Croatia working to limit foreign labour, may result in higher imports, warns analyst

The Croatian Interior Ministry (MUP) is working on changes to the laws that should limit the import of labour into Croatia, a move that could result in a significantly larger import of labour ‘in the grey zone’ than now, independent labour market analyst Predrag Bejaković warned Euractiv.

The legal changes would set employers new conditions for hiring foreign workers, Hina reported on Tuesday.

These include ensuring employees are properly qualified for the roles in Croatia, as well as reinforcing the ratio between domestic, EEA and Swiss workers, and third-country workers.

According to Hina, the MUP points out that the legal changes aim to bring order to the Croatian labour market, which has been flooded with labour from overseas countries in recent years. It is not stated, however, when the changes could come into force.

After joining the EU, Croatia faced mass emigration to more developed member states, especially to Germany, Austria, and Ireland. This has produced a shortage of workers, especially in industries such as tourism, catering, trade, construction, and crafts.

Croatian employers began to compensate for the lack of workers by importing labour from the Western Balkans. However, in recent years, they have been massively importing labour from more distant parts of the world, including India, Nepal, the Philippines, Bangladesh and Egypt.

According to the Interior Ministry, 172,499 residence and work permits were issued last year.

Employers in Croatia are under strong pressure to increase wages because they are chronically short of workers, Independent labour market analyst Predrag Bejaković told Euractiv.

“Employers are desperate because they can’t find workers, so they believe that by increasing wages they will retain existing and attract new employees. As we are facing a labour shortage, wages in Croatia will likely continue to rise under such circumstances, although it is difficult to say at what pace,” said Bejaković.

According to data published on Tuesday by the Central Bureau of Statistics (CSO), the average net salary in Croatia in December 2023 was €1,191.

Compared to December 2022, which is also the last month in which salaries were paid in former national currency kuna, the average net salary increased by €145 (13.9%).

In an analysis last year, experts from Raiffeisen and the Vienna Institute for International Economic Studies (WIIW) found that average salaries in Croatia were among the highest among the new EU members.

However, economists warn that the problem is that wages are rising mainly because of a shortage of labour, not because of productivity growth. This is echoed by Bejaković, who points out that labour costs are already a large part of companies’ costs and that continued wage growth threatens the already weak competitiveness of Croatian companies.

“This undermines the competitiveness of Croatian companies on the world market, which was not at an enviable level until now. Due to higher allocations for salaries, our products and services, which were expensive until now, are becoming even more expensive, and thus the demand for them, and thus the company’s income,” Bejaković said.

Although the government is now trying to limit the import of foreign workers through administrative measures, Bejaković is sceptical.

“Any excessive regulation on the labour market is not good. The fact is that Croatia lacks a labour force and has to import it. Administrative restrictions cannot change that,” said Bejaković.

(Adriano Milovan | Euractiv.hr)​

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