BARRIERS AT LABOR MARKET AND PROPOSALS OF PRIVATE SECTOR FOR THEIR ELIMINATION

1
BARRIERS AT LABOR MARKET AND PROPOSALS OF PRIVATE
SECTOR FOR THEIR ELIMINATION

• Slavia Delic
• Montenegro Business Alliance
• Solun, May 27, 2005

2
Briefly about Labor Law

• Labor Law has been adopted in July, 2003
• Changes are done in December, 2004
• The Law has 156 articles
• Valid Labor Law anticipates existence of economy
  with large number of stable jobs

3
General Economic Situation in Montenegro

• High level of unemployment, primary because of
  the lack of investments
• High level of employment in grey economy. As
  consequence it has increase of pressure on (i)
  social funds and (ii) everyone who pays taxes and
  contributions
• Most of existing employment is situated in areas
  in which sufficient number of workers already
  exist (i) public sector and (ii) large quasi
  private enterprises

4
Review of Existing Law Regulations

• Regulation is primary directed on maintenance of
  existing employment in state-owned and privatized
  enterprises
• Freedom to make agreements is violated, as one of
  the most significant market principles.
• Protection of workers is too emphasized. The Law
  regulates 48 cases in which employers are to be
  fined 50 to 200 lowest prices of work and about
  60 articles about rights and protection of
  employees.

5
Review of Existing Law Regulations

• Collective agreement includes many elements of
  arbitrary and bureaucratization in work
  relations. Represents inheritance of the past and
  it is not adapted to market conditions for doing
  business.
• The role of the Union is over dimensioned
  (employers are obliged to pay a membership fee to
  the Union, although they arent, according to
  definition, members of the Union). Law
  regulations are at edge of Union interference in
  business policy.

6
Guiding ideas-basic recommendations concerning
regulation of labor market

• The Law has to contain general frame of basic
  rights, in which free agreement between worker
  and employer is going on. In all of that the Law
  and the state appear as protectors of agreement
  and guarantees of its execution.
• Necessity to protect workers in privatized
  enterprises should be realized through concrete
  agreements with buyers of enterprises. If this
  protection is included in general regulation it
  represents burden to all enterprises and
  employees.

7
Guiding ideas-basic recommendations concerning
regulation of labor market

• More liberal labor market brings about greater
  possibilities to open new jobs. Too much of
  regulation, which disables free negotiations
  between worker and employer, represents
  limitation of new employment. Plans for
  rationalization of state administration, as well
  as Agenda of economic reforms which as one of its
  priorities has support of entrepreneurship and
  opening of new jobs, should be kept in mind.
• Collective agreement shouldnt relate on those
  who were not included in its passing

8
Unemployment in Montenegro and measures for its
reduction

• The level of unemployment in Montenegro is above
  20
• Taxes and contributions in Montenegro are at
  level of around 90 of net wage. Just for
  comparison, in surrounding countries this level
  is Serbia 70, Bosnia and Herzegovina 68,
  Croatia 64, Macedonia 70, Slovenia 62

9
Unemployment in Montenegro and measures for its
reduction

• MBA analysis of reduction of taxes and
  contributions on wages
• Workers and employers and the state would have
  benefits due to reduction of these charges
• Benefits for employers
• Reduced operational costs
• Increase of investments
• By increased budget for wages provision of
  professional cadre is possible, and existing
  workers are more motivated and more professional
  in their work by increase of wages
• Necessity to express wages on minimal level (due
  to high taxes and contributions) and usage of
  cash money (outside of legal flows) for payment
  of the rest of agreed wages to workers, would be
  eliminated

10
Unemployment in Montenegro and measures for its
reduction

• Benefits for workers
• Wages of workers would be at higher level, really
  expressed
• Contributions would be paid regularly and in real
  amount
• Provided social and health insurance
• Benefits for state
• Reduction of grey economy
• Increased employment
• More stable sources of income for the budget of
  Montenegro
• Increased investments
• Real expressions of wages and real payments of
  taxes and contributions
• Growth of standard

11
Instead of conclusion

• To increase employment in Montenegro,
  considering Labor Law, it is necessary to
• replace unnecessary bureaucracy procedures which
  burden employers,
• not regard enterprises and investors as opponents
  to workers,
• labor market becomes more flexible, where
  employment will be considered as mutually
  beneficial agreement between employer and
  employee,
• make the Law in every aspect more flexible from
  the viewpoint of potential investors i.e. capital
  owners.
• supplement regulations concerning prohibition of
  competition

12
Instead of conclusion

• If we want economic recovery we must change our
  attitudes concerning doing business
• We must understand that a person who invests
  money and takes over a risk shouldnt be a
  subject to sanctions and to be subordinate to
  employees
• Many other laws influence ambient for doing
  business
• Through private - public sector partnership make
  better conditions for doing business
• This is a common interest and private sector
  represented by Montenegro Business Alliance is
  ready to respond that challenge
• THANK YOU FOR YOUR
  ATTENTION!