www.peer-review-social-inclusion.eu

On behalf of the European Commission DG Employment, Social Affairs and Equal Opportunities

Slovak Republic In-work poverty and labour market segmentation A Study of National Policies Zuzana Kusá The Institute for Sociology of the Slovak Academy of Sciences Bratislava Daniel Gerbery The Institute for Labour and Family Research

Disclaimer: This report reflects the views May 2010 of its author(s) and these are not necessarily those of either the European Commission or the Member States.

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Content Summary ............................................................................................................................................... 2 1. The current situation in Slovakia: statistical overview in comparative perspective ............. 3

1.1 In-work at-risk-of-poverty rate by gender, age, educational level and household type ........ 4 1.2 Tax rate on low wage workers: low wage traps ................................................................... 6 1.3 Gender pay gap................................................................................................................... 6 1.4 Gender segregation............................................................................................................. 9 1.5 Inactivity and part-time work due to lack of care services for children

and other dependants........................................................................................................ 10 1.6 Transitions by type of contract........................................................................................... 11 1.7 Transitions by pay level ..................................................................................................... 13 1.8 Diversity and reasons for contractual and working arrangements ..................................... 13 1.9 Undeclared work................................................................................................................ 15 1.10 Overtime work and hours of overtime................................................................................ 16 1.11 Access to flexitime............................................................................................................. 19

2. Main causes of in-work poverty and labour market segmentation: literature review.......... 19 3. Presentation and analysis of policies ....................................................................................... 23

3.1 In-work poverty .................................................................................................................. 23 3.1.2 Low work intensity ................................................................................................ 26

3.2 Labour market segmentation – working conditions and “employee-friendly” flexibility....... 29 References .......................................................................................................................................... 35

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Summary The Slovak Republic belongs to the EU countries with below-average monetary poverty rate since 2005 when the SILC was launched. The working poor are not very widespread: in 2008 6% of employed persons were in the risk of poverty, which is less than in more than half of the EU countries. In-work poverty is the most frequent among working lone parents (17%) and low-educated workers (14%). People with temporary work contracts face higher risk of poverty than employees with permanent work contracts. The same holds true for part-timers in comparison to full-time workers. An extent of part-time jobs in the Slovak Republic (1.5% in 2008) is one of the lowest in the EU. Fixed-term contracts are still not very significant (3.4% in 2008). On the contrary, self-employment is more widespread (13.6% in 2008). In case of overtime work and undeclared work we lack sufficient time series of valid data. Low shares of overtime documented by the LFS do not correspond with evidences of wage survey. In the period of economic growth, a significant part of temporary employees (69% in 2006-2007) changed the status into more secure “permanent employee”. On the other hand, more than one tenth of unemployed moved into the inactive group of population in both periods. It suggests that new openings were used less by those far from labour market. Concerning pay level mobility, the highest proportion of upward transitions occurred in the lowest decile in both observed periods. Slovakia belongs to the EU countries with the lowest tax rates imposed on low wage earners. The gender pay gap has been above the EU-27 average and in all education categories and this situation is rather persistent. In-work poverty hasn’t been explicit target of academic or policy research in Slovakia up to now. Even ad hoc studies have been absent, not to speak about more systematic efforts. There are few studies concerning undeclared work, minimum wage or labour segmentation. A part of them has a character of an overview of policies. Though low level of wages in the Slovak economy is perceived as a problem encompassing most of its population and worsening the quality of life in the country, on the other hand, it has been considered as a comparative advantage in competition for foreign development investment. The government’s support of increase in wages has mostly a form of gradual increasing of non-taxable part of the tax base. In 2010, employee premium is paid for the first time to low-wage workers within the tax clearance. Slovakia has the institute of minimum wage. Its level is regularly subject of negotiations between social partners. In case of their disagreements, the government is entitled to set the sum of minimum wage for the next year. Present sum of monthly minimum wage is 307.7 EUR and 1.768 EUR is an hourly rate of an employee. In 2008, 4.4% of the employed received less than the minimum wage. Less than the minimum wage pay was received mostly by those working part time – almost 43% women and 45% of men working part time receive less than the monthly minimum wage. Basic in-work benefits are set by the Labour Code but higher benefit can also be negotiated. As a rule, big private companies are more generous.

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The Labour Code amended in 2007 covers broad areas of protection of employees. It regulates the use of atypical forms of employment in order to avoid negative effects. It provides also protection for women and men caring for children. One of the most general measures is represented by flexible working time which should be applied to increase the work efficiency and meet the needs of employees. Persons with child-care duties may use network of pre-school facilities which are established and administered mainly by municipalities. There are some indications of lack of these services. However, it seems that lack of day care services is more urgent in case of seniors and people with disabilities. In order to increase flexibility of parents, a new child care allowance has been adopted. The allowance covers the costs of child care of working parents (to the level of parental benefit). The Slovak employment policy is colour-blind and belonging to an ethnic minority is not considered to be a disadvantage. Though low education is regarded as substantial factor of joblessness, education and training programs have not been supported enough in recent period. Probably because of the economic crisis and the emphasis on sustaining existing jobs, new work schemes for low-skilled workers have only been used poorly in 2009.

1. The current situation in Slovakia: statistical overview in

comparative perspective In introducing the statistical overview of the current situation in Slovakia we draw on several statistical sources. The main source that secures comparative perspective is “Indicators for monitoring the Employment Guidelines including indicators for additional employment analysis 2009 Compendium” (referred to as 2009 Compendium onwards). We also use surveys by the Statistical Office of the Slovak Republic and exceptionally also other sources.

The Slovak Republic belongs to the EU countries with below-average at-risk-of-poverty rate since 2005 when the SILC was launched. Moreover, the development in monetary poverty incidence is favourable in Slovakia – at-risk-of-poverty rate for total population decreased from 13% in 2005 to 11% in 2008. At the same time the EU-27 average remained stable (16% in 2005, 17% in 2008).

From the perspective of household types, the highest risk of poverty can be found among large families with three and more dependent children (33% in 2008). This share has increased sharply during the four years during which the SILC data have been available. According to the SILC 2005 it was “only” 24%. On the contrary, there is clear evidence of the positive development in poverty incidence among lone parent households (32% in 2005, 21% in 2008). High poverty rate for children belongs to stable features of poverty profile in Slovakia. Children face markedly higher risk of poverty than all the other age categories. In 2008 there were 17% of children below the at-risk-of-poverty threshold, compared to 12% of young people aged 18-24, 10% of people aged 26-49, 8% of 50-64-year-olds, and 10% of persons aged 65+.

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1.1 In-work at-risk-of-poverty rate by gender, age, educational level and household type When looking at poverty incidence in different categories of economic activity1 we can see clear allocation of the risk of poverty. The highest risk of poverty is mainly connected to the unemployed, as Table 1 indicates. In 2008 43% of unemployed persons were below the poverty threshold. This share was significantly higher than the share of the poor among the employed (6% in 2008), pensioners (10% in 2008), or among other non-active persons (16% in 2008). This pattern has been stable since 2005. Exclusion from the labour market is thus one of the key factors of poverty incidence in Slovakia (including status of non-active persons). And vice versa, employment seems to be quite successful protection against poverty. The working poor represent only minor part of the society. In 2008 there were 6% of employed persons in the risk of poverty. In-work poverty is lower than in more than half of the EU countries (The EU-27 8%). The highest poverty rate for the employed is in Romania with 18% and Greece with 14%. The below-the EU-average value of this indicator in Slovakia is comparable with its values in two neighbour countries – the Czech Republic 4%, Hungary 5% – which belong to the lowest within the EU. Table 1: At-risk-of-poverty according to the most frequent economic activity

(%, SK population 16+)

2005 2006 2007 2008 Employed 9 6 5 6 Unemployed 39 41 45 43 Pensioners 7 8 8 10 Other non-active persons 19 16 15 16

Source: SLOVSTAT, Database of the Statistical Office of the Slovak Republic Available at the http://www.statistics.sk/pls/elisw/objekt.send?uic=2424&m_sso=2&m_so=40&ic=80 Education is strongly associated with in-work poverty: it is the most frequent among low-educated workers. Employed persons with low education faced significantly higher poverty risk in 2008 (14%) than employed with “medium” (5%) or high (3%) education. 2 One of the reasons behind this distribution of risk is that low-educated persons are overrepresented among the unemployed, and especially among the long-term unemployed, whose weak labour market status makes them very vulnerable. There is rather ambiguous association between age and in-work poverty. During the observed period share of the working poor among young people aged 18-24 (5% in 2008) was below the value for total population (6% in 2008). The same holds even more for older workers who face much lower risk of in-work poverty than it is the case for total population (3% in 2008). As we could expect, there are no reliable data (for the whole period) in relation to the persons aged 65 and more. The data shortage has two reasons. Firstly, retirement age is 62 (60) years in Slovakia and only small part of persons of

1 In case of poverty incidence based on economic activity we talk about persons aged 16+. 2 Low education refers here to the education level ISCED 0-2, “medium” to the education level ISCED 3-4, and high

education to the education level ISCED 5-6.

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this age category still works 3 . Secondly, the present legal arrangement allows for taking full retirement pension while having income from employment. This arrangement significantly decreases the risk of in-work poverty of this age group. Table 2: In-work poverty according to the household composition (%)

2005 2006 2007 2008 Households without dependent children 5 3 2 3 Households with dependent children 11 8 7 8 Single persons without dependent children 11 7 6 11 Single persons with dependent children 20 17 20 17 Two or more adults without dependent children 5 3 2 2 Two or more adults with dependent children 11 8 6 7

Source: http://epp.eurostat.ec.europa.eu/portal/page/portal/living_conditions_and_social_protection/data/database In addition to demographic characteristics, household composition plays an important role in distribution of poverty risk. In general, households with children show higher risk of poverty than childless households. Share of the working poor among persons living in households with children is more than twice as high as among persons from households without children. The most vulnerable group from this aspect there are lone parents with dependent children. Share of the working poor in this category was significantly higher than in total population during all observed period (17% compared to 6% in 2008, for example). During years 2006-2008 it was even nearly three times higher. Employed persons living in households with dependent children and two or more adults are less likely to be poor. On the other hand, incidence of in-work poverty is here much more frequent than among people from childless households with two or more adults. Apart from households with children, it is important to point out that single persons without dependent children show also above-average in-work poverty. A character of work contract seems to be an influential factor contributing to increasing incidence of in-work poverty. People with temporary work contracts face higher risk of poverty. In 2008 there were 11% of the working poor among those people, compared to 5% of the working poor among persons with permanent work contract.4 Similar allocation of poverty risk we can find at the EU-27 level – the working poor represented 13% of the employed with temporary work contracts and only 5% of the employed with permanent work contracts. Remarkable differences are also found between full time/part-time workers. As expected, in Slovakia the employed working part-time face poverty risk more frequently than the employed in full-time jobs (11% compared to 5% in 2008). The similar findings hold true for the EU-27 average – with 7% of the working poor in full-time jobs and 12% in part-time jobs. When interpreting this situation, it is important to consider the fact that the extent of part-time sector in Slovakia is comparatively low, with only less than 3% of employed persons engaged in this type of working-time.

3 Only 9.8 thousand of 646.8 thousand of persons aged 65+ (that is 1.5%) were employed in the 1st quarter of 2009.

(LFS – 1st quarter 2009: O1, P1). 4 Data from: http://epp.eurostat.ec.europa.eu/portal/page/portal/living_conditions_and_social_protection/data/database

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1.2 Tax rate on low wage workers: low wage traps Indicator “Tax rate on low wage workers: low wage traps” offers another perspective in the area of low wages. It measures “size” of financial incentives to improve an income situation by increasing the earnings5 (by increasing working hours or by moving to a better-paid job). Slovakia shows dynamic development in this respect during the last decade. Between 2002 – 2004 structural reforms of the Slovak welfare state occurred, including the reform of tax-benefit system (introduction of flat income tax and increase of non-taxable income base). Data from Eurostat confirm that between years 2003 – 2004 values of the indicator (for both types of households where calculations are available) changed significantly. While in period 2001-2003 the marginal effective tax rate (METR) in case of one-earner couple with two children was at level 100% and more, in 2004 it dropped to 34%. In 2008 its level was even lower (25%). It provides clear indication that there was shift toward stronger financial incentives to increase earnings by more work effort (and thus to avoid low wage trap) because significantly the lower part of the increase in earnings is “taxed away”. In case of single childless person, the drop wasn’t so striking. In 2001 the METR was 36%, in the period 2003-2004 it fell from 30% to 23%. In 2008 it reached the level of 25%. Comparatively speaking, Slovakia belongs to the EU countries with the lowest tax rates on low wage earners. The METRs for both selected household types are well below the EU-27 average in 2008 (64.61% for one-earner couple with two children and 49.54% for single childless person). 1.3 Gender pay gap The gender pay gap in Slovakia was above the EU-27 average in the observed period and this situation is rather persistent. There is no indication of decreasing gender pay gap in the time-series data (2009 Compendium p.42 18M2) from both the sources. Structure of Earnings Survey (SES) indicates higher levels of gender pay gap than national sources assembled by Eurostat (for instance, in 2006, it was 23.6 according to SES and 22 according to the Slovak Statistical Office). In 2008 the difference between men’s and women’s gross hourly earnings as a percentage of men’s gross hourly earnings (for paid employees) was 22. Official data of the Statistical Office of the Slovak Republic for 2008 suggest even higher gender pay gap: 246. Gender pay gap by educational attainment 2009 Compendium does not provide data on gender pay gap by educational attainment for the new member states. Table 3 provides the relevant data for Slovakia for 2008 from two domestic sources. One data source is the wage survey of the Statistical Office of the SR7 and the second one is MERCES agency’s professional salary monitor, which is based on self-reporting of more than 123

5 According to Carone et al. (2004: 15) 6 Structures of wages in Slovak Republic 2008 7 Data collection and processing is provided by TREXIMA under the auspices of the Statistical Office of the SR. The

sample of 4,500 firms reporting about the wages and work hours of their employees were selected by stratified probabilistic sampling out of the basic population of 68,633 legal statistical bodies in the Slovak economy (Structure 2008, p. 81).

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thousand of the Slovak respondents who provide the data about their wages/salaries. Table 3 also includes 2001 ESHP data for the neighbour Austria, to preserve comparative perspective. Table 3: Gender pay gap by educational attainment

Educational attainment

SK Gender pay gap 2008 (Statistical Office of the SR)

SK Gender pay gap 2008 (MERCES agency)

Gender pay gap Austria 2001 (ECHP)

Low (basic education) 25.3 31 20

medium (higher vocational education without academic certificate)

31.7 31.4

Medium (higher secondary with academic certificate) 24.2 23

17

High (University or College Master’s degree) 30.7 26 30

Total 24 – 20

Source: Structure of wages 2008. p.36, table 21, our calculation8; http://www.merces.sk/?cms_id=41914&print=1 our calculation

Comparison of the Slovak data on wages of men and women with the same educational attainment (Table 3) with the data of the old member states covered by the European Community Household Panel (ECHP) in 1999 – 2001 (18.M2 2009 Compendium) suggests that in Slovakia in 2008, the gender pay gap in all educational attainment categories was significantly higher than in all the member states covered by the ECHP with the exception of low education for Ireland in 1999.

However, one should be careful in interpreting this difference. It might be the case that the lower sizes of gender pay gap that had been found by ECHP are at least partly the effect of different sampling. It is obvious that persons with very well paid jobs, managerial positions still typically occupied by men, are not proportionally represented in household oriented surveys such as the ECHP. If men in such positions are underrepresented, the gender pay gap tends be smaller. On the other hand, if reporting units are firms, as it is in case of the wage survey of the Statistical Office of SR, the information about pays is much more precise and comprising all categories of earners. For that reason, it is possible to assume that the Slovak gender pay gap is not bigger than it is in the old member states but simply more accurately documented.

Differences in women and men pays in individual educational categories in Slovakia (Table 3) can be partly attributed to up till now uneven division of child-caring responsibilities in Slovakia with traditional main load on women and rather a long break during the parental leave (majority of women takes at least two of the three years of parental leave) that disadvantages women in competition for better paid managerial positions, etc. the next factor that contributes to gender pay gap increase in high education category is overrepresentation of women with high educational attainment in the public sector (34.6% of all employed women and 19% of all employed men work in the public sector) 8 Structures of wages… p.36, table 21, for the sake of comparison, the more segmented data on educational levels

were merged, for instance data for medium education are merged with data on wages for higher secondary education and higher technical education with academic certificate.

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and in those branches of economic activities with lower wages. More can be found in section 1.4 on gender segregation. Table 4: Gender pay gap by age

age

SK Gender pay gap in 2008 (Statistical Office of the SR)

SK Gender pay gap 2008 (MERCES agency)

Gender pay gap Austria 2001 ESHP

19 – 24 14.3 16.3 17 25 – 34 21.6 22 35 – 44 30.7 33.4 45 – 54 29.1 23.6

19

55 – more 21.3 15.9 29 Total 24 -- 20

Source: Structure of wages 2008 p.37, table 22, our calculation; http://www.merces.sk/?cms_id=41914&print=1 our calculation

Table 4 shows levels of gender pay gap in different age groups in Slovakia in 2008 and in Austria 2001. Both domestic sources indicate that the gender pay gap is the narrowest in the youngest and the oldest age groups. The highest gender pay gap is in the age group 35 – 44 (both sources) and the age group 45 – 54 (Statistical Office). If we compare these Slovak data with the 1994 – 2001 ESHP data (18M2 2009 Compendium, p.43), we see that Slovakia does not follow the pattern that has been obvious in the old member states (with the exception of Portugal), which means that the gender pay gap is the highest in older age categories and decreases in younger age categories. Illustrative 2001 ESHP data for Austria in Table 4 also show the biggest gender pay gap in older age group.

Specific incidence of gender pay gap in age categories (the highest level among the age group 35 – 44 and decreasing level among persons aged 55 and more) needs explanation. It is clear that gender pay gap in age groups 35-44 and 45 – 54 cannot be attributed to the differences in the levels of attained education among employed men and women as levels of their attained education do not significantly differ and education of women in younger cohorts is even slightly more favourable9. As we have already suggested, the increased gap is probably the consequence of existing asymmetries in sharing parental responsibilities and a lower share of women on managerial positions. Men also work two or three times more frequently in well-paid new professions such as computing and information technologies (LFS 1 quarter 2009: P7, p. 52). The gap can also be the result of mentioned overrepresentation of women in public sector and in non-market services such as education and social services where the average salaries are under the country average. More can be found in section 1.4 on gender segregation.

The Statistical Office data indicate that average salaries of women are stagnant since the age of 35. On the other hand, and this is the specific feature of the Slovak wage distribution (and probably of the wage distribution of other former socialist countries, too), from the age of 45, average wage of men

9 For instance, in the age group 35 – 39, 16.2% of men have college and university education. In case of women, it is

17.7%. (LFS 1st quarter 2009: 30, our calculation).

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decreases with age. How to explain a narrowing gender pay gap in higher age category (55 years of age and more)?

Attained education can hardly explain decreasing gender pay gap as diminishing shares of high education can be observed in senior age groups of both genders. On the other hand, the amount of hours of absence from work because of sickness can matter: if women have constantly higher amount of hours out of absence due to sickness, in case of men the amount of hours absence increases significantly in age from 44 to 5910. More frequent incidence of sickness has negative impact on wages. Apart from lower work intensity, diminishing gender pay gap in more senior age groups might partly be a consequence of different occupational structure of these groups: various well-paid professions such as computer manufacturing, electricity and gas production supply, information technologies, or aircraft transportation employ mostly younger categories. Such jobs are often in organisations “in international ownership with preponderance of public sector” that recruit mainly younger university graduates11. It is also probable that men and women over 45 have been more frequently employed in the public sector than younger age categories. Tariff wage categories in the public sector could contribute to the narrowing of pay gap in case of persons of the same age, education and occupation. For instance, the gender pay gap in education sector was only 9 in 200812. Data confirming higher share of higher age groups’ employment in public sector are not available, however. According to the MERCES professional salary monitor, the average gender pay gap in the same occupation was 19 in 2008. The highest pay difference was in banking and finances – 35.2, and in the occupations: Financial consultant (41.7) and Country director and Project manager (37.2). This survey also identifies occupations where women earn more than men in Slovakia. These positions are interpreters, department directors in public sectors and recruiters. However, pro-women gender pay gap is much narrower here (from -6.4 to -4) than in the top pro-men gender pay gap occupations. (ibid)

1.4 Gender segregation Differences in shares of employment for men and women in different occupations and sectors in Slovakia tend to remain the highest in EU-27 (18.A4 2009 Compendium). In 2008, gender segregation in occupations was 30.5 in Slovakia and 26 in EU-27. In 2008, gender segregation in sectors was 23.5 in Slovakia and 19.4 in EU-27. Gender segregation tends to fluctuate or slightly rise in the period under observation.

10 Structure of wages in the SR 2008: table29, p.43 11 Consultation with Ing. Marta Záhorská, Department of Labour and Wage Statistics. Statistical Office of the SR, May

2010 12 Structure of wages in the SR 2008: Table 26, p.41. The data of MERCES professional salary monitor suggests even

narrower gender pay gap: 7.8. (www.merces.sk/?cms_id=41914&print=1)

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Table 5 Proportion of employed men and women in sectors of economic activity

Sectors of economic activity Men employed Women employed Total SR economy total 56.2 47.8 100 Industry 66.4 33.6 100 Industry, construction 83.5 16.5 100 Market services 50.5 49.5 100 Non-market services 31.0 69.0 100

Source: Labour force Survey/VZPS 1 quarter 2009: tables P4a, P4b, P4c, p. 36-41. Men dominate in the domains of industry with wages above the average – such as gas and electricity supply with the above average salaries. The highest gender imbalance is in education, health care, and social service, especially in the public sector in Slovakia. As we have already shown, women tend to work in the public sector more often than men. On the other hand, in total, women slightly outbalance men in the public sector economy: of all employees in the public sector and state enterprise 56.6% are women. However, the public sector comprises very diverse types of economy domains, including for example, gas and electricity supply). Yet, in specific branches of the public sector economy, women significantly predominate. Women make for 79% of employees of the public education sector and they also represent 84.2% of those employed in the public health care and social services. According to sectors of economic activity (see Table 5), market services (retail trade, transportation, accommodation and food services, etc.) represent the only domain where employed men and employed women are in the balance. Women predominate only in non-market service (69% of all employed) where average wages are under the SR average (Structure of wages in the SR 2008: Table 26, p.41)13. 1.5 Inactivity and part-time work due to lack of care services for children and other

dependants 2009 Compendium data (18.A6, p.60-61) suggest that the share of inactive persons and part-time workers who would like to work (more) but are not searching for (more) work due to their care responsibilities expressed as % of the whole population aged 15-64 is slightly lower in Slovakia than their average in the EU-27 in the period of observation (4% SK and 4.4% EU-27 in 2006, 4.1% SK and 5.4% EU-27 in 2007, and 4.1% in SK and 4.6% in EU-27 in 2008). In Slovakia as well as in EU-27, inactivity and part time work due to care for children and other dependants is almost exclusively women’ issue: in 2008, but 0.2% of men in Slovakia (it was 0.3% in EU-27) and 8% of women (8.9% in EU-27) were inactive due to their care responsibilities.

The difference between Slovakia and EU-27 in the share of inactivity and par-time work due to lack of care services is much higher. 2009 Compendium data suggest that shortage of services is much less frequent reason for inactivity of persons with care responsibilities in Slovakia than in most of the EU- 13 Wages in the public administration are the only exception from this pattern. It is characteristic that in the public

administration with wages higher than the SK average, gender segregation is not a problem: it is the only branch of non-market services where the shares of men and women employed are almost even (48.7% of men and 51.3% of women).

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27 countries. If in EU-27 more than every fourth person with care responsibility does not search for work because of the lack of care services, in Slovakia it is only every tenth person or less: 10.1% in 2006, 8.4% in 2007, and 10.3% in 2008. (2009 Compendium p.60: 18.A6)

Favourable situation concerning low obstacles to work for persons with caring responsibilities, which is suggested by the above data, can partly result from the traditional preference of parental care for child at least up to two years of his/her age14. At the same time, it can be a consequence of the fact that during the period observed, persons caring for a child less than three years old could have taken full parental contribution while working to cover a part of child care costs. This concurrence of wage and parental contribution was possible under the condition that a child did not attend a public kindergarten and contribution could have been used for paying a physical person. Moreover, no documentation of its use was needed15. Awareness of this opportunity that was of weight as a compensation for missing child care facilities in rural areas could also have contributed to lower reflection of shortage of quality and affordable child-caring facilities.

On the other hand, persons with child older than three years who do not receive any contribution and persons with a sick or handicapped child or persons responsible for caring for older relatives can reflect the lack of caring facilities as very pressing. The lack of day care services for seniors and handicapped children or adults is probably much more urgent than the lack of kindergartens. Though coverage of children under 2 years is rather small, the majority of children in pre-school age are schooled in pre-school facilities.16 An important change was introduced by the new School Act (2008) that makes pre-school education free to children from families in material need for the duration of schooling. This legislative change has not yet touched the period under analysis. 1.6 Transitions by type of contract

Indicator “Transitions by type of contract” captures a specific dynamic of changes related to the labour market. It expresses what proportion of persons with specific (labour market-related) status changed their status within two consecutive years. There are five types of the status plus an undefined one. Table 6 we have constructed from the 2009 Compendium’ data doesn’t cover all the cases because of the lack of space and problems with the data reliability in some cases. We are going to comment on all of them in the text, however.

Table 6 shows that persons working as permanent employees remained prevailingly involved in this type of contract. Only 5% of them transferred to new “temporary employees” status between years

14 High sickness of children in (overcrowded) crèches and pre-school facilities was well-known fact and led to the

extension of parental leave to three years already in 1980s. It is reasonable to assume with Steven Saxonberg that many women rather postpone their return to work until their child “gets stronger” because they fear that child will be often sick in a child-care facility and they will have absences from work and turn to be unwanted for the employer. (Saxonberg 2008) And as they do not look for a child care facility, they might not reflect their possible shortage.

15 In 2009 contribution was reformed, contribution to working parents with child under 3 years of age was decreased and its pay was transformed to reimbursement principle.

16 The share of children younger than three years attending kindergarten (children from two years of age are eligible but part of kindergarten only admits children of three years and older). According to the school statistics, the share of children under 3 years that are schooled in kindergarten decreased from 20% in 2004 to 10% in 2008. (Herich 2008) More in section 3.1.2

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2005 – 2006 and 8% between years 2006 – 2007. The outflow into unemployment or inactivity was represented even in lesser extent. On the contrary, among temporary employees there occurred more significant changes. In years 2005 – 2006 nearly half of temporary employees changed the status into “permanent employees”. Even higher proportion of them (69%), became permanent employees between years 2006 – 2007. It suggests a positive development in the sense that more and more employees obtain more secure working conditions which are better paid and better covered by social security. Table 6 Transitions by type of contract for persons aged 16-64 in year t (selected types)

Status in year t Status in year t +1 2005 – 2006 (% of status in year t)

2006 – 2007 (% of status in year t)

Employees – permanent 89 87 Employees – temporary 5 8 Self-employed 2 1 Unemployed 2 2

Employee – permanent

Inactive 2 2 Employees – permanent 46 69 Employees – temporary 40 20 Self-employed u 1 Unemployed 6u 5

Employee – temporary

Inactive 6u 5 Employees – permanent 15 26 Employees – temporary 17 5 Self-employed u 2 Unemployed 55 52

Unemployed

Inactive 11 15 Source: Indicators for monitoring the t…2009 compendium, pages 119-120 Note: “u” refers to unreliable data and/or data that were removed because cell frequencies were too low or non-response too high Quite mixed picture is offered also by data on the unemployed. 15% of them became permanent employees during 2005 – 2006 and 26% during 2006 – 2007. In addition, transfer also occurred into temporary employment (17% in the first period, 5% in the second one). On the other hand, more than one tenth of the unemployed moved into the inactive group of population in both periods. In case of self-employed persons we have reliable data only for years 2006 – 2007. They indicate only small changes, with the highest level of change in case of outflow into the category “permanent employees” (7%). Among inactive persons only vague transfers can be identified (ranged from 0 to 6%). To sum up, we register positive inflow into the category of permanent employees mainly from the category of temporary employees and to lesser extent from the category of the unemployed. At the same time, the transition from unemployment to inactivity concerned more than 10% of unemployed persons. It can be said then that though the growth of the Slovak economy brought about not only more jobs but higher quality jobs in the observed period, these openings were used less by those far from the labour market.

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1.7 Transitions by pay level Another aspect of the dynamic related to labour market is captured by the indicator “Transitions by pay level” that measures transitions between various levels of pays/earnings distribution for persons aged 16-64. It allows to describe upward and downward moves in each decile and to express them as percentage share, as well as the extent of inter-yearly pay stability (no change in pay level). Unlike the other indicators we don’t provide a comparison to other EU countries here because of number of data which are necessary to compare The highest proportion of persons who didn’t change their pay level between years 2005 and 2006 is found among persons in the top deciles of earnings distribution.17 In the top 10th decile there were 55% of persons without any change in their pay level in the given period. In the second highest decile the proportion was quite lower, but still higher than in the most of other deciles. In the 1st decile there were 28% of people whose pay wasn’t changed; in the 2nd decile the share represented 40%. The highest proportion of upward moves between 2005 and 2006 occurred in the first decile: 19% of people in the 1st decile moved into the 2nd decile and 49% into the higher deciles (3rd – 10th). Altogether, the upward changes related to 62% of persons in the first decile. The second highest proportion of upward changes occurred in the 4th decile (44%). In general, higher proportions of transitions into higher pay categories we can find in the first five deciles (i.e. in the lower half of the earnings distribution). Between years 2006 and 2007 similar picture emerges. We can identify the highest shares of people who didn’t change their pay level in the top and the bottom deciles: 58% of persons in the 10th, 41% in the 9th, 40% in the 1st, 35% in the 2nd decile. Like in the former period, the highest proportion of upward transitions occurred in the first decile – 10% of people moved into the second decile and 38% of people moved into higher deciles (3rd – 10th deciles). Similarly to the previous period, higher proportions of persons who moved into higher pay categories can be identified in the first five deciles. 1.8 Diversity and reasons for contractual and working arrangements One of the key characteristics of present labour market(s) is an extent of diversity of working arrangements. If a generation ago, standard, full-time employee jobs predominate in the Slovak economy, now they still cover the major part of the working age population, but other forms of contracts may also be widespread. These other forms of contracts are often connected to a greater degree of uncertainty than standard jobs and sometimes – in the case of part-time jobs, fore example – to less advantaged conditions in terms of wage as well as of coverage by social protection. To measure some aspects of diversity in this respect, the indicator “Diversity and reasons for contractual and working arrangements” is employed by the European Commission. It consists of several parts, covering the share of employees in part-time and/or fixed-term contracts, as well as the self-employed. In case of employees in non-standard employment (part-time and fixed-term), the review of reasons behind is provided. 17 If we take into consideration also the non-employed and their pattern of transition, the highest proportion of persons

without change in pay level will be shown among the non-employed. 87% of the non-employed in 2005 had the same status (and therefore the same pay level) one year later.

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Table 7 suggests that the extent of part-time jobs is very low in Slovakia. The proportion of employees in part-time jobs fluctuated around 2% since 2005. In 2008 it fell to 1.5% of total employees (from 2% in 2007). It is one of the lowest levels in the EU and it is also well below the EU-27 average (14.5% in 2008). Part-time sector in Slovakia, however not developed, is the domain of women. The share of women in part-time jobs was more than two times higher than the share of men in a given period, as the next table shows. Unfortunately, it is difficult to say anything about reasons for part-time work because of small population involved in. Moreover, the most frequent reported category of reasons is category “other reasons” which doesn’t allow further examination. Table 7: Diversity of contractual and working arrangements in Slovakia (% of all employees)

2005 2006 2007 2008 Total 1.8 1.9 2.0 1.5

Women 2.8 3.2 3.3 2.6 Employees in part-time contracts (%)

Men 0.8 0.8 0.8 0.6 Total 4.1 4.1 4.3 3.4

Women 3.6 3.7 4.1 3.2 Employees in fixed-term contracts (%)

Men 4.5 4.5 4.5 3.5 Total 12.5 12.5 12.8 13.6

Women 6.8 7.3 7.2 7.7 Self-employed (%)

Men 17.1 16.7 17.2 18.3 Source: Indicators for monitoring the Employment Guidelines…2009 Compendium. Pages 121-132 Fixed-term contracts are more widespread, but still not very significant when expressed as % of total employees. The share of employees in fixed-term contracts in Slovakia (3.4% in 2008) belongs to the lowest in the EU (with the EU-27 average 11% in 2008). Here, the opposite allocation of men and women appears in comparison to part-time jobs. Men are more likely to work in fixed-term contracts than women. However, the difference is not very large. Also here, in-depth description of reasons is very limited due to the low number of answers (small sample size). Another aspect which contributes to the diversity in the labour market relates to an extent of self-employment. As Table 7 indicates, more than one tenth of all employees were involved in self-employment since 2005. Between years 2005 – 2008 we can even see an increase in this proportion. It was stimulated by the active employment policy measure – a grant for starting self-employment. The data in Table 7 show that self-employment is two times more often the “business” of men in Slovakia. Women show significantly lower engagement. The share of the self-employed in Slovakia was below the EU-27 average during the observed period.18 The largest sector of self-employment was found in Greece with 29.5% of all employees involved in (in 2008). Among the Slovakia’s neighbours, Poland shows the strongest inclination toward such a type of working arrangements (18.8% in 2008).

18 The EU-27 average values were as follows: 15.2% in 2005, 15,1% in 2006, 15.1% in 2007 and 14.8% in 2008.

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1.9 Undeclared work

In comparison to the emphasis given to the topic of undeclared work by the Slovak Government and mass-media since the beginning of this decade, available data (2009 Compendium: 21.A1, p.135) are very poor. Moreover, Compendium data, that are the data from the European Employment Observatory Review 2004, are not enough comparable especially for Slovakia: the referred note (9) linked to the only Slovak datum in the 2002 column in table 21.A1 (p.135) is missing at all. For that reason it is not clear if datum 13-15 means the share of GDP or the share of persons employed.

The missing estimations are surprising as undeclared work has been an important agenda and several institutions were involved in developing the reliable methodology of undeclared work estimation.19. Especially in 2000 – 2005, diverse estimations of undeclared work were published. For instance, in 2001, Tax Office estimated that more than half of all unemployed in Slovakia do undeclared work. The National Labour Office estimated its share to one third of registered jobseekers and the Ministry of Labour estimated 82 thousand undeclared workers (20%). All these estimations were high enough to contribute to diminishing trust and solidarity with jobless people. With the benefit of hindsight we can see such estimations might have been the part of preparation of public opinion to accept the radical retrenchment of social assistance. The basis of these estimations was rather fragile. For instance, the Deputy Prime Minister of the Government of the SR Mr. Mikloš considered the retail return, household consumption and general increase of savings.20 Other experts thought that the absence of social unrest under the condition of high unemployment and modest social assistance could follow from high amount of undeclared work. (Národná Správa 2002: p. 21) Some foreign analyses, however, suggested that undeclared work in Slovakia is not above the average, but, on the contrary, it is one of lowest among the so called transition countries (from 15.1% to 18.3% of GDP). 21

Next source of information about the extent of undeclared work there are the results of labour inspections. In January 2005, Act Illegal Work and Illegal Employment entered into force. In compliance with this Act, labour inspectorates perform control of undeclared work two times a year and Information on Eradication of Undeclared Work is submitted to the session of the Government.22 According to the last Information on Eradication of Undeclared Work that refers to the second half of 2009, 8% of inspected employers (out of total number of 2,668 inspected employers) employed some staff without documentation. From the total number of 7,226 inspected persons, 456 persons (6.3%) did undeclared work23. In comparison to the second half of 2008, the share of uncovered cases of undeclared work increased by almost one third (Hospodárske noviny April 26 2010).

In 2006, Statistical Office carried out the representative survey on the experience with undeclared work. General public and employers were surveyed. According to its findings, the amount of 19 Publication Illicit work in the context of the Slovak society (Bednárik – Sihelský – Danihel 2003) provides overview of

methodologies of estimations of undeclared work used at home and abroad and introduces the authors’ research of undeclared work that combined public opinion research among the local and the central public administration and expert estimations.

20 I. Mikloš, Deputy Prime Minister of the Government of the Slovak Republic; April 3 2001, 46th meeting of the National Council of the SR http://www.psp.cz/eknih/1998nr/stenprot/046schuz/s046057.htm

21 Schneider, F.2002. Quoted from NSĽR 2002 p. 21 22 Reports can be found on the web page of the National Labour Inspectorate or on the web page of the Government

sessions www.rokovania.sk And on the webpage of the National labour Inspectorate http://www.safework.gov.sk 23 http://www.safework.gov.sk/attachments/126_Sprava_druhy_polrok_2009.pdf

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undeclared work calculated through the number of working hours could represent about 3.4 – 5.5% of total working hours worked in the national economy in the year 2006. In average, persons with undeclared work experience worked without documents for about 9.9 weeks in 2006 and 26 hours per week. Approximately 54% of undeclared work was done by persons who did it as their only job/employment. Remaining 46% of undeclared work was done by persons as their second or third job. This survey found out that the main reason for the undeclared work was the need to increase or top up a household income either from main job or from social assistance (or pensions). For the category of the unemployed, the survival was the main reason for taking up undeclared work.

Employers state the effort to avoid tax and delivery payments as their second main reason for running undeclared work. The survey also found out that some employers force their employees to do part of their regular work as undeclared work. The undeclared work was most often seen in building industry, agriculture and various services for households. The highest shares of respondents with experience of undeclared work were in the Eastern Slovakia regions that have the highest unemployment rate (Hajnovičová – Marchevský 2007).

1.10 Overtime work and hours of overtime In the end of the 1990s, Slovakia belonged to the countries with the highest number of hours worked per week and the highest permitted amount of overtime. Limit of 150 hours of overtime set by the new Labour Code in 2001 was attenuated in the end of 2002 as the shortened hours were extensively criticised for tying down industriousness and being dangerous to livelihood. Whenever an amendment of the Labour Code is on the agenda, voices against shortening of overtime work strengthen. The Slovak Labour Code (full wording of the Act No.479/2007 amending Act. No. 311/2001) sets 37.5 hours of working week and it permits 8 hours of overtime per week (250 hours yearly) and in the area of healthcare it is even 16 hours per week. Permitted hours of overtime exceed the EU average and the Slovak Republic has the exception to the EU labour regulation. However, the above conditions and tendencies and the publicised high demand of employees for more hours of overtime to increase their rather low wages was not reflected in the 2009 Compendium data. Overtime data for Slovakia (p.138: 21.A3) are low and the share of workers who worked overtime in the reference week is significantly lower than the EU-27 average during all the observed period.24. Moreover, the share of workers who worked overtime in the reference week in Slovakia was decreasing: in 2008 it was halved in comparison to 2000 (1.6% and 3.2%). Women work overtime significantly less often than men.

24 Comparative study on working time development in 2008 also confirms this finding.

http://www.eurofound.europa.eu/eiro/studies/tn0903039s/tn0903039s.htm

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Table 8 Average number of overtime hours per person/month in economy sectors of

Slovakia in 2008 and 2009

Year 2009 Year 2008 Total Men Women Total Men Women Sectors

Hours/month Hours/month Hours/month Hours/month Hours/month Hours/month

Total SR 2.80 3.51 2.03 3.37 4.44 2.20 Agriculture, forestry, fishing 2.89 3.39 1.66 4.23 5.08 2.12 Mining and quarrying 7.10 7.86 2.52 7.07 7.79 2.84 Manufacturing 3.68 4.00 3.20 5.12 6.01 3.78 Electricity, gas supply 3.79 4.62 1.29 4.45 5.61 1.06 Water supply, waste 3.67 4.30 1.29 3.81 4.55 1.23 Construction 3.35 3.86 0.52 3.75 4.42 0.43 Wholesale, retail trade 1.63 1.62 1.63 1.98 2.28 1.66 Transportation, storage 3.64 4.43 1.81 4.45 5.57 2.02 Accommodation, food service 1.30 1.41 1.24 1.63 1.67 1.60 Information, communication 1.39 1.64 0.91 1.25 1.52 0.74 Finances, insurance activities 0.62 0.71 0.59 0.47 0.68 0.38 Real estate activities 1.26 1.93 0.60 2.62 4.15 1.08 Profession, techn. Activities 0.96 1.22 0.68 0.85 1.14 0.56 Administrative services 3.95 5.69 1.67 4.41 6.29 2.03 Public admin., social security 0.76 1.80 0.34 0.88 1.63 0.55 Education 2.39 3.00 2.21 2.76 3.34 2.57 Health, social work 5.31 10.58 3.78 4.70 9.95 3.34 Art, recreation 1.74 2.37 1.31 2.78 3.77 2.04 Other 0.92 0.71 1.14 0.60 0.79 0.43 Source: Informačný systém o cene práce ISCP (MPSVR SR) 1-04 Low shares of overtime documented by the Eurostat and domestic LFS (2009 Compendium: p.138: 21.A3) differ considerably from common expectations based on publicised (politically defended) demands for more generous overtime hours in Slovakia. To clarify this paradox we have also examined additional reliable source of information of overtime hours in Slovakia; which is the wage and working hours survey of the Statistical Office of the SR. We have already introduced it in section 1.3. Here it is worth to remind that in this survey reporting units are firms (the sample amounts to 4,500 firms) and the reporting is their legal duty. Table 8 based on the wage and working hours’ survey shows that the average number of overtime hours monthly per one worker and in gender breaks in various sectors of economy. Average number of overtime hours is calculated from all the hours worked and paid as overtime in firms representing the given sector in given years and divided by the total number of employees and by 12 months. We can see that there are significant differences in some economy sectors in amount of hours worked overtime: mining and quarrying and health care and social work are the sectors with the highest

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average amount of overtime hours per person per month. Gender differences in overtime hours within the economy sectors (with exception of the accommodation and the food sector) are even more significant than the differences among sectors. It is interesting that in mining and quarrying, the average basic salary of women exceeds the average salary of men and though men have even three times more supplements and wage compensations (for overtimes, weekend work, etc.), there was less than 1 EUR difference in women and men average gross salaries in this economy sector (in favour of women). It is clear that in this sector, the gender division overlaps with the blue collar and the white collar division with women prevailing in professional and clerk occupation and men working as craft workers and plant and machine operators in rather declining economic activity. On the other hand, gender differences in health care and social work occur in all parts of wages. Predominance of women among technicians and nurses can partly explain this difference (Structure of wages in the SR 2008: Table 26, pp.39- 41) However, the average amount of hours worked overtime presented in Table 8 still does not give information on the fact how many employed persons worked overtime in a given year. The total amount of hours worked overtime is certainly not divided evenly among all the workers (we have already seen significant gender differences in overtimes). Table 9 that is based on the same source shows the shares of those who worked overtime in a given year in break by gender.

Table 9 Number of employed persons that worked hours of overtime in given year

(absolute and in %)

Persons doing overtime work in 2009 Persons doing overtime work in 2008 Yes Yes

% No No

% Total/100 Yes Yes

% No No

% Total/100

Total 401285 41.9 555559 58.1 956844 420864 47.6 462405 52.4 883269 Men 228098 46.5 262040 53.5 490138 244832 53.7 210949 46.3 455781 Women 173187 37.1 293519 62.9 466706 176032 41.2 251456 58.8 427488

Source: Trexima calculations Informačný systém o cene práce ISCP (MPSVR SR) Striking difference appears if we compare the share of employed persons who worked overtime (at least one hour) in 2008 in Table 9 with information of about 1.6% of employed persons who worked overtime in reference week in 2008 in 2009 Compendium data (p. 138, 21.A3). Table 9 shows that work overtime is actually widespread experience for people employed in the Slovak economy. In 2008, more than every second employed man worked some overtime hours and two women out of five worked overtime, too. Documented widespread experience with work overtime suggests that bonuses for work overtime create a part of income of the significant part of employers. Such picture shows more accurately the basis of political salience of permitted extent of overtime hours in Slovakia. It also means that this data source (firm reporting) and “year-long” horizon give more adequate representation of overtime experience than the LFS question about the reference week.

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1.11 Access to flexitime Good “access to flexitime” has positive implications both for work and private life. Together with availability and accessibility of care services it may contribute to better balancing of work duties and family responsibilities. In addition, it may help employees with other specific requirements. Indicator “Access to flexitime” measures employees who have other working time arrangements than the fixed start and end of a working day as a % of total population.25 As only data for 2004 are available by May 2010, the analysis of this field is very limited. According to the Labour Force Survey’s Ad hoc module from 2004, 19.4% of employees had flexible working time arrangements in Slovakia. There were slightly more men than women who benefited from this measures (20.7% of men compared to 18% of women). Comparatively speaking, proportion of the employees with access to flexitime is significantly lower than EU-27 average (31.3%) and lower than the proportion in 15 EU member states. Access to flexitime is the most widespread in the Scandinavian countries in which there is more than two times higher share of employees with flexible working arrangements than in Slovakia (Sweden 61.2%, Denmark 62.1%, and Finland 50.2%). On the other hand, the Slovak Republic scores better than the Baltic countries, a part of its neighbouring countries (Hungary, Poland) or the last newcomers in the EU (Romania and Bulgaria). It is interesting to see that while in Slovakia and the most other EU member states the proportion of women with flexible working arrangements is lower than the proportion of men, a different situation is in countries with the largest extent of flexible arrangements among total population of employees (in Sweden and Denmark).

2. Main causes of in-work poverty and labour market segmentation: literature review

In-work poverty hasn’t been explicit target of academic or policy research in Slovakia up to now. Even ad hoc studies absent, not to speak about more systematic efforts. It is interesting that the lack of research interest in the situation of the working poor goes hand in hand with ongoing debates on poverty among researchers and academics. One possible explanation lies in an empirical evidence regarding in-work poverty. According to all four waves of the SILC, which have been available by now, the working poor don’t represent a significant part of the working age population. On the contrary, there are other social groups that are seen as the most vulnerable and attract attention of researchers. The other potential explanations of absence of research literature relates to relatively poor academic and research personal infrastructure in this field. In addition, in order to obtain additional financial resources researchers often have to adapt their work to actual demand from the side of research agencies, decision-makers, etc. where the issue of the working poor hasn’t resonated during the past years (as a result of its weak urgency, but possibly due to the fact that cheap labour force is the comparative advantage of the Slovak economy and it would not be strategically cautious to make an issue from low wages in the country). However, despite these facts, there are a few studies which deal with some indirect aspects of in-work poverty, especially with the issue of minimum wage. The issue of labour market segmentation is quite better covered by research analyses. As we will show, there are several studies examining its various aspects.

25 “Indicators for monitoring the Employment Guidelines…2009 Compendium, page 139.

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While in-work poverty is a neglected object of social research in Slovakia, one partial aspect of the problem – minimum wages – is given a bigger attention. Several studies were done during the last years in the Slovak Republic. Some of them were policy driven in the sense that their preparation was called for by policy-makers (namely the MLSAF). Some of them have a character of comparative policy analysis. In her study from 2004, Barošová explores various mechanisms of the minimum wage setting in order to prepare recommendation for the MLSAF. The study was partly response to public discussions (mainly between social partners and the Government) on the minimum wage in the period 2001 – 2003, which – according to the author – suffered from the lack of relevant information and knowledge concerning good practices (Barošová, 2004: 6). Firstly, the author provided a review of minimum wage settings and adjustment mechanism in the OECD countries and then analyzed the context of the minimum wage development in Slovakia. Last but not least, she offered data on the proportion of minimum wage earners and the extent of low wage sector in Slovakia. Data used in her minimum wage research came from the database on earnings “Information System on Labour Cost26” processed regularly by private company Trexima on behalf of the Statistical Office of the SR and the MLSAF. Barošová’ s study is based on the data from the first quarter of 2004. She constructed her own sample from the total sample, which included only employees who worked for minimum of 368 hours within the period under study. (Barošová, 2004: 81) The idea behind was to eliminate the employees with part-time contracts which could have biased data on low wage incidence (the author worked with data on monthly wages, not with per hour wages). Author’s calculations confirmed assumptions that low wages are concentrated in small companies. In the first quarter of 2004, wages at the level of the minimum wage and below were earned by 5% of employees from companies with less than 10 employees while overall proportion for the total population was significantly lower in the given period – less than 1% (Barošová, 2004: 83). On the contrary, the companies with the highest number of employees had the lowest incidence of those employees. The author pointed to the fact that relative low incidence of very low wages (at the level of the minimum wage and below) is accompanied by relatively massive proportion of employees with wages slightly above the minimum wage (29%)27. The author also provided the empirical evidence on some “classical assumptions” regarding the minimum wage: as key determinants of minimum wage incidence appeared belonging to the specific group of employment (the highest proportion of minimum wage earners among unskilled workers), the sector of economy (hotels, restaurants), and the level of education (low educated persons). This study provided data that were missing for a long-time in Slovakia. The problem is that this study covered only a limited period. In spite of lacking information in this area, the MLSAF does not show interest in systematic study of distribution of low wages in the Slovak economy.

Barošová published another study on minimum wage which is based on analysis of labour and wage legislation in Slovakia. Author focuses there on all the legal regulations that are somehow related to the minimum wage. The aim of the study is to illuminate complex relationship between the minimum wage and regulations in other areas of societal life which used the minimum wage as a reference 26 in Slovak - Informačný system o cene práce 27 Barošová also made a provocative estimation that if minimum wage increased by 15% (what was close to proposal

of trade unions in the given year), proportion of employees with wage that would be then at the level of minimum wage and below would reach 11%.

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point in any way. As the number of legislative norms connected to the minimum wage had increased in the period of 1993 – 2005 significantly, the author discussed opportunities to simplify this complexity in Slovakia.

Minimum wage has been also object of economic analysis. Vokorokosová (2008) examines the minimum wage in relation to the issues of competitiveness and employment in her study. The author tested econometric models which captured several hypotheses regarding the relationship between employment and the minimum wage. According to findings of the study, changes of the minimum wage (its setting and fixing as % of average wage) influence total employment, but without any negative impact (Vokorokosová, 2008: 86). The author also pointed out that changes of minimum wages could lead to so-called substitute effect with new re-allocations of labour force in the labour market, but also without any significant impacts. In addition, the study didn’t confirm assumption that an increase in minimum wage is accompanied by a decrease in employment rate of young generation (Vokorokosová, 2008: 87). As employers’ organisations in the Slovak Tripartite permanently dispute negative effects of the minimum wage institute on the Slovak economy, the findings of Vokorokosová’s study may be a very useful basis for more peaceful negotiations about the minimum wage (see section 3.1.1 on minimum wage). Altogether, the study on minimum wage, competitiveness, and employment represents the newest effort to look at the macroeconomic consequences of minimum wage settings. It provides model-based results which would need further examination from a longer time perspective. Research on labour market segmentation in Slovakia focuses on diverse issues. Hanzelová et al. (2005)28 studied atypical forms of employment. They concentrated on the development in the area of atypical work contracts and work regimes. They showed that despite the gradual increase in proportion of temporary contract since 1994 Slovakia still belongs to the EU countries with a primacy of permanent contracts. Temporary contracts are found especially in service sector, agriculture and construction (Hanzelová et al, 2005: 4). Regarding atypical work regimes, authors paid attention to their several forms. Firstly, they analyzed the role of collective agreements in shortening working time in relation to the maximum length of working time set by the law. According to their findings, between 2002 and 2004 the extent of working hours agreed in the collective agreement decreased, depending on type of work. It decreased by more than two hours in case of “two-shift operations” and by more than 4 hours in the case of “three-shift operations”. Drop in agreed working hours concerned also employees in non-stop operations. Secondly, they dealt with overtime work which belongs to the favourite forms of atypical working regimes in Slovakia in the sense that their extent didn’t show signs of decline (Hanzelová et al, 2005: 5). In 2001, there were 9.3% of employees engaged in overtime work, with the dominant share of men. Overtime work was the most widespread in the sectors of industrial production, agriculture, and construction. Within the tertiary sector it was the matter of health care services. Another form of atypical working regime – flexible working time (6.3% of total employees in 2001) – was, according to the authors, used especially by administrative professions. One quarter of employees using flexible working time was from the public administrative sector, with prevalence of women. Hanzelová et al. paid special attention to part-time jobs in Slovakia. They stressed that the most of women (who used a part-time job to a larger extent than men) were involved in this type of atypical employment involuntarily. It was mainly result of a lack of opportunities to find a full-time job. Authors called attention to the adverse cases concentrated at the beginning and at the end of working age: voluntary decisions for part-time work were especially done by young people (combining work and school) and older people (Hanzelová et al, 2005: 7). 28 English translation available at: http://www.sspr.gov.sk/texty/File/bulletin/bulletin_3.pdf

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There are several evaluation studies that are focused on evaluation of so called activation work, which has been the ALM programme since 2004. (Magdolénová 2005, Brutovská.2006) According to their evidence, activation work in Slovakia operates, to a certain extent, as a close system or independent labour market segment. It is frequently the only earning option in some areas and the participation in it is absolutely necessary as part of social assistance is preconditioned by taking part in it. Cases were documented that students from poor environment were forced by their parents to leave school at age 16 in order to start activation work and bring home the only available source of income in their nearest area. Evaluation studies on activation work later stirred up limitation of activation work programme (2008), however, without sufficient compensation. Another aspect of labour market segmentation is covered by the study of Bellan (2010) on labour market opportunities of long-term unemployed. He focused on transitional (intermediate) labour market offering transitional jobs as a measure which should improve position of the long-term unemployed. Based on the review of good practices from abroad, he pays attention to the functioning of social enterprises in the Slovak Republic. Comparing institutional settings he concludes that the role of the civic sector is significantly lower in Slovakia than in other EU countries (for example in the UK). The most influential agent in establishing social enterprises in Slovakia is represented by the public sector at the municipality level. According to Bellan, in this sense, Slovak social enterprises are closer to those in Germany. In Germany, however, municipalities are more involved into fighting against the long-term unemployment (because of specific division of responsibilities set by the Constitution) and this fact needs to be taken into account (Bellan, 2010: 46). Bellan also calls attention to some problems of transitional job creations. The aim of social enterprises in Slovakia is to create (transitional) jobs for so-called “disadvantaged jobseekers”, defined in the Act on Employment Services. The problem is that the Act specifies categories which are seen as disadvantaged very extensively. The question then is, as Bellan states (2005:45), whether jobs in the social enterprises are provided to those who actually have no other opportunities in the labour market. He shows that in 2009, the long-term unemployed represented only 28% of employees in social enterprises in Slovakia. According to his recommendation, stricter targeting should produce not only better outcomes in this respect, but it would mean better use of huge financial resources which are assigned to this type of measure (Bellan, 2005: 45).

Gender and age dimensions of the labour market are stressed by the publication by Butorova et al (2008), which deals with it within complex analyses of labour conditions of men and women in Slovakia.29 Authors pay special attention to the development of gender segregation. On the basis of statistics from the end of the 20th and the beginning of the 21st centuries they document “lingering and even deepening of the gender segregation on both the horizontal and vertical axes” (2008: 124). Number of empirical evidence based on statistics data is completed here by analyses of sample surveys concerning public attitudes towards gender a/symmetries. This collection of studies provides an exhausting review of data not only on gender issues but also on situation of older men and women.

29 Publication in English is available at: http://www.ivo.sk/buxus/docs//publikacie/subory/She_and_He.pdf

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3. Presentation and analysis of policies 3.1 In-work poverty Low wages and low work intensity are two main causes of in-work poverty in Slovakia as well. In this part, the report focuses on policies put in place to tackle them and assesses their effectiveness. Both governmental policies and initiatives by the social partners are examined. 3.1.1 Low net wage

“Making work pay” was an important aim and slogan associated with the tax and social assistance reforms in 2003/2004. These reforms were launched in situation of almost 18% of unemployment and attempted to reach their aim first of all by resolute cuts of social assistance on the one hand, and by tax bonuses and several activation contributions on the other. In the whole, the negative attraction – welfare disincentives – dominated. It is clear that such an approach can hardly be effective in fighting in-work poverty. It rather makes poverty of a part of the population less visible and gives it more decent in-work status, but does not make more decisive step in mitigation monetary poverty not to speak about material deprivation and economic constraints30.

Tax reform that introduced flat 19% income tax (2004) increased tax for low wage earners from 10% to 19% on the one hand. Simultaneously, it also instituted tax relieves for employees, such as reduction of tax base for the tax payer and his or her non-working spouse and flat rate tax bonus for each child31 on the other. After the tax reform, value of “low wage trap” indicator rapidly decreased.32 Both in case of the single person and in case of the household of couple with 50% work intensity (one earner) and two children with one earner, low wage trap indicator for Slovakia belongs to those under the EU average.

Though low level of wages in the Slovak economy is perceived as a general (encompassing most of the population) problem, which has various negative consequences, including stagnation of employment in services (as there is low and limited consumption, insufficient capacity to pay for services), low average wages are considered to be a comparative advantage of the Slovak economy in competition for foreign investments.

The Government’s support of increase in wages has mostly the form of gradual increasing of the non-taxable part of the tax base. However, as the taxes from physical persons are the basic source of income for municipalities of Slovakia, the Association of Towns and Communities has been a

30 Comparison of poverty threshold and median income of the EU member states in terms of purchasing poverty

standards (PPS) suggests that the income of almost 50% of the Slovak population has only been sufficient to secure such purchasing standard/living standard that is affordable to those Britons who live from income of 60% of median in the UK. (Our calculation based on Eurostat news release 10/2010, p.2)

31 While before the tax reform the non-taxable part of the tax base for a taxpayer was 960 EUR and for a non-working wife it was 300 EUR per year, after the tax reform the non-taxable part of the tax base increased to 2021 EUR for both spouses (2004 exchange rate). The tax deduction for a child before the tax reform (420 EUR) was replaced by the tax bonus: 10 EUR monthly for each child or 120 EUR per year. Only employed parents were entitled to tax bonus (later also pensioners began to receive compensation).

32 More about this indicator in part 1.2

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permanent opponent to this way of increase in wages. The last increase of non-taxable part of the tax base for employees was passed in February 2009 as the part of anti-crisis measures. The non-taxable part of the tax base for physical persons was increased from 3,435.27 EUR to 4,025.70 EUR for all the taxation period of 2009. This change was advocated by the Government’s aim to decrease the tax burden of lower and medium wage employees and with the estimated effect that the most profound decrease of tax burden would concern low wage employees with the income around the minimum wage. According to the Ministry of Finance, the increase in the non-taxable part of the tax base will yield 9.35 EUR monthly for employees who claim the full amount of the non-taxable part of the tax base and pay taxes. Those with lower wages and claiming employee premium (see the next part of this section) will gain even more (15.09 EUR). For illustration, this amount suffices for buying 12 litres of full-cream milk or three pairs of socks. However, this tax allowance is intended only for the crisis period. Since 2011, the amount of the non-taxable part of the tax base and the amount of the employee credit will return to their 2008 or original level. (Implementation Report of NRP 2009) Minimum wage Receiving an adequate income from work is a difficult objective in Slovakia.33 Abolition of the institute of the minimum wage is a long-term strategic objective of one of the important representatives of social partners, the employers’ organisation, National Union of Employers (RUZ). During the preparation of the new Act on the Minimum Wage, employers’ representatives attempted, at least, to introduce regional variation in minimum pay and to warrant social partners’ entitlement to agree on the lower minimum wage than the wage set for the given year. These proposals were refused by trade unions as well as by experts. The amendment to the Labour Code (2007) and the new Act on the Minimum Wage were believed to be steps towards a more adequate income from work. Disputes and disagreements concerning the institution of the minimum wage as well as the level of its annual adjustment are, however, chronic. Act No. 633/2007 on the Minimum Wage realistically counts on the situation that social partners fail to come to agreement when the amendment of the minimum wage is negotiated. For the sake of such a situation, the act comprises the safeguard that in case of disagreements of social partners the Government is entitled to set the sum of minimum wage for the next year. The present sum of the monthly minimum wage is 307.7 EUR and 1.768 EUR for every hour worked by employee. In 2008, 4.4% of the employed received less than the minimum wage in the Slovak economy. Less than the MW pay was received mostly by those working part-time – almost 43% women and 45% of men working part-time received less than the monthly MW (Structure of wages 2009: Table 41, p.54) Commitment of the Government to gender equality was manifested in the reorganization of the National Labour Inspectorate in 2007. Its aim was strengthening the control over the equality in men’s and women’s wages.

33 We have already suggested that the employers’ associations advocate for low wages as the competitive advantage

of the Slovak economy. Progress Report on the Implementation of the National Reform Programme of the Slovak Republic for 2006 –2008 (October 2007) admits contradicting interests of social partners in this issue and also admits that low wages are the reason for a lot of Slovaks to seek work abroad (Progress Report 2007 p.21)

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Tax credits for low-wage/income workers The use of taxes to support transition into employment continues also in 2006 – 2010 period. In 2008 so-called “employee’s premium” has been introduced with effect from January 2009. This instrument has been intended to stimulate increase of employment, especially of long term unemployed by "increasing their motivation to work for lower pay and improving their social situation". It is provided to low-wage earners (employees) who worked at least six months and their income is under the level of minimum wage. The tax credit is received with a year delay. The income-tax return was applied in 2010 (for 2009) for the first time. According to the Ministry of Finance’s estimation, about 16% of all employees should benefit from the increased employee’s premium, which is about 302 thousand employees in the Slovak economy. It is estimated that entitlement to the maximum amount of employee’s premium (annual amount 181.03 EUR) will result, for about 120 thousand of employees, in the wage that is lower than the minimum wage34. The actual number of persons who were eligible for the tax credit in 2009 will be available by the end of May 201035. These are mainly those workers who after deduction of all the non-taxable parts of the tax base (for husband/wife, for tax payer, contribution to supplementary pension insurance, contributions to special purpose saving and life insurance saving) and after counting up tax bonus did not pay any tax in the previous taxation period. In our view, the employee tax credit is very ambivalent as the motivation tool. Firstly, it is rather modest (considering amount). Moreover, it is not household-friendly: it cannot improve household everyday situation as it is received with a year delay (it is paid after the tax clearance in April next year).

In-work (top-up) benefits, both in-cash and in-kind According to the § 152 of the Labour Code, employers are obliged to provide catering for employees in all shifts when their work is longer than 4 hours. Employers are obliged to contribute to employees meals at least in the amount of 55% of the cost of catering (but not more than 55% of the meals allowance is provided for shorter (maximum 12 hours) domestic business trip). Care for life-long learning, education and training of employees, and care for healthy working environment are other obligations of employers. Their content and extent is the subject of collective negotiation both on the level of the economy of sectors (Sectoral social partners’ tripartite) and on the level of firms. The repeated survey of the MERCES agency, the professional salary monitor, on employees’ benefits in kind and cash has confirmed the expectations that the amount of employees’ benefits increases with size of a company in Slovakia. The most widespread benefits are education of benefits, drinking regime (free beverages) and flexible working hours. The highest amount of benefits is provided by big companies with foreign ownership in Bratislava region. The least generous benefits are offered by small companies in Prešov region, which is the region with the lowest average salaries in Slovakia. Foreign companies and private companies are more generous in providing employees with benefits than public sector (by one third if assessed in cash). Private and public companies also

34 Národný program reforiem SR 2008 – 2010, Implementačná správa. Bratislava Október 2009. 35 The Tax Directorate will send us the data under the request.

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differ in structure of employees’ benefits: employees of the public sector more often receive contribution to pension insurance, education, flexible working hours, and extra holiday than those working in private firms.36 3.1.2 Low work intensity Low work intensity at individual level Low-work intensity as one of the in-work poverty causes may result from inadequate labour market participation. As we have shown in the first part of the report, in general, an incidence of precarious employment depends on its form. The percentage share of employees involved in fixed-term contracts or in part-time jobs is quite low in Slovakia compared to the other EU countries. It could suggest that the most used forms of precarious employment don’t represent widespread problem. On the other hand, according to the data from Eurostat37, in 2008 almost one quarter of people working part-time in Slovakia hadn’t decided for this type of regime voluntarily. Involuntary jobs are the domain of women, who are often disposed to accept such “throffer”38 because they are very often “only” the second earner within the household and/or they have also additional responsibilities limiting their full “commodification”. Willingness to accept atypical forms of employment may not lead to intended consequences – to maintain at least minimum decent living standard. Such jobs are more likely to be re-designed or just cancelled. Thus, a work history and a work career are likely to be interrupted and may contribute to further worsening of opportunities on the labour market. Working conditions in general and atypical forms of employment in particular (including potentially precarious forms of work) are covered by the Labour Code in Slovakia. Here, the use of temporary contracts (fixed term jobs) is specified relatively strictly. According to this legislative norm (§48), the fixed term employment may be agreed for a maximum of two years. The upper time limit serves as a barrier against the frequent renewal of the temporary contract with the same employees, which could lead to a worsened coverage by social security and to other negative effects. On the other hand, the Labour Code allows to renew or to extend the fixed term contract in specific situations, enumerated by the law (for example, in case of need to significantly increase the number of employees for a transitional period or in case of performance of seasonal work).39 Of great importance is that the Labour Code explicitly determines that “an employee in a fixed term employment relationship may not be given both more or less favourable treatment act and working conditions relating to safety and health at work under special regulation” (§48, 7). 40 It seems that principle of equal treatment irrespective of nature of the working contract represents – at least at the normative level – solid protection against unfavourable conditions, apart from earnings and social security issues (in comparison to permanent work contracts).

36 http://www.merces.sk/analyzy?cms_id=42369&detail=1 37 http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database 38 The term ”throffer“ comes from the study of Lodemel and Trickey (2001) where it is used to label measure which is

seen as both “threat” and “offer” at the same time. The authors use the term in the context of analyses of workfare policies.

39 §48, 4 of the Labour Code. 40 The statement is cited from English version of the Labour Code which is available at the website of the MLSAF:

http://www.employment.gov.sk/index.php?SMC=1&id=144

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The Labour Code in the Slovak Republic defines also “employment relationship with reduced working time” with an entitlement to wage corresponding to the agreed reduced working time (§49). Lowered working time doesn't need to be allocated over all working days. On the contrary, the law allows accumulating working hours within fewer days than the usual week consists of. Several contracts with reduced working hours may be agreed on between the employer and (the same) employee under condition that these contracts relate to different types of work. In general, protection of employees has been one of the most stressed goals mentioned in the Manifesto of the Government of the Slovak Republic for the Period of 2006-2010 that defined it as having social-democratic orientation. 41 In this document, the Government declared intentions to change the existing Labour Code (reformed lastly in 2003 along with other significant changes of the Slovak social assistance and employment policy) in order to improve a protection of employees. The improvement of the employees protection was defined, for example, as a protection of employees working part-time, as an elimination of misusing of fixed-term contracts42, an improvement of the protection of employees contracted by temporary employment agencies (Programme Declaration: 24). In addition, the emphasis on a role of labour inspection was put in place in this document. Commitments included in the Government Manifesto were partly adopted from the trade union demands and were reaction on previous changes done by the former government, which were aimed at “the liberalization” of employment relationships. The protection of employees, especially in such potentially precarious jobs as multiple consecutive fixed-term contracts, has belonged to the most prominent issues in public debates. Special attention has been paid – by the current Government as well as by the trade unions – to so-called “forced self-employment”. It refers to the situation when employees are forced to change their status because it brings advantages to the employer. The self-employed become then officially sub-contractors of their former employer, and, in reality, they are still engaged in a dependent position but without social security responsibilities of the former employer. There have been various estimations of an extent of this phenomenon; however, exact data are not available. Low work intensity - at household level Weak labour market involvement due to constraints at the household level has been an object of policy interventions during the past years. One of the aims of the tax-benefit reform in years 2003 – 2004 was to improve conditions for the labour market participation of all working-age adults by eliminating financial disincentives. As the reform was implemented, marginal effective tax rates on the potential second earners in the household have been decreased. It means that entering the labour market has become more attractive also for persons that were dependent on partner’s earnings. Decisions made at the household level concerning the labour market participation of adult household members are not, of course, the result of only direct financial incentives (or the absence of financial disincentives). Decisions are made also in relation to complex household conditions, including the need for care for dependent members. If the need for care does exist, there are three basic options

41 http://www.vlada.gov.sk/1683/3-2-pracovne-vztahy-a-socialny-dialog.php 42 Misusing of fixed term contracts is based on forced agreement of employees on several consecutive contracts.

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from long-run perspective: to provide care by household members (unpaid work or paid but often at low level – in case of parental leave benefit, for example), to provide informal care by relatives (often limited in scope of activities and/or duration), and to use public or private institutional services. It is well-known and empirically well-established that accessible and affordable public services may contribute to increase in the labour market participation of persons with family responsibilities. In Slovakia, persons witch child-care duties may use the network of pre-school facilities which are established and administered mainly by municipalities. Private and church kindergartens also exist in Slovakia, but their percentage share is well below the proportion of public institutions. In addition, regional educational authorities may also establish such facilities in the case of services for children with special needs. Kindergartens can be attended by children aged two and more. This age threshold was set in 1994 when former age threshold (3 years) was changed. It was reaction to the negative development in the sector of services for very young children under three years43. The number of public kindergartens declined during the whole transformation period (4,025 in 1990, 3,322 in 1995, 3,263 in 2000 and 2,945 in 2005).44 In 2008 there were 2,871 kindergartens in Slovakia. The highest enrolment rate was among 5-year-old children, it represented 82% in 2008. The coverage is much lower among younger children. In 2008 kindergartens were attended by 61% of 3-year-old children and only 10% of two-year-old children. One of the reasons behind the low proportions is that parental leave benefit is provided until the child reaches the age of 3 years.45 The information on use of services for very small children (aged 2 years and less) is not available from official administrative sources. The reason is that there is no central body in Slovakia which would be responsible for collection of such data. Moreover, there is no governmental body responsible for nurseries as such.46 On the other hand, there are data from the SILC, which allow us to estimate the share of very young children attending formal pre-school facilities. In 2006 Slovakia belonged to the EU countries with the lowest proportion of 2-year-old children cared for in formal arrangements (i.e. pre-school education, centre-based services). In the age group of 0-2 years, only 1% of children attended formal child-care facilities for between 1 and 29 hours weekly, whereas there were 4% of this age group who attended formal arrangements for 30 hours a week and more (European Commission, 2009: 75). The situation is similar in the neighbouring countries, such as the Czech Republic, Poland, and Hungary. Data from the EU SILC show that other arrangements (mainly care by grandparents, other household members, or relatives) played a more important role. From reconciliation policies’ point of view, public child care services haven’t belonged to the core agenda for a long time. Their educational aspect has been more visible than that related to increasing the labour market participation of parents. It is partly understandable as kindergartens are under the auspices of the Ministry of Education. Despite this fact, during the last years the MLSAF has prepared a new measure related to the use of pre-school facilities which should support participation of parents of small children in the labour market. In 2008 the Act on the Child Care contribution was

43 Crèches that were the part of health care institutional system were abolished as the part of this system in early

1990s. They lost their legal definition. Organisation of crèches was left to discretion of municipalities as an optional service. Such situation has lead to rapid evanescence of crèches from towns and villages of Slovakia.(for more see Hašková – Saxonberg 2008)

44 Data come from administrative registers provided by the Institute for Information and Prognosis in Education, www.uips.sk

45 Its duration reflects the ideas that care for very small children should be the responsibility of family members mainly due to considerable sickness of children. (Saxonberg 2008)

46 For more details (in English) see Gerbery (2010).

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adopted. The new “child care contribution” is intended for one of the parents of children under three years. Parents have to work or attend secondary school or university and provide care for the child with the help of other persons, private entities, or child-care facilities. The contribution covers the costs of child care of working parents (to the level of parental benefit). Parents have an opportunity to choose between the parental leave benefit and the child care contribution. If they decide to work, they can arrange child care by physical or legal persons or by child-care facilities and they can claim the contribution which covers the cost of care.47 Thus, more flexible options have been introduced for the parents of small children in order to allow them to follow their own preferences.48 Adoption of the Act on the Child Care Contribution (No. 561/2008) was explicitly framed by several issues, most importantly the labour force participation of parents of small children. The draft Act even mentioned that this support is partly a reaction to the OECD recommendations concerning the length of parental leave and the labour market participation of parents. Beside the issue of the family-work reconciliation, the Act was also intended to support the birth-rate. Lastly, the Act also made reference to the aim of increasing opportunities for individual choice (Gerbery, 2010). 3.2 Labour market segmentation – working conditions and “employee-friendly” flexibility It is well-known that implementation of flexibility principles alone into the working conditions could lead to both positive and negative effects. Therefore, the concept of flexicurity includes the emphasis on flexibility and security, both of which should contribute to wide range of societal goals, especially to bringing people into good jobs and to developing their talents. (European Commission, 2007: 7) While internal flexicurity is about improving working organization and investing in worker’s skills, external flexicurity “attempts to offer safe moves for workers from one job into another and good benefits to cover the time span”. (European Commission, 2007: 7) From the labour market segmentation perspective, flexicurity should help to solve the problem of division between “good and poor” jobs.

Unlike involuntary part-time jobs or use of consecutive fixed-terms contracts, “employee-friendly” flexibility is based on the use of atypical forms of employment in order to meet specific needs of employees (in the first place49). Here we provide the review of several measures which are framed by this goal. The crucial reference point here is the Labour Code, which contains their definitions and specifications. One of the most general measures is represented by flexible working time. According to the Labour Code (§88), flexible working time should be applied in the interest of increasing the work efficiency and improved securing of the employees’ needs. The beginning and the end of the working time for days agreed with employers should be the matter of decision of employees. Flexible working time can be used in various forms which are connected to different working-time requirements: flexible working day, flexible working week, and flexible working four-week period. Overtime work is defined as work beyond a given weekly working time. Commanded overtime work 47 We can expect the role of private providers (for example, co-called „maternal centres”) to become more significant

due to the Act. 48 In connection to the option to claim child care contribution, since 2010, parents receiving parental leave benefits

haven’t been allowed to work. 49 Of course, “employees friendly” forms of an internal flexibility serve also to employers for better adaptation to

changing conditions.

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shouldn’t exceed eight hours per week on average during four consecutive months. The extent of commanded overtime work per one calendar year should not exceed 150 working hours. In case of very serious reasons, the employer may agree with the employee on the length of overtime exceeding 150 hours. However, the upper limit is set; it amounts to 250 hours per year. One of important aspects of good working conditions is that people performing risk work cannot be ordered to agree with overtime work (the contrary is the truth in case of extra ordinal situations).

The Labour Code covers also the area of working conditions for women and men caring for children. Especially, it requires taking into account the needs of parents continuously caring for children (as well as pregnant women) when designing work shifts (§164 of the Labour Code). Those parents are well-covered by another regulation included in the Labour Code: if they ask for reduction in weekly working time or for another change related to weekly working time, employers are obliged to accept it50 (with some very specific exceptions). Moreover, there are concrete measures aimed at potential mothers and their security, in both financial and health terms.

Maternal/parental leave policies are often viewed as key pillars of family policies, social inclusion policies, etc. They have, however, also strong implications in the area of working conditions and associated social rights. Thus, they are not only the matter of duration and/or level of benefits, but they require also employment-related regulations. Here we can conclude that legislative norms covering the maternal and the parental leave from the perspective of job security and flexibility are in line with generally accepted principles set by international organizations (ILO, for example). Life-long learning The life-long learning indicator does not rank Slovakia among the countries that devote education of adults above the average attention. On the other hand, the low level of education has belonged to most emphasised hindrances of access to the labour market and, in harmony with this thesis, training and retraining have been an important part of programmes of the active labour market policy in Slovakia. Importance of life-long-learning and specific on-the-job schemes for the low-skilled has been emphasised because of the massive and stubborn long-term unemployment in the country and diminishing openings for manual labour. The long-term unemployment deteriorates working skills and leads to their loss. Belief that education and training increases employability is embodied in Act No.5/2004 on Employment Services and in various active labour market policy (ALMP) tools prepared by the Ministry of LSAF. The ALMP tools are regarded as the tool of “necessary integration of marginalized group in education and work process” (Report on SSP/SI 2006 p. 10, p.18). The emphasis on education is partly learned through the conditions of financing of the policy programmes from European Social Fund. It is evident that also in the domain of education the ALMP tools form an open and dynamic system. Its dynamism is maintained by supporting various pilot projects that test the new ALMP tools, including the bottom up initiatives, and by small-scale projects tailored to the local needs (or attempting to do that). The Act on Employment Services and on amendments of certain acts as amended by further regulations defines various possibilities of participation of job-seekers in

50 The only condition is care for children younger than 15 years

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education and training. Fulfilment of these legally defined possibilities depends both on centrally organised national projects and on local and regional initiatives and, last but not least, on their financing and budgets of district labour offices. The ALMP measures can be sorted by at least two ways: according to the site of investments (direct support for job creation or human resources development support or in removing various hindrances and making taking job sustainable) and according to the type of mobility they promote. Professional mobility The Act on Employment Services recognises the importance of life long learning, re-training and professional mobility, and support of various forms of education and preparation of jobseekers for the labour market, and also of employees who are already on the labour market and of the need to sustain and further develop their working capacities (Act 5/2004 On Employment Services, § 46). In the first programming period (2004 – 2006) when education and retraining programmes were introduced as the part of the ALMP, the interest in education programs proved to be high. For instance, in 2005, the labour offices received twice more applications for placing in education and preparation for the labour market programs than they could accept. 35,689 jobseekers were accepted for education programs.51 However, as we have shown in our older reports, education programs did not prove to be very effective in sense of helping the participant to get a job.52 For that reason, participation in education programs has been gradually more and more complicated.53 In the present programming period, education programmes are much more individualised and the support of education of jobseekers (maximum of two years of continuous education) is tailored to their individual needs (Act No. 338/2008, § 44 – 46). However, participation in education programs has been now very limited. According to the Evaluation of the ALMP, in 2009 only 6,443 jobseekers participated in education programs (§46). On the other hand, there also were 9,673 employees participating in education programs (§47) funded by the ALMP schemes (§47). (Vyhodnotenie…2009) In total, it is still two and half times less involvement in education programs than in 2005. Suspicion of experts that education and training programmes are not supported adequately in recent period has been substantiated. On the other hand, higher involvement of employees than jobseekers in education programs also deserves attention.

51 Realizácia … 2006 p. 9 52 Evaluation after the first two years of the new programmes revealed that after the completion of education and pro-

market preparation, but 16.8% of their participants got a stable job. After finishing the training for graduates, only 2.5% of participants got a job. Evaluation of the commitments from the Statement of the Policy of the Government of the Slovak Republic 2002 – social domain March 2006 www.employment.gov.sk/mpsvrsr/internet/home/page_pdf.php?id=1937& the access on April 26, 2006

53 Since January 2006, differentiated contributions have been introduced for the repeated participation in education programs. Only the first education course/retraining program is provided free of charge. The second and the next courses have become co-financed by jobseekers now. The purpose of introducing the jobseekers’ co-financing has been “to motivate jobseekers and providers of education/retraining services as well as to find jobs for the participants as soon as possible.” On the other hand, education costs are fully reimbursed if jobseekers are capable to find a job within the three-month-period after the end of an education program.

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Jobs schemes for the low skilled There are several measures set by the Act on Employment Services that are targeted at supporting employment of low skilled (or de-skilled by long-term unemployment) jobseekers. Among them there are: Contribution for training and incorporation of a disadvantaged jobseeker (§49a); Contribution for employing a disadvantaged jobseeker (§50); Contribution for sustaining of employment of low wages employees (§50a); Contribution for creating job in social enterprise (§50c); Contribution for support in employment (§ 50d); Contribution for support of new job (50e); Contribution to employee wage (50f). Some of these measures passed in 2009 as a part of the anti-crisis package. For instance, contribution to employee wage (50f) has an amount of 22% of average wage during the first year of employment and an amount of 11% of average wage during the second year of employment for those jobseekers who were social assistance recipients for at least three months and whose monthly salary is less than 1.7 times of subsistence minimum. All new contributions are planned to be provided at last until the end of 2010. Table 10 Support of job schemes for the low-skilled in 2009

Estimated number of supported persons in

2009 – 2010

Supported persons/created

jobs in 2009

Agreed support in

EUR Contribution for training and incorporation of a disadvantaged jobseeker (§49a)

250 136,392.95

Contribution for employing of a disadvantaged jobseeker (§50)

1 1,981.93

Contribution for sustaining employment of low wages employees (§50a)

37 158,510,14

Contribution for sustaining employment (§ 50d) 20, 000 38,197 2555,404.23 Contribution for creation of new jobs (§ 50e) 323 903,110.92 Contribution to wage of employee (§ 50f) 7,000 8 13,755.14 Contribution for creating jobs in social enterprise (§50c) 10,000 62 565,624.58

Source: Implementation Report of National Report Plan 2009, Evaluation of the ALMP 2009 (www.upsvar.sk accessed April 29 2010) Table 10 shows that some promising job schemes for the low-skilled measures have been poorly implemented up till now. It is worth mentioning that in the most successful measure, Contribution for sustaining employment (§ 50d) out of 38,197 supported jobs in 2009 (§ 50d), 1,878 belonged to elementary occupations. Most of supported jobs were ISCO-88 COM 7 and 8 (more than 24,000). However, legislators, senior officials and managers (1,273) and professionals (1,919) were also supported by this scheme. (Evaluation of the ALMP 2009)

Non-discrimination policies and inclusive work environments The Slovak Constitution fully recognizes the fundamental rights and freedoms for its citizens and stipulates the principle of equality for all: “All human beings are free and equal in dignity and in rights. Their fundamental rights and freedoms are sanctioned, inalienable, imprescriptible and irreversible.” (Art. 12, 1) A prohibition against discrimination is laid down in the subsequent paragraph: “Fundamental rights shall be guaranteed in the Slovak Republic to everyone regardless of sex, race, colour, language, belief and religion, political affiliation or other conviction, national or social origin,

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nationality or ethnic origin, property, descent or any other status. No one shall be aggrieved, discriminated against or favoured on any of these grounds.” (Art. 12, 2) As it is known, the Slovak Roma minority54 suffers by extremely high long-term unemployment. The majority of the Roma live in districts with collapsed industry or depressed agriculture and an extremely high number of jobseekers per vacancy. Early school leavers are much more frequent among the Roma youth than among the majority population in Slovakia55. Though the present Government strongly supports the development of ethnic self-awareness for the Roma minority, here is an unwillingness to recognise the Roma minority’s disadvantaged position in the labour market. Employment policy is “colour-blind” and the Roma minority is not considered a disadvantaged group in the Act on Employment Services. In 2008, an amendment to the Act on Employment Services was passed, which broadens the list of disadvantaged groups. Many non-governmental organizations proposed the inclusion of a category of ethnic minorities as well. Although the ethnic minorities were not included in the proposition, the Act initially included a category of people disadvantaged by insufficient knowledge of the Slovak language. However, the final version of the Act does not include this category56. Slovak authorities are often afraid of adopting any positive measure or action which would prevent or compensate for disadvantages linked to a racial or ethnic origin, in spite of the fact that such positive actions are highly recommended by the Council Directive 2000/43/EC on equal treatment, as stated in Article 557. The directive on equal treatment was implemented into the Slovak legislation in 2004 by adopting the Act on Equal Treatment in Certain Areas and Protection against Discrimination, amending and supplementing certain other laws (Antidiscrimination Act)58. The Act defines direct as well as indirect discrimination59 and the principle of equal treatment was implemented into other Acts, such as the Labour Code. One of the obligations stemming from the implementation of the Directive on equal treatment is to establish an institution that would prevent discrimination on an ethnic or racial basis. In Slovakia, this institution is the Slovak National Centre for Human Rights. In its annual reports, the Centre monitors cases of unequal treatment against people of the Roma ethnic origin, chiefly in areas of labour relations (hiring and firing) and in how goods or services are provided. The 2007 report mentions one successful out-of-court settlement (with financial compensation for the person discriminated against) and three pending trials on workplace racial discrimination in 2007. (SNCHR 2008) However, besides 54 Ethnic belonging is, however, based solely on self-identification 55 The survey of total 15 – 16 year-old population of pupils of two Slovak towns has showed that one third of the Roma

respondents planned to leave education next year (Kusá et. al. 2009) 56 The category of those disadvantaged by language was deleted, following the suggestion by the Ministry of Education

(with very poor argumentation) that “there is no reason to claim that anybody who needs further language training to enter the labour market is a disadvantaged jobseeker”.

http://www.rokovania.sk/appl/material.nsf/0/B3D904E18B9D98C6C12573BE004CF21E/$FILE/Zdroj.html 57 “With a view to ensuring full equality in practice, the principle of equal treatment shall not prevent any Member State

from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to racial or ethnic origin.”

58 Act No.365/2004 59 Indirect discrimination is defined as: “an apparently neutral instruction, provision, decision or practice that would put

a person at a disadvantage compared with other persons, unless such instruction, provision, decision or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary”.

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the out-of-court settlement, no precedence has yet been made for winning a case involving ethnic or racial factors. Awareness raising campaigns are more than rare, especially when the Roma minority is concerned. The role of social partners The role of the Tripartite (Hospodárska a sociálna rada) has increased considerably under the present Government (2006 – 2010). It is the consultation body of the Government and its position is regulated by the Act No.103/2007 on Tripartite Consultation at the National Level. In 2007, Slovakia introduced various changes in labour legislation and most of them came about as a result of the requests from the trade unions to improve the employee protection and collective bargaining. (For more detail see part 3.1.2) Employers’ organisations had reservations about a part of these changes as they consider them as worsening the labour relations making them less flexible and limiting competitiveness of the Slovak economy.60 All forms of in-work support, including health and safety, social security rights (e.g. sick/ holiday leaves) are defined in the Labour Code and in the Act on Social Insurance. Level of rights set in these acts is not allowed to be lowered. Collective bargaining can only increase the amount of rights of employees. Employee rights The National Labour Inspectorate (Národný inšpektorát práce) is the main body entitled to control the implementation of the labour legislation in force. Trade unions also have the right to monitor the implementation of the labour legislation, including occupational health and safety matters. In the event of collective and individual labour conflicts, civil courts decide on the cases.

60 In order to map experience on the implementation of changes, the Institute for Labour and Family Research

conducted a company survey in late 2008. Overall, respondents were mostly satisfied with the current collective bargaining system. http://www.eurofound.europa.eu/eiro/2009/08/articles/sk0908029i.htm

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References Barošová, M., 2004: Mechanizmy úpravy minimálnej mzdy. Inštitút pre výskum práce rodiny, Bratislava

Barošová, M., 2005: Analýza právnych predpisov s väzbou na minimálnu mzdu. Inštitút pre výskum práce rodiny, Bratislava

Bednárik, Rastislav – Danihel, Miroslav – Sihelský Ján, 2003: Nelegálna práca v podmienkach slovenskej spoločnosti. F.E. Stiftung Bratislava

Bellan, P., 2010: Prechodný trh práce ako nástroj tranzície dlhodobo nezamestnaných na otvorený trh práce. Rodina a práca 1/2010. Inštitút pre výskum práce rodiny, Bratislava

Bútorová et al, 2008: She and He in Slovakia. Gender and Age in the Period of Transition. Institute for Public Affairs, Bratislava

Carone et al, 2004: Indicators of Unemployment and Low-Wage Traps (Marginal Effective Tax Rates on Employment Income). OECD Social, Employment and Migration Working Papers, No.38, OECD Publishing

European Commission, 2009: Indicators for monitoring the Employment Guidelines including indicators for additional employment analysis. 2009 Compendium

European Commission, 2009: The provision of childcare services. A comparative review of 30 European countries. Office for Official Publications, Luxembourg

Gerbery, D., 2010: Public child care in the Slovak Republic: development, outcomes and public attitudes. IN: Scharle, A: Manka goes to work. Public childcare in the Visegrad countries. Budapest Institute for Policy Analyses, Budapest

Hajnovičová, V. – Marchevský, P. 2007. Odhad neregistrovanej práce v SR (Výsledky z prieskumu verejnej mienky) Slovenská štatistika a demografia 4/ 2007

Hanzelová et al, 2005. Atypické formy zamestnanosti na Slovensku: minulosť a súčasnosť. Rodina a práca 3/2005. Inštitút pre výskum práce rodiny, Bratislava

Hašková, Hana and Steven Saxonberg: “The long path: The institutional roots to post-communist family policy in the Czech and Slovak Republics”, delivered at the ECPR conference, Rennes, France, April 11-16, 2008

Herich, J., 2008: Kvantitatívna prognóza vývoja ukazovateľov materských a základných škôl. (Quantitative Prognosis of development of indicators for kindergartens and elementary schools) ÚIPŠ Bratislava. Document available at http://www.uips.sk/sub/uips.sk/images/JH/prognoza_ms__zs_08-prezent.xls

Informácia o potieraní čiernej práce za 2. polrok 2009 http://www.safework.gov.sk/attachments/126_Sprava_druhy_polrok_2009.pdf

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Kusá, Z. – Kostlán D. – Dráľ P. – Rusnáková J. .2009 Survey report Slovakia. EDUMIGROM http://www.edumigrom.eu

Lodemel, I., Trickey, H. (eds.), 2001: An offer you can’t refuse. Workfare in international perspective. The Policy Press: Bristol

Národná správa o ľudskom rozvoji S R 2001-2002 http://www.cphr.sk/undp2002sl_04.pdf

Príloha k Informácii o vyhľadávaní a potieraní nelegálnej práce a nelegálneho zamestnávania za II. polrok 2009

Manifesto of the Government of the Slovak Republic for the Period of 2006-2010

Progress Report on the Implementation of the National Reform Programme of the Slovak Republic for 2006 – 2008 (October 2007)

Národný program reforiem SR 2008 – 2010 Implementačná správa.[ National Reform Programme of the Slovak Republic 2006 – 2008. Implementation Report] Bratislava Október 2009

Informácia o implementácii národných projektov aktívnej politiky trhu práce v roku 2006 [Information on the Implementation of National Projects] ÚPSVR Bratislava March 2006,

Slovenská republika v číslach. 2008 http://portal.statistics.sk/files/Odbory/odb_410/el_publikacie/Slovenska_republika_v_cislach_2008.pdf

Správa o sociálnej situácii obyvateľstva SR v roku 2008. [Report on the social situation of the population of the Slovak Republic] MPSVR Bratislava Máj 2009

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Trh práce: zamestnanci a priemerné mesačné mzdy 2009

Vokorokosová, R., 2008: Minimálna mzda a konkurencieschopnosť. Ekonomická fakulta TU, Košice

Vyhodnotenie Aktívnych opatrení trhu práce v roku 2009. www.upsvar.sk access April 29, 2010

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Legal sources

Act amending Act. No. 2/1991 on Collective Bargaining

Act amending Act. No. 365/2004 on the Equal Treatment in Certain Areas and Protection against Discrimination (clarifying gender pay discrimination)

Act No. 348/2007 amending the Act No. 311/2001 Col. the Labour Code, as amended by later regulations and on amendment of certain Acts http://www.employment.gov.sk/new/index.php?SMC=1&id=12045 English version)

Act No. 103/2007 on Tripartite Consultations at the National Level http://www.government.gov.sk/data/files/2889.pdf

Web pages

http://www.eurofound.europa.eu

http://ekonomika.etrend.sk/ekonomika-slovensko/cierna-praca-poskodzuje-stat-o-472-mld-sk-rocne.html?print=1

http://hnonline.sk/podniky/c1-42918460-firmy-platia-ludom-minimum-zvysok-daju-bokom

http://portal.statistics.sk/files/Sekcie/sek_600/Socialne_statistiky/Trh_prace/zamestnanci_a_priemerne_mesacne_mzdy_2009.pdf

http://www.aspekt.sk/download/aka_praca_lom_web.pdf

http://www.eurofound.europa.eu/eiro/2010/country/slovakia.htm

http://www.eurofound.europa.eu/eiro/country/slovakia_5.htm