent upon the capacity of the state budget.

Issues and policies
As noted in Section 2, trends in real wages differ depending on whether the deflator used is that for consumption or for GDP overall. The latter is the more relevant in relation to the impact of wage trends on employment. On this basis, wages grew more rapidly than productivity in 1995-97; wages went on growing in 1998 and 1999, although lagging somewhat behind productivity; and real wages were broadly unchanged in the year 2000, when GDP per worker rose by somewhat over 3%. 

While wage trends over the last three years may thus be seen as "employment-friendly", this may not as yet have been sufficient to compensate for an over-shoot in real wages in the preceding years. Despite some improvement as compared with 1999, over one-third of all businesses were still loss-making in the year 2000. Wage trends, and their impact on employment, must also be seen in the context of demographic pressures leading to increased labour supply – the labour force has been growing by over 1% annually on average since 1997.

See Slovak Republic: Selected Issues and Statistical Appendix, International Monetary Fund, August 2000, page 22. The analysis there indicates that "as a result of previous wage increases, employment at the beginning of 1998 may have been above its equilibrium level, which increased the scope for dismissals in the following years."

Current projections are for average wages to increase by about 10.0% in nominal terms in both 2001, and 2002. This should see real wages rise by about 3% in each of these years, broadly in line with anticipated productivity increases in the economy overall. 

The Government is conscious of the need, in co-operation with social partners, to ensure that wage developments are in line with the employment needs of Slovakia. With this in mind, a special advisory body on pay issues has been set up within the Council for Economic and Social Agreement of the SR; this will provide a forum for the government to promote wider discussion and understanding of the pay/productivity relationship. 

Assessment
Employment-friendly wage developments will  be critical to Slovakia's ability to compete in international markets, and to maximise the employment effects of economic growth. Government should continue to promote social-partner consensus on appropriate wage developments through the Council for Economic and Social Agreement.

3.3.2Tax and benefit systems
One possible influence on the wage-formation process comes from the operation of the tax and benefit systems and how they interact.

Taxation and social contributions
Current situation
Deductions from wages in Slovakia, as elsewhere, arise under two headings – personal income taxation paid by employees, and social contributions payable by both employees and employers.

The personal income tax code is progressive, with rates on successive tranches of income rising from 12% to 42%. The first SKK 38,760 of annual income (equivalent to 28% of average earnings) is exempt from tax, and social contributions as well as part of any personal pension contributions are also tax-deductible. The lowest 12% rate of taxation applies to the first SKK 90,000 of taxable income, followed by a rate of 20% on the next SKK 60,000. A number of changes were made to the tax code in the year 2000 aimed at reducing the tax burden at lower earnings levels – the basic tax exemption was increased sharply to its new level of SKK 38,760, and the initial rate of tax was reduced from 15% to 12% while at the same time widening the income band to which this rate applies from SKK 60,000 to SKK 90,000.

Social contributions (health, sickness, pension and the employment fund) are payable at a rate of 13% by employees and 38% by the employer. Where monthly earnings fall below a specified floor (SKK 4,000 for the sickness and pension elements of the contribution, and SKK 3,000 in the case of the health and employment elements), that specified floor is used as the "assessment basis" for contributions. The ceiling on the assessment base, for all elements of the contribution, is set at just under three times average earnings.

Issues and policies
The combined rates of income tax and social contribution are high, leading to a high effective "tax wedge". Thus the "wedge" for a single worker on two-thirds average earnings is currently 40%, rising slightly, to 41%, where the worker is on average earnings. The burden of tax and social contributions at the lower of these two earnings levels is particularly high by international standards. 

i.e. personal income tax plus employee's and employer's social contributions as a proportion of total labour cost including employer's contributions.

In 1998, the latest year for which comparable international data are available, the lowest wedge for a single worker on two-thirds average earnings in the EU was in Ireland, at 23.4%. The median value across the EU member states was just over 39%. At average earnings, the median EU wedge was 44% (Taxing Wages 1998-99, OECD 2000)

Moreover, the marginal tax burden is high even at relatively low earnings levels, and rises further as earnings rise. The marginal tax wedge, including employer's social contributions, represents 44% of incremental labour costs for a single worker at two-thirds average earnings, and rise to 54% just above average earnings. 

There are growing concerns that high combined rates of tax and (particularly) social contributions are encouraging both employers and employees towards illegal employment. At the same time, despite the level of the contribution burden, health insurance companies and the Social Insurance Agency suffer from shortages of resources, largely due to failure to pay contributions by the employers and other payers (with the exception of employees). (NOTE: DOES THIS INCLUDE FAILURE BY ENTERPRISES TO TRANSMIT FUNDS FROM CONTRIBUTIONS THAT THEY HAVE ALREADY DEDUCTED FROM EMPLOYEES' WAGES?) Making good the shortfalls in these funds has imposed a significant burden on the general government budget in recent years.

In response to these problems, measures have been adopted to increase compliance with payment discipline and to improve the management of financial resources in the various social funds. Further, an agreement of co-operation and co-ordination on measures to control illegal labour was signed in April 2000 between the Ministry of Labour, Social Affairs and Family, the Ministry of Finance, the Ministry of Interior, the National Labour Office, the Social Insurance Agency, and the Occupational Safety Office (from 1 July 2001, the National Labour Inspectorate). Initial analytical work carried out under this agreement has led to draft proposals for legislative and organisational changes, and these have been submitted to government for discussion and approval.

More generally, the government is planning measures to reduce further the overall tax burden, by varying both tax brackets and the level of basic exemptions. With the effect from 2002, it is planned to increase the tax allowance in respect of each dependent child from SKK 11,400 to SKK 16, 800. Preparations are also under way to simplify tax administration for small and medium-size businesses. However, while the government is anxious to cut the tax and contribution burden of employees, the pace of this cut will depend upon the implementation of the reform in major fields of public expenditure. 

Assessment
 The high tax wedge represents a significant barrier to the creation of jobs at moderate wages, and a disincentive to unemployed and inactive people taking up such jobs. Moreover, high marginal rates of tax and social contributions promote "grey economy" activity and payments systems among those already in employment.

Reductions in the tax wedge, particularly at lower earnings levels, should thus be an urgent policy priority. Given the current financial state of the various insurance funds, the scope for such reductions must come from a) improved collection systems and b) better targeting and control of expenditures from the funds.

As an interim measure, there is a need to review the operation of the minimum "assessment basis" in relation to social contributions, and its possible impact as a disincentive to the creation of part-time employment.

Income maintenance for the unemployed
Current Situation
Unemployment benefit is payable to people who have lost their job and to students who have left school and failed to find employment. To be eligible, an individual must have been in insurable employment for two of the last three years prior to claiming benefit. Benefit is granted 9 months (if an unemployment insurance contribution was paid by the individual concerned for more than 15 years), otherwise for 6 months. If the unemployed individual left his/her last job without any serious reasons the duration of benefit is reduced by half. Where the person has been in continuous insurable employment for the previous six months, the rate of benefit is 50% of previous earnings for the first three months and 45% for the remaining months, subject to a maximum monthly benefit payment of SKK 5,325. Where employment has not been continuous over the preceding six months, the rates of 50% and 45% are applied to a notional earnings figure of SKK 3,000, yielding an initial monthly payment of SKK 1,500.

The average amount of unemployment benefit granted in 2000 was SK 3,392, equivalent to about 41% of average net earnings for the year 2000. The number of beneficiaries receiving the maximum unemployment benefit (SK 5,235) fell significantly between end-1999 and end-2000. The most common payment amount is now SKK 1,500, suggesting that significant numbers of the newly unemployed have been in only intermittent employment. The average duration of UB receipt was 5.9 months and the average number of beneficiaries was 114,000 persons (or 22% of the average number of registered unemployed).

Where entitlement to UB has been exhausted, or where the amount of benefit is lower than the subsistence minimum, an individual is entitled to seek a social assistance benefit under the Social Assistance Act. Social assistance benefit is calculated on a household basis, and is equal to the difference between the net income of the household and a "subsistence minimum level" that varies with the size and composition of the household. Since June 2000, the monthly subsistence minimum is set at approximately SKK 3,500 for a single person, SKK 5,900 for a couple without children, and SKK 9,100 for a couple with two children. One of the conditions for eligibility for social assistance is that all adults in the household are either employed, retired, disabled or registered as unemployed. Where at least one adult is in employment, the monthly subsistence minimum for the household is increased by 20%. 

These amounts apply where the individual's requirement for social assistance is based on "objective reasons". Where the requirement is based on "subjective reasons" – e.g. has been caused by him or he has not applied for his other legal claims – these amounts are reduced by 50%.

In January 2001 social assistance benefit was being paid to 308,800 beneficiaries, of whom 283,000 (91.6%) were registered as unemployed. The average payment was SK 2,674, equivalent to 32.4% of the average net wage in the year 2000. Just under half (48.6%) of all beneficiaries were receiving payments designed to raise individual or household income to 50% of the subsistence minimum ("subjective reasons"), 45.8% of payments were based on 100% of the subsistence minimum ("objective reasons") and 5.4% based on 120% of the subsistence minimum (i.e. at least one household member was in employment).

Issues and policies
There has been a growing awareness that the system of income maintenance is over-complex and may have unintended side effects on employment incentives through the creation of poverty- and unemployment-traps. Partly in response to this, a large number of reforms have been introduced over the last few years.

In December 1999, the contribution conditions for unemployment benefit were raised (from one to two years out of the last three prior to claiming), the duration of benefit was reduced from 12 to 9 months, and the rates of payment were reduced from their previous levels of 60% for the first three months and 50% thereafter. Shortened eligibility duration was introduced for persons who had left their last job voluntarily, and stricter eligibility criteria were introduced for school-leavers seeking benefit. 

Under the social assistance system, the application of a higher subsistence minimum in cases where at least one household member is in employment was intended to improve employment incentives, and in particular to allow for costs incurred in travelling to work and other work-related expenses. Also, since December 1999 school leavers and graduates have automatically been assessed to be in need due to "subjective reasons" for the purposes of becoming eligible for social assistance. 

Despite these changes, the system remains unnecessarily complex, particularly in relation to the interaction between the unemployment benefit regime and the arrangements for social assistance. It is clear, for example, that most recipients of unemployment benefit also have a separate entitlement to top-up social assistance payments, thus leading to administrative duplication. In addition, there remain significant employment disincentives within the social assistance system, at least for certain categories of worker. Payments for a family with two children (SK 9,090 for "objective" and SK  6,125 for "subjective" reasons) can be compared with the average net wage in the Slovak economy overall of SK 8,260; the average net wage in the social care sector is SK 6,125.

The Slovak Government is conscious, therefore, of the need for better co-ordination between the unemployment benefit and social assistance systems, primarily in terms of their impact on job-search among the unemployed. In reviewing the system, the government intends to pay particular to relative incomes when in and out of work, taking account of travel costs to/from place of work, and of expenses on accommodation when travelling further afield for jobs. The review will also assess the extent to which job-search and availability criteria are adequately enforced by the organisations responsible for paying the various benefits and allowances.

Assessment
A number of problems have been identified in the system of income maintenance for the unemployed – replacement rates relative to earnings from employment are high for at least some categories of worker; the social assistance system is unnecessarily complex; the interaction between social assistance and unemployment benefit is also complex, leading to uncertain effects of recent reforms in unemployment benefits; support for active job-search among recipients of benefit and assistance, and monitoring of the job-availability criteria for eligibility for the payments, appears relatively limited.

The government's review of benefits and assistance should be proceeded with as a matter of urgency, and focus on the identified shortcomings in the system. The objective should be to remove work-disincentives as far as possible. Better targeting and control should also help relieve financial pressures on both the insurance funds and the general budget, thus increasing the scope for the necessary reductions in tax and contribution levels. Consideration should also be given to the introduction of in-work benefits for some categories of worker.

Pensions 
Current situation
Pensions are currently financed on a pay-as-you-go basis. The retirement age is set at 55 years for women and 60 for men. Depending on the retiree's work history, the pension award in the year 2000 could range from a minimum of SKK 2,337 to a maximum of SKK 7,740 per month. The actual average pension payment as of 31 December 2000 was SKK 5,382 per month.
 
The current system contains some encouragement to people to remain employed beyond the normal retirement age. In such cases, as long as the person concerned does not draw a pension, the pension entitlement is increased by 6% for each full year of employment after the right to old-age pension has been established. Part-years of employment beyond the retirement age are taken into account on a pro-rata basis. The current system also provides for the possibility to retire early on a reduced pension.

Issues and policies
As noted in Section 2, labour force participation is relatively low for women aged 55-64 and for men aged 60-64. In addition, the size of the population in these age groups is projected to rise relative to the population of working age. As a result, on current policies, pension costs are likely to impose a growing burden on the public finances.

In response, based on the Concept of Social Insurance Reform of August 2000, the Government plans to reform the pension system by introducing an element of funding. The reformed system of social pension insurance will comprise three "pillars":

a)	pillar I – a statutory mandatory pillar financed on a pay-as-you-go basis,

b)	pillar II – a statutory mandatory pillar funded from contributions to individual personal accounts of policyholders. 

c)	pillar III – complementary voluntary pillar financed from contributions by employers and the employee to individual personal accounts of policyholders.

Outside the framework of social insurance, a worker and or the employer may make additional contributions to a voluntary commercial pillar. 

Within the reform, starting in 2002, the pension age for women will be raised progressively to the current pension age for men, i.e. 60 years. The proposed system will not make provisions for the possibility of early retirement. These changes are expected to increase the size of the effective working-age population by approximately 60,000 by 2006 and increase labour-force participation in the older population. The Government also intends to review possible further measures to increase participation of older workers (e.g. support for flexible working time arrangements, facilitating access of older workers to different forms of further training)

Assessment
The current direction of pension reform is appropriate given the low level of labour-force participation in the older population. Over the longer term, the target retirement age of 60 years may still be too low in the light of prospective demographic developments. It should therefore be kept under review.

3.3.3 The Public Employment Service
Current Situation
The PES is an important instrument of employment policy, particularly in the context of the high levels of unemployment obtaining in Slovakia and the need for a more active and preventive approach to unemployment. The capacity of the PES to develop such an approach depends in part on the level of resources devoted to it and on how these resources are deployed. 

As already noted, the NLO has an overall staffing level of almost 5,000, representing a ratio of one staff member for each 100 unemployed. However, a significant part of the staff are devoted to functions other than those of a typical PES (notably the collection of insurance contributions and the payment of benefits). For professional front-line PES staff, the ratio to the total unemployed is approximately 1-to-400. Even allowing for the fact that the ratio would be somewhat reduced if clerical and other back-up staff directly related to PES functions were included, this ratio is high by international standards. This relatively large workload is reflected in the extent of access for unemployed people to employment services. Although the network of regional and district PES offices is relatively dense (one office for every 60,000 of population), the times at which the offices' facilities are available to the public are rather limited – typical opening hours are limited to mornings only for four days each week.

Staff quality and skills are also important. Currently, NLO staff can improve their skills through training at the NLO Training Institute or externally. Training is complemented by methodological guidelines and instructions issued on an ongoing basis for job brokers, consultants, inspectors and other functions with the objective of providing a uniform level of service throughout the national-wide network of NLO offices.

The effectiveness of staff can also be enhanced through the application of information technology. Such technology is widely applied in the internal administration of the NLO in such areas as e-mail and communication of management information. Application to job-broking and related PES functions is however more limited. Although there is a nation-wide vacancy database, in practice job-brokers and clients can access only information on their own local area. District offices do not have Internet access, which restricts their ability to offer appropriate self-service facilities that might reduce the routine work-load of front-line staff and free them for more intensive work with priority groups among the unemployed.

Issues and policies
The guiding principle of the future development of the PES will be the government's objective of offering a "fresh start" to unemployed persons aged 29 and under before they reach six months of unemployment, and to persons aged 30 and over before they reach 12 months unemployment (Measure no. 8 of the National Employment Plan). To move towards this objective, the Plan envisages more widespread use of personal employment plans for the newly unemployed, as well as the introduction or expansion of active programmes (employment subsidies, training and work-experience schemes) that could form the basis of such a fresh start.

However, the core of such an active strategy must be the PES' ability to initiate meaningful contact (including the drawing up of a re-employment plan) with all of the unemployed at an early stage in their unemployment spell, and to maintain such contact on a regular basis thereafter. This is necessary to allow systematic support for and monitoring of the job-search strategies of individual unemployed people, and the identification of appropriate employment-subsidy or re-training interventions for those requiring such additional assistance. In-depth contact with the unemployed would also help in identifying, at the individual level, barriers to re-employment caused by the tax and benefit systems, thus contributing to the design of necessary reforms in these systems. 

The National Employment Plan recognises the need to reinforce the job-mediating and advisory services of the NLO relative to its other activities (Measure 18). A special budget of SKK 100 million has been set aside for 2001 to support development of the NLO's work with individual unemployed people. In addition, measures to improve the management of the collection of insurance contributions should also release additional NLO staff from this type of administration for more direct work with the unemployed. However, at present, the Plan is not specific on the procedures to be followed in relation to systematic contact with the unemployed, or on their resource implications for the PES functions of the NLO. 

More generally, the Plan envisages a number of developments and objectives in relation to the PES:
•	specification of targets for a range of NLO activities within an annual performance plan (Measure 7)
•	evaluation of the effectiveness of the current system of governing boards in the NLO at three separate levels (national, regional, district) (Measure 11)
•	continued development and improvement of the NLO's computerised National Job Information System "as a comprehensive universally available national communication instrument" (Measure 15)
•	increasing service quality in the NLO through continued attention to personnel development and improved management and financial control systems (Measure 18)

Again, the Plan tends to identify only general objectives in these fields. The actions specified for the year 2001 involve, in many cases, a process of analysis and review leading to the preparation of more precise measures and targets, rather than actual implementation. It is envisaged that more precise targets will be set in planning documents for subsequent years.

Assessment
An active PES, capable of initiating regular and effective contact with the individual unemployed throughout their spell of unemployment, will be essential to achieving the government's objective of a "fresh start" for young people and the long-term unemployed. A concrete plan for an active PES should be prepared, identifying the detailed approach to be adopted and the personnel and other resources that will be necessary for the PES to implement it (based on the level of flows through unemployment, frequency and nature of PES contact, etc.).

The indications are that a more active approach will require additional resources to be devoted to the front-line PES activities of the NLO (job-broking, support for individual job-search, preparation of individual employment plans). It will be important therefore, to move quickly to implement measures that will release NLO staff resources for application to front-line services, including:
•	streamlining the NLO's involvement in collection of social security contributions
•	increasing the use of information technology, particularly through widespread use of the Internet to improve the flow of information on vacancies, on a self-service basis, to jobseekers.

Increased front-line staffing should also allow the PES to increase the quality and accessibility of its services to both employers and job seekers (e.g. through longer office opening hours).

3.3.4 Active labour market programmes
Current situation
Total expenditure on active labour market programmes was SKK 1.6 billion in 2000 – equivalent to 0.18% of GDP in current prices. Apart from the limited provision of re-training for the unemployed discussed in Section 3.2 above, the main active measures take the form of employment subsidies for so-called "negotiated jobs" for two groups – young people and the long-term unemployed. Out of the total expenditure of SKK 1.6 billion, 4% was used for retraining programs, 86.4% for "negotiated jobs", and 9.7% for promoting employment of disabled people.

Support of employment of young people
To tackle unemployment among school graduates, a pilot project titled “Short-term programme supporting the employment of young people” was commenced in May 2000. The programme involves an employment subsidy to encourage the recruitment of young people by private sector employers. NOTE: CAN WE GIVE MORE DETAIL? E.G.. SIZE OF SUBSIDY? DOES IT TAKE THE FORM OF A GRANT PAYMENT OR ALTERNATIVELY EXEMPTION FROM SOCIAL SECURITY CHARGES? WHAT OTHER CONDITIONS APPLY? The programme is operated by the NLO. Initially, 2,400 young people participated and almost 2,000 of them are currently continuing in the participation. The programme is being extended to the entire country this year, and 50 million SKK has been reserved in the 2001 national budget for the purpose. 

A program supporting one-year study visits by university graduates at central state authorities has been running for several years. Preparations are underway to extend this programme to secondary school leavers, and to employers in regional and district government as well as private enterprises.

Employment support program for the long-term unemployed
Long-term unemployment (defined as unemployment lasting in excess of one year) increased from 38.2% of all unemployment in December 1998 to 43.2% in December 1999 and to 50.0% in mid- 2000. Responding to this development, in August 2000 the Government introduced an “Employment Support Program for the long-term unemployed". The programme allows district labour offices to conclude agreements with non-profit employers to hire a long-term unemployed person for a specified duration into "public beneficial" jobs. The employer receives a monthly subsidy of SKK 4,537 per month (1.3 times the minimum wage) for each worker recruited under the programme. The district office also pays the employer's social security contributions for such jobs. Subsidies from the national budget amounting to SKK 1.3 billion were set aside to finance these jobs in the year 2000.

Demand from long-term unemployed people for places on the programme was strong – in fact larger than could be financed from the available funds. By the end of 2000, over 72,000 people (equivalent to almost 3% of the labour force) had been placed in jobs supported under the programme. NOTE: IS THE FIGURE OF 72,000 CORRECT? I TOOK IT AS THE FIGURE OF 72,300 ON PAGE 51 OF THE DRAFT JAP The initial sharp uptake under the programme is seen as having contributed to a reduction of 80,000 in registered unemployment between July 2000 and October 2000. The share of long-term in total unemployment also fell in the second half of 2000. However seasonal factors may also have contributed to these trends, and the broader LFS measure of unemployment showed relatively little change over the same period. The programme for the long-term unemployed is continuing in the year 2001, with State-budget financial support of SK 1.5 billion.

Assessment
Active programme expenditure and participation remains low relative to the scale of the unemployment problem in Slovakia. Moreover, the vast bulk of expenditure goes on the provision of temporary jobs – opportunities for re-training for the unemployed are extremely limited.

There is therefore a need to expand active programme provision, while at the same time switching the balance of provision substantially in favour of re-training and other measures that can enhance the skills and employability of the unemployed. The PES should have a central role, based on its systematic contacts with the unemployed, in determining the content of expanded active programmes, and in identifying and recruiting the priority groups among the unemployed at whom programmes should be targeted.

3.3.5 Regional aspects of employment policy
Current Situation
As noted in Section 2, Slovakia is marked by significant regional and local imbalances in the economy and the labour market.  Almost 43% of the Slovak population live in "problematic" regions as defined in the National Development Plan.  Outside Bratislava, the level of GDP per capita in the Slovak regions varies between 29% to 44% of the EU average figure. Regional disparities are especially great.

The priority given by government to addressing regional problems has been reflected in a series of policy documents, notably the Integrated Regional Development Plan (October 1999) and the National Development Plan (March 2000).  Principles for the allocation of responsibility for regional policy among the various tiers of government are set out in the Act on Regional Development Support due to come into effect in mid-2001. 

Support for small and medium-sized enterprises (SMEs) is a central element in policy for the development of the regions. The National Agency for Development of Small and Mid-Size Enterprises was set up by the Government in 1993, to co-ordinate all activities to support small and mid-size enterprises at local, national and international levels, and an advisory body to government, the Governmental Council for Small and Mid-size Entrepreneurship, was established in 1999. A state programme to support development of small and mid-size enterprises for the years 2000 to 2005 was approved by the governmental in September 2000 targeting on technology transfer, consulting, support of international co-operation, loan and micro-loan schemes, training support and educational activities. SMEs are also supported through tax legislation; since 2000 the income tax of legal entities has been reduced from 40% to 29%.  In addition, a new option has been introduced for micro-enterprises to pay a flat tax based on revenue rather than profits and greatly reducing the accounts-reporting requirements for such firms.

Total revenues of up to SK 500,000 are taxed at 2%, up to SK 1 mil are taxed at 2.25% and up to SK 1.5 mil a flat tax of 2.5% applies.

New legislation came into force in 2000 regulating, inter alia, the criteria for State support for SMEs. The support may be in the form of State aid (subsidies, grants) or of indirect aid (loan guarantees, sale of public assets at below-market prices, advisory and consulting services). The legislation provides for relatively favourable state-aid terms to be granted in districts where the living standard is very poor or unemployment rate is very high.

Policy also supports direct foreign investment through tax credits as well as a range of measures to improve the legal and regulatory environment for foreign investors. The tax-credit measures, in particular, are targeted on supporting foreign investment in districts where the unemployment rate exceeds 10%.

Encouraging regional mobility in the labour force is also important. Housing policy (support for housing development and for a properly functioning housing market) is seen as one way to achieve this.  A range of measures has been taken: privatisation of publicly owned housing, housing subsidy reductions and de-regulation of the housing market. New forms of financing have been introduced for housing purchases. There is direct support for housing construction for low-income families, a programme of infrastructure construction and a programme of reconstruction of houses and apartments. 

Issues and policies
It is recognised that the existing range of measures to support SMEs and inward investment has had only a limited impact on regional disparities. The government is therefore conscious of the need both to improve the effectiveness of these measures and to increase their targeting to the most disadvantaged regions.

At the level of overall effectiveness of supports for enterprise, a number of planned measures are set out in the National Employment Plan. These include steps to improve the business environment through further simplification of tax, customs and financial legislation; improved consulting and advisory services for SMEs; and specific supports for co-operative enterprises. Enterprise incentive measures are being reviewed and up-dated to ensure their compliance with the EU acquis.

The process of public administration reform is intended to improve the ability of regional and district administrations to respond to local conditions by reducing the level of centralisation in the administrative system. This will open the way for drafting local measures to support regional development and job-creation. In addition, some national measures (e.g. support for co-operatives, creation of "industrial zones") will be targeted in particular on high-unemployment areas.

Despite the government's efforts, housing construction has not kept up with demand, and regional mobility in the labour force continues to be constrained by the operation of the housing market. There are significant differences in costs for housing in prosperous and backward regions and travelling costs remain high compared to the average net wage. While the government is of the view that specific labour-market policy measures in support of mobility might help counteract these problems, no specific proposals in this area have been included in the National Employment Plan.

Assessment
Addressing regional imbalances will be achieved principally through policies for development – enterprise and FDI supports, improving the climate for business, improving infrastructure, and increasing the capacity of regional and district administrations to respond to local conditions. In each of these areas, central government support should be closely and consistently targeted on areas with the highest levels of unemployment. 

The main barriers to regional mobility relate to housing, and efforts to improve the operation of the housing market should be continued and intensified.

Barriers to mobility may also exist within the system of income maintenance for unemployed people, and identifying such barriers should be one focus of the review of that system. 

Expansion of the training and human resources element in active labour market programmes should also be targeted on high-unemployment regions, and the type of training provided should be linked to the priorities of the proposed regional development plans.

3.3.6. Equal Opportunities
Gender equality
Current Situation
Aggregate-level indicators are not suggestive of pronounced disadvantage for women in labour-market outcomes in Slovakia. Thus, despite the low overall employment rate, the rate for women is close to the EU average, and the gender-gap in employment rates is low by EU standards. Nor has there been any significant gap between male and female unemployment in recent years. However, the apparent lack of inequality in aggregate employment and unemployment must be seen in the context of the generally higher standard of education in the female than in the male workforce.

Moreover, some inequalities in labour-market outcomes do persist. More of the female unemployed, for example, remain out of work for long periods. Women's earnings are also significantly below those of men – partly because of wage-differences within occupations, but largely because of the concentration of women in occupations offering relatively low pay rates.  

For example, women dominate occupations such as teachers at elementary schools, library employees, accounts clerks, health care jobs, social workers, cooks, etc. On the other hand, men dominate in occupations such as managers, IT staff, designers, manual jobs in manufacture and maintenance, assemblers, service of machinery in metallurgy, etc.

Equal opportunities legislation is underpinned by Article 12 of the Constitution where fundamental rights and liberties are guarantied within the Slovak territory regardless of sex, race, colour of skin, language, religion and faith, political or other thoughts, national or social origin, minority or ethnic group, family or other position. The revised Labour Code adopted in 1999 gives effect to these principles in the field of employment. Inter alia, the Code provides for equal pay for equal work, as well as for equal opportunities in employment. The legislation prohibits indirect discrimination; places the burden of proof on the employer in equal opportunities cases; provides for equal treatment of part-time workers; explicitly bans discriminatory job-advertisements; and provides for equal treatment of men and women in relation to parental leave.

"Equal work" is defined as " work which is equally complicated, having equal responsibility and intensity carried out under the same working conditions and achieving the same performance and outputs of the work".

More generally, a National Action Plan for Women in Slovakia was approved by the government in 1997, with the objective of improving the position of women in Slovakia over a ten-year period. The Plan involves "mainstreaming" of gender equality into a wide range of government policies, and progress is evaluated annually at the end of April. This enables the identification of issues that have not been addressed sufficiently. The main employment-related issues identified for additional action in the most recent evaluation report under the National Action Plan for Women include: continuing pay inequality, difficulties posed for women by the "double burden in employment and at home"; and particular difficulties in relation to access to credit finance for women starting up new businesses.

Starting in 2000, the Ministry of Labour, Social Affairs and Family launched an audit called “Family and Work”. The objective is to value employers who create a favourable working environment for persons with family commitments and ensure equality of men and women at work.

Issues and policies
The concentration of women into certain occupations, particularly those with lower rates of pay, is the main continuing source of gender inequality in the labour market. This suggests that the main focus should be on ensuring the effective implementation of policies on equal opportunities in access to employment. A number of issues arise in this regard.

First, at present persons wishing to vindicate their rights under equal opportunities legislation must do so through a range of different legal channels. A more effective system would involve a single public agency devoted to active enforcement of the anti-discrimination legislation, including systematic dissemination to women of information on their legal rights, and support to them in vindicating those rights. Recognising this, the government intends to establish the position of an ombudsman for equal treatment, who should operate as an inspection or control body when eliminating discrimination.

Second, women's access to employment could be enhanced by more general measures to promote family-friendly patterns of employment for both women and men with childcare responsibilities. Some public encouragement to employers in this area already exists, and further possible measures are being discussed with the social partners. Wider availability of part-time work opportunities would be one way of addressing this issue, and, as noted at 3.3.2 above, this should be borne in mind in reviewing the system of social contributions.

Third, although women (including those returning to the workforce after an absence while caring for children) are in the majority among participants in re-training programmes, the overall availability of such opportunities remains low.

Insofar as wage inequality within occupations remains a problem, there may be scope for reviewing the relatively restrictive definition of "equal work" in the equal pay legislation (see footnote 19).

Assessment
Priority should be given to measures to improve the enforcement of existing equal opportunities legislation, through the establishment of the proposed single agency for enforcement and through positive communication of individual's rights under the legislation.

Measures to promote "family-friendly" employment patterns for women and men with child-care responsibilities should include identification and elimination of barriers to an increase in the number of opportunities for part-time employment.

Opportunities of minorities
Current Situation
One of the crucial issues in Slovakia related to equal opportunities of minorities is the low social and economic status of the Roma population who make up the second biggest minority in Slovakia. 

The relatively disadvantaged situation of the Roma on the labour market is attributable to a range of factors:

•	Education levels among the Roma continue to be relatively very low.    Failure to complete elementary education, and to progress to secondary level schooling is far more frequent among Roma children than among other groups. As a result, the proportion of Roma students in the secondary school system is low and most of them are trained to be manual workers. The proportion of Roma students in the university system is minimal. 
•	Roma's access to the labour market and to education is also hampered by their living conditions. According to official data a significant part of the Roma population (about 126 thousand) live in 616 settlements with no accessible roads, no water, lighting, sewage system or telecommunications.
•	In spite of the legislative ban on discrimination in access to employment, the signals do exist that there is a discriminatory approach adopted towards Roma population. 

Issues and policies
The complex nature of the problems facing the Roma minority has led the government to follow a wide-ranging approach to the issue. The office of a Governmental Plenipotentiary was established in 1999 to address the issues of Roma minority, and a “Strategy for Addressing the Roma Minority Problems and a Set of Implementation Measures" has been published. In 2000 the Government approved 56 projects costing over SK 10 million operating in education, culture, employment, the social field and the health condition of the Roma population.  To fund other systematic actions addressing Roma problems the Government has developed a Minority Development Project for the years 2001 to 2002 costing 4 million EURO.

Educational disadvantage is seen as particularly important. The Ministry of Education is preparing a detailed strategy on the education and upbringing of Roma children. Experiments have been made with preparatory classes for Roma children at elementary schools, and the number of such classes is increasing. Specific measures aimed at improving the living conditions of Roma include a World Bank-supported project to construct more than thousand apartments. In relation to discrimination, a Minority Tolerance Project for 2000 to 2001 focusing on Roma issues and funded by PHARE. Effective implementation of anti-discrimination will also be enhanced by the creation of the position of Ombudsman referred to earlier, and by the introduction of detailed statistical monitoring of labour-market outcomes and programme participation for the various ethnic groups.

Roma are not directly targeted for participation in active labour-market programmes. However, recruitment to programmes is being concentrated on long-term unemployed people with low qualifications; given the prevalence of Roma within these groups this represents a degree of de facto targeting.

Assessment
The main focus of efforts to improve the labour market situation of the Roma population should continue to be on measures to increase their participation levels in basic and secondary education, as well as in an expanding range of re-training programmes.

Given the evidence of continuing discrimination against Roma in access to employment, greater efforts are required in the enforcement of existing anti-discrimination legislation. 

3.3.7. Social Partnership
Current Situation
Social dialogue on employment policy issues takes place at a number of levels:
•	tripartite dialogue at national level in the Council of Economic and Social Agreement, and in bodies such as the Social Insurance Agency, National Labour Office and health insurance companies 
•	tripartite involvement in boards of directors of regional and district labour offices, 
•	bi-partite social dialogue (collective bargaining) at sectoral level
•	micro-level – bipartite-based social dialogue among employers and trade unions at an establishment level.  

The role of the Council of Economic and Social Agreement is underpinned by legislation dating from 1999, which provides that social partners are involved in drafting legislation and any other principal documents in the economic and social field including employment policy. The Council has played an important role in clarifying the position of the Government, trade unions and employers on issues in the fields of the economy, employment policy, income and social policy, employees’ and employers’ rights based on valid legislation and agreements, and on ILO recommendations. Recent years have also seen increased tripartite involvement in advisory bodies in the field of education at national, regional and local level, particularly in relation to the alignment of vocational education with the needs of the labour market.

Issues and policies
Difficulties for bi-partite collective bargaining are posed by a decline in union membership to its current level of 35% of all employees. As a result, most SMEs do not have any trade union organisations or units, so a significant part of employees are not protected. To address this issue, the new Labour Code provides for the establishment of employees’ councils representing all employees in firms where no trade union operates. The Code is currently under discussion in the National Council of the Slovak Republic. 

As a further measure to support bi-partite dialogue, training has been provided for already practising and newly appointed intermediaries and arbiters to improve their ability to provide impartial and objective assistance in different phases of collective bargaining.

Assessment
Social partnership already plays a significant role in the formulation and implementation of employment policy at national and regional level. Continued involvement of the social partners will be important to success in a number of areas – particularly the development of a more active PES, the expansion of training opportunities for the unemployed, and the reform of vocational education. 

3.3.8. Preparation for Implementation of the European Social Fund
This Joint Assessment Paper constitutes an important preparatory document for developing a national and regional strategy for potential assistance by the European structural funds after accession of Slovakia to the European Union, and until then through the PHARE programme.

The institutional framework for utilisation of structural funds, primarily of the European Regional Development Fund (ERDF) and the European Social Fund is being established with the use of SPP, the special preparatory program of the European Union in the SR Governmental Office, and with the SPP program for utilisation of the European Social Fund through the European Training Foundation (ETF) in Turin. A National Development Plan is in preparation, co-ordinated by the Ministry of Construction and Regional Development and its temporary controlling structure, the Preparatory Council for structural funds. A proposal for the establishment of a more permanent national steering and monitoring committee is under consideration by the government.

At the same time the Ministry of Labour, Social Affairs and Family is responsible for preparing an Operational Programme for human resources and for ensuring its co-ordination with regional operational programmes. The Ministry also intends to establish a special structure as the managing authority of the European Social Fund, including a central payment agency. Initial responsibilities of this unit will be to co-ordinate and monitor ESF-type pre-accession activities in the field of labour market policy, as well as dissemination of information on the ESF and on the requirements of the labour market. The unit's co-ordination work will build on the former departmental PHARE structures (at the Ministry and the National Labour Office, as well as at the Ministry of Education).

Issues and policies
A number of issues remain to be dealt with in the preparations for ESF utilisation, in particular:
•	establishment of a national monitoring committee for the human resources operational programme
•	clarification of the relationship of  the ministerial structure for the human resources OP with regional controlling structures of the ESF and with ERDF control structures
•	the role of implementation units within the NLO and the education ministry

The government's priorities for 2001 include resolution of these issues as well as enhancing of qualification and skills of staff working for both the management authority and the implementation units. 

Assessment
The Government should move urgently to finalise the arrangements necessary for effective utilisation of the ESF.

4. Conclusions
The Slovak Republic has made substantial progress in the restructuring of its economy and in its approximation towards a market-oriented and socially oriented economy. 

The Commission's Regular Report 2000 concludes that "Slovakia may be regarded as a functioning market economy", although it also points to risks in relation to fiscal policy, to the need for effective implementation of the legislative framework for business activity, and to the need for further progress in privatisation and banking supervision. Also, Slovakia "should be able to cope with competitive pressure and market forces within the Union in the medium term, provided that the structural reform agenda is fully implemented and broadened to include remaining reforms". 

Clearly, sustainable macro-economic policies and the programme of broad economic reforms will be essential to ensure the competitiveness of Slovakia and thus underpin economic and social progress. But employment policy and labour market reforms will also have a crucial role to play, for several reasons. Extremely high unemployment is the clearest macro-economic imbalance, and the clearest evidence of the competitive pressures faced by Slovakia. Moreover, the labour market displays a number of clear structural features – most notably a high level of long-term unemployment; very high unemployment among those with lower levels of education; high youth unemployment; wide regional variation in unemployment, and extremely high unemployment among the Roma minority. Employment rates are also low, and continuing re-structuring will pose further employment challenges. It is essential therefore that employment and labour market policies should be supportive of the broader process of economic reform, and help maximise the employment impact of expected economic growth.

This Joint Assessment Paper has identified a number of priority policy areas where progress is still needed in the Slovak labour market and where ongoing monitoring should be carried out in the context of the Employment Policy Review: 

•	Committed implementation of initial-education reforms, with particular emphasis on reducing drop-out at secondary level and on aligning initial VET with the needs of the labour market
•	Expansion of continuing education and training in the context of a clear strategy for lifelong learning
•	Maintenance, through social-partner consensus, of "employment-friendly" wage developments in line with growing labour productivity
•	Reducing the "tax wedge", particularly at lower earnings levels 
•	Co-ordination between the tax/contribution system and the unemployment support system (including social assistance) in order to in order to increase incentives for the unemployed and inactive to take up employment in the formal sector, 
•	Implementing an active strategy of supporting and encouraging job search and employability through systematic engagement of the PES with the unemployed throughout the unemployment spell; this will require a re-orientation of the priorities of the NLO and improvements to the services it can provide to both job-seekers and employers 
•	Expansion of active labour market programmes as part of this activation strategy; preference should be given to training and human resources measures over those providing only temporary public jobs,
•	Increased focusing of development supports on those regions hardest hit by unemployment
•	More active enforcement of equal opportunities legislation, both in relation to gender and to ethnic background, together with committed implementation of measures to raise education participation among the Roma minority
•	Continuation of a high level of social partner involvement in the formulation and implementation of employment policies
•	Completion and reinforcement of the institutions required for implementing the European Social Fund.

Broad strategic principles for action in a number of these areas have already been set in the National Employment Plan, published in 2000, and drawn up in consultation with relevant ministries and with the social partners. A progress report on implementation is to be prepared in mid-2001 for review by the government. This review should be taken as an opportunity to set more concrete targets in planning documents for future years.

The Commission and the Government of the Slovak Republic intend that the preparation of this Joint Assessment will form only the first stage in an ongoing process of employment policy review. Further co-operation will concentrate on joint monitoring of progress in implementing the measures outlined above, based on regular implementation reports.