Severe labour shortage hurting Croatia’s growth
December 06 2018 12:05 AM

Croatia is suffering a severe labour shortage, most glaringly in its booming seaside tourist resorts, that is compounding obstacles to economic growth and dimming hopes of catching up to more developed European Union peers.
The problem reflects poor levels of pay, education and skills-training in a still mainly state-dominated economy that has driven many young Croats to find more lucrative, fulfilling work in affluent western EU countries, analysts say.
“The mismatch between education and the needs of the economy, a low readiness for mobility within Croatia and a high number of people leaving to work in other EU states negatively affect Croatia’s labour market,” Iva Tomic at the Zagreb Economic Institute think-tank told Reuters.
According to the national employers’ association HUP, Croatian firms cannot fill at least 30,000 jobs, largely in tourism, which accounts for almost 20% of gross domestic product, and in construction, retail and manufacturing.
This at a time when Croatia and other European Mediterranean tourist hotspots are struggling to cope with huge crowds arriving on cheap flights and cruise ships in the summer high season.
Tourism in Croatia, with its spectacular, rugged Dalmatian seacoast and offshore islands, regularly offsets the country’s considerable trade deficit, so it is crucial for the service sector underpinning it to be able to fill job openings.
But many other businesses, Croatian- or foreign-owned, also have many job opportunities going begging, compounding the drag on growth and helping keep the unemployment rate unacceptably high — currently at 9.1%, analysts say.
That is down from 11.6% a year, but only because of the brain drain of young Croats.
Labour shortages are not unique to Croatia — other emerging economies in Europe’s ex-communist east and southeast have also experienced a drain of young talent to the richer west of the EU, exploiting the right of free movement within the bloc.
But it explains analysts’ doubt that Croatia’s longer-term growth will surpass a modest 1-2 % needed to rise to western levels of prosperity.
At the moment the former Yugoslav republic’s economy is expanding just below 3% annually, but even that is below peers in eastern and southeastern Europe.
Labour-starved businesses are lobbying the Zagreb government to raise the annual quota for foreign workers, which this year amounted to 38,769 licenses.
But skilled workers from less developed European economies are difficult to lure as they can find better paid jobs further west, for instance in wealthy Austria or Germany.
The average salary in Croatia in September was 6,195 kuna ($950.21), far below western European levels.
Croatian media report anecdotally that Croats working in hotels in Austria earn at least double what they could at home.
Critics say that excessive red tape and high tax rates lingering from Croatia’s communist past within Yugoslavia, lumbering judicial procedures and frequently changing, opaque regulations add to barriers to growth and investment.
While a clear solution for Croatia’s growth problems is not in sight, senior Labour Ministry official Marija Knezevic Kajari said the domestic workforce pool was far from exhausted.
Only about 60% of Croatians between 15 and 64 years of age are employed — among the lowest rates in the EU.
“Importing workers is partly a solution but we believe there is space for retraining local people, for which we offer financial support to businesses and for people who have a business idea and want to be self-employed,” Knezevic Kajari said.

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