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1. Labour market situation in the country

2. Definitions and concepts

Labour market situation in the country

Slovakia's labour market has indeed undergone significant transformations in recent years, driven by various factors such as economic recovery, demographic changes, and global economic trends. Here are some key points highlighting these changes and challenges:

Economic Recovery and Labour Market Trends

• Employment Rates: Slovakia has seen improvements in employment rates, with the national employment rate standing at 73.1% in 2023, surpassing the OECD benchmark of 69.4%. The employment rate varies significantly across regions.
• Unemployment: The unemployment rate has fallen significantly, reaching a near-record low of 5.07% by March 2024. This tight labour market has led to increased wage growth and challenges for employers in finding skilled workers.

Demographic Shifts and Challenges

• Ageing Population: Slovakia faces demographic challenges, including an ageing population and early retirement trends, which contribute to labour shortages and pressure on employers.
• Regional Disparities: There are significant regional disparities in employment rates and participation, with Bratislava showing the largest gap in age inclusion disparities.

Global Economic Trends and Challenges

• Inflation and Wage Growth: Despite recent high inflation, nominal wage growth is projected to surpass inflation rates in 2024 and 2025, potentially leading to real wage increases.
• External Vulnerabilities: Slovakia's export-oriented economy remains vulnerable to external shocks, such as global economic downturns and geopolitical tensions.
• Productivity Growth: The country's productivity growth has slowed, partly due to limited technological advancements and foreign direct investment.

Policy and Regulatory Changes

• Immigration Regulations: Changes in immigration policies aim to ease the process for highly skilled workers, potentially alleviating some labour shortages.

Regional Variations in Slovakia

Slovakia exhibits significant regional variations in employment rates. In 2023, these rates ranged from a low of 65.7% in East Slovakia to a high of 80.4% in the Bratislava Region, resulting in a difference of 14.7 percentage points. This variation is above the average OECD regional dispersion of 10 percentage points.

• Bratislava Region: The highest employment rate at 80.4%.
• East Slovakia: The lowest employment rate at 65.7%.
• Central Slovakia: Experienced the greatest recovery in employment rates, surpassing pre-pandemic levels by 4.2 percentage points.
• West Slovakia: Employment rates were also above the national average but less than Bratislava's.

Trends and Challenges

• Number of Employed Foreigners: As of June 2023, there were 97,263 employed foreigners in Slovakia, with Ukrainians being the largest group at 36,929, followed by Serbians at 9,967. This increase is largely due to the influx of refugees from Ukraine
• Over the past decade, the gap in participation rates between prime-age and younger workers increased in all Slovak regions, with the largest increase in Bratislava. Conversely, the gender inclusion gap decreased across all regions, with the most significant reduction in Bratislava.

Sources of Labour Market Data

• Statistical Office of the Slovak Republic:Provides essential labour force data, including employment rates, unemployment rates, and sectoral employment trends.
• OECD Reports:Regional labour market analyses highlight disparities in employment rates, skill mismatches, and labour shortages across Slovakia's regions. Reports also address the impact of technological changes such as generative AI on job creation and productivity growth.
• Institute of Economic and Social Studies (INESS): Conducts studies emphasizing the need for labour market flexibility to address challenges like demographic changes and skill shortages.

Youth employment

Youth employment in Slovakia has faced significant challenges, necessitating both national and EU-level interventions. Here's an overview of the historical context, policy interventions, and current trends:

Historical Context & Policy Interventions

• 2008 Financial Crisis Impact: The crisis led to a peak in youth unemployment, with rates reaching as high as 21.3% in 2014. This was due to economic downturns and job market contraction.
• National Youth Guarantee Plan: Introduced in 2014, this initiative aimed to provide early intervention and activation programs to integrate young people into the workforce. It was part of a broader EU strategy to combat youth unemployment.
• EU Support: Slovakia has benefited from EU funding, including the Operational Programme Human Resources, which is the supporting framework for the implementation of the Youth Guarantee initiative. 

Current Trends

• Youth Employment Rate: By 2023, Slovakia's youth employment rate (15–29 years) was 42.8%, below the EU27 average of 49.7%. As of December 2024, Slovakia's youth unemployment rate stood at 18.30%, reflecting a significant improvement compared to the long-term average of 27.05% recorded between 1991 and 2023. This represents a reduction of 8.07 percentage points below the historical average.
• NEET Trends: The NEET rate in Q3 2024 was 10.6%, slightly below the EU average but higher than in neighboring countries like Czechia and Austria.
• Regional Variations: Higher NEET rates are observed in regions like Košice and Trnava, where vocational training opportunities are limited. In Trnava, a significant portion of youth have only basic education, increasing their vulnerability to unemployment.

Skills Forecast 

Slovakia's labor force is becoming more highly qualified, with forecasts indicating that by 2025, 36.8% of the workforce will have high-level qualifications. However, regions with limited educational opportunities continue to face challenges in integrating young people into the labor market.

In summary, while Slovakia has made progress in addressing youth employment challenges, regional disparities and educational attainment remain key factors influencing youth employment outcomes.

Definitions and concepts

• Employment Contract: An employment contract is a bilateral legal agreement between an employer and an employee, establishing an employment relationship. It must be in writing and include details such as the type of work, place of work, commencement date, and remuneration. Employment contracts must specify working conditions, including payment terms, working time, holiday duration, and notice period.
• Types of Employment: The main forms of employment in Slovakia include employment for an indefinite period, part-time employment, working from home, and employment for a temporary defined period.
• Youth employment refers to employment opportunities for young people, typically those under the age of 29.