Keywords

Introductory Notes: Socio-Economic Situation, Retirement Practices, and Older Workers

Croatia has very low labour participation among the older population. According to Eurostat data the employment rate of older workers (55–64) in Croatia was 42.8% in 2018 compared with the EU average of 58.7% (Eurostat 2019). While the average for the EU rose from 45.8% in 2009, the Croatian figures increased more slowly from 39.4%. This difference is not only the result of a very low employment rate in general, but has also been encouraged by policies which informally encourage early retirement (despite official rhetoric). In 2018, the unemployment rate was 8.4% compared to 6.8 for the EU28 (Eurostat 2019). While this represented a fall from 17.4% in 2013, this change has been mainly attributed to high levels of emigration particularly since Croatia joined the EU in 2013, rather than increased employment.

Croatia , along with Italy , are among EU countries with the lowest number of total years in employment. The duration of working life was only 32.4 years in 2018 (Eurostat 2019). There are also gender differences as the average working life for women was 3.7 years shorter than for men .

Bađun (2011) reported that Croatia has 12,000 per 100,000 beneficiaries of invalidity pensions , the highest number in Europe. This number includes former soldiers from ‘Homeland War’ between 1991 and 1995. Individuals receiving invalidity pensions are generally young (43% are under 59 years of age), and on average they enter the pension system at 52.6 years old. In recent years there has been increased interest in the field of validity particularly relating to invalidity pensions and other disability benefits (Stubbs and Zrinščak 2015).

The widespread use of early retirement as a policy option is reflected in population attitudes. Research has shown that more than 40% of employed people want early retirement (men slightly more than women). Just under 40% fear that their health might influence their work ability before the legally prescribed age of retirement. Desire for early retirement more prevalent among people with lower levels of education (57% with primary education or no primary education, 47% with secondary education and 29% with college or university degree). People with poorer health also report high desire for early retirement . 60% of men expect to be retired by 65 years old and only 6% expect to retire after 65. The proportion of women who want to retire at 65 and at 60 is similar (36–37% respectively). Comparable to men , only 6% of women expect to be retire after 65 (Akrap et al. 2013).

The paradigm of active ageing in Croatia is present in debates among experts on how to deal with the ‘third age population’ and it has been periodically mentioned in EC/EU reports on the working life (e.g. European Commission 2012; Kaliterna et al. 2014; Bejaković 2015). However, issues such as training, part-time work, or reducing hours for older workers have not been systematically explored.

So far, researchers in Croatia have not analysed the EWCS (European Working Condition Survey) database. One study explored the quality of working life among employees aged 50+ comparing Croatia with other EU countries (Galić et al. 2019). With the exception of medical research, systematic research on ageing is limited. The concept of active ageing is touched upon very superficially, mainly by pointing out the need to focus on it (Zrinščak 2010, 2012; Spajić-Vrkaš et al. 2013; Obadić 2018). Research on age management is a rare (Pološki-Vokić and Grgurić 2011), as is age discrimination , which is studied mainly from a legal point of view (Grgurev 2011; Zekić Eberhard 2014; Bodiroga-Vukobrat and Martinović 2011). Recent research based on SHARE data will provide new analyses (Strmota 2017). Thus, there is an urgent need to have more research on topics related to ageing and late work employment.

There is only one pioneering study of employers’ attitudes toward older workers (Vehovec 2008). Employers from Croatia and Slovenia agree that older employers perform better than their younger counterparts in relation to willingness to work hard, reliability, attentiveness, professionalism, decision making competence, loyalty and honesty and integrity.

Research Insights: Notes on Caring, Health and Pension System

There is little research on caring in Croatia and the studies which are available mainly explore work-life balance , i.e. how work influences domestic obligations, particularly caring for children and other dependant family members . Research suggests that work characteristics, (primarily work hours, experience of work and perception of job safety) impact on work-family conflict . Family factors also influence work-family conflict , the most important factor influencing work-family conflict is care for older and disabled people (Dobrotić and Laklija 2009). Research on caring for older people is scarce, existing studies are mainly orientated towards policy highlighting that the majority of care is provided by family and elder care is performed by family and other non-formal organisations, whereas formal care is underdeveloped and even ignored by the authorities (Rusac et al. 2011; Bađun 2015; Dobrotić 2016).

Health in the work place is an interdisciplinary topic. The majority of research papers have focused on health from a medical point of view, however one paper has taken an economic perspective (Bađun 2017). Bađun (2017) reported difficulty in comparing the costs of occupational injuries and illnesses in Croatia with costs in other countries, mainly due to variation in components included and methods applied. As the financial costs of occupational injuries and illnesses are significant, even without including the costs to workers, the authors’ recommendation was to put additional efforts into prevention . In addition, it is necessary to develop data transparency within the Croatian Health Insurance Fund’s expenditures to facilitate clear tracking of costs. It is also recommended that occupational injuries be distinguished from occupational illnesses and that records of accidents at work must be the same in all official sources.

There are some studies on pension inequalities due to special pension rules applied to some categories of pensioners (Bađun 2009; Vukorepa 2017). Bađun reviewed all retirees who were granted pensions under favourable conditions and Vukorepa analysed workers in arduous and hazardous jobs. The scope of such jobs or the actual level of their arduousness and hazardousness has changed over time due to technological advancements and the development of health and safety measures.

Notes on Policy Issues

Pension Policies

The pension system in Croatia is a mixed system, based on three pillars (Stubbs et al. 2018). The first one is a pay-as-you-go (PAYG) system financed by obligatory contributions paid by employees and managed by the Croatian Pension Insurance Institute. The second and third pillars are fully funded contribution schemes, while the second one is obligatory and the third one voluntary. The mixed system was introduced in 2002, replacing the old system exclusively based on the PAYG scheme. Despite some state incentives, the third voluntary pillar has remained underdeveloped, there were only 359,098 people included at the end of 2019.

There are several critical issues connected with the pension system. The pension system is characterised by a very unfavourable dependency ratio that was 82% or 1.21 contributors for every pensioner at the end of 2018 (CBS 2019a). Also , early retirement has been widespread as the average contribution is 30 years, while only 20% of pensioners have 40 or more qualifying years in 2018 (Ministry of Labour and Pension System 2018). This is reflected in the financial instability of the system and the fact that it does not provide basic security in old age. The average pension equals to 41.78% of average salary, while the EU average is 58%. The at-risk-of-poverty rate was 19.3% in 2018, but 28.1% for men aged 65 and above, and 31.3% for women in the same age group . For one-person households 65 years and over the at-risk-of-poverty was 48.1% in 2018 (CBS 2019b). Expenditure for all types of pensions amounted to 10.5 per cent of the GDP in 2017, which was a slightly lower than was the EU28 average (11%), but slightly higher than in many other Central and Eastern European countries.

The problems associated with pension and employment policies are nicely summarised in the Country Report Croatia 2016 (European Commission 2016) which indicated that low activity rates are mainly the result of early retirement for men , while for women family care responsibilities also play a major role. Early retirement mostly concerns men , and the impact can be seen by the fact that more than half of inactivity in the age group 40 to 44 years is due to early retirement . For women, retirement is the predominant reason not to work in the 55 to 59 age groups . It should be stressed that with 12% of the working age population in some form of retirement, Croatia tops the EU ranking.

The instability of the pension system is a result of a number of partial and contradictory reforms, which have made the system opaque and confusing: for example, currently there are 18 different laws that relate to the pension system. This can be illustrated with attempts to prolong working age before retirement. In 2011 an incentive to work longer was introduced, through addition of 0.15% for each month of later retirement . On the other hand, penalties for early retirement were reduced from 0.34 to 0.15% in 2007 (the election year), which meant that the pensions from early retirement were only nine% lower than pensions at the statutory pension age, in comparison with 20.4% difference prior to the reform. In 2011 the size of the penalty was changed in relation to the number of contribution years. In 2014 policy changed again and the penalty varies again from six to 20.4%, however those who have 60 years and who have at least 41 years of contributions can receive a full pension, without penalties. Early retirement penalties were also abandoned for those individuals unemployed for at least two years as a result of the bankruptcy of their employers . There are few incentives for people to work longer as many laws in the public sector do not allow individuals (with a few exceptions) to work after the age of 65. Income tax also favours retirement as an option over working.

In December 2018, the Parliament adopted a set of new pension legislation, entered into force in January 1st, 2019. One of the main aims was to promote gender equalisation by standardisation of the pensionable age for both men and women (65 in 2027 and 67 in 2031). Some dispensation measures are also envisaged for early retirement as well to allow some groups of pensioners to work once retired without a reduced pension. There have been fierce debates on the proposed measures over the application of a different pension formula for pensioners who were covered only by the first (PAYG) pillar and those who were in the first (PAYG) and second (fully funded) pillar and which would result in a lower pension for the second category. These debates ended with the Parliament’s decision to retain a pension model with two pillars , and with adoption of the pension formula, which would not penalise people who pay mandatory benefits to the first and second pillars with a lower pension. However, the opposition to the rise of pensionable age and to gender equalisation was quite strong. Trade unions organized the collection of citizens’ signatures for holding of national referendum for cancellation of adopted changes. As the campaign was successful and trade unions collected much more than needed 10% of voters’ signatures, the Government gave up and the Parliament again changed the law, by which the pensionable age was again set to 65, and the gender equalisation will happen only in 2030.

Employment Policies

Regarding specific employment policies covering measures such as flexible employment , training and the creation of good working conditions for older workers , Croatia does not have any well-designed policy to effectively address these domains.

Recently, flexible employment has been promoted by politicians as one of the milestones of the future employment and labour market policies. Given that Croatia has one of the strictest sets of employment protection regulations (World Bank 2011; Matković 2013; Račić 2013; Kunovac 2014), there was an absence of flexible employment in the Croatian labour market prior to the new Labour Act.

After a long and intense public debate , the Labour Act was adopted by the Croatian Parliament on 15 July 2014, with the aim to increase the number of people employed, to create a legal framework that enables employers to develop more flexible business models and to adapt to market demands , while maintaining employee protection and combating the grey economy . The main amendments were greater flexibility in working hours; easier cancellation of employment contracts in certain cases; encouragement of atypical forms of employment.

In parallel with the new legislation, there has been a rise in the number of various part-time and precarious jobs in Croatia , especially among young and first-time workers. According to Butković‘s and Samardžija’s study (2016), the introduced changes primarily targeted non-standard types of employment, which contributed to a further segmentation of the Croatian labour market, widening the gap between well protected workers on standard contracts and other workers who increasingly face uncertainty. According to the new empirical research, the majority of employed have an open-ended contract (71%) and one fifth have a fixed-term contract (21%). “This is very similar to the Labour Force Survey Results for 2017 which recorded 68% of workers with open-end contracts and 21% with fixed-term contracts (Butković and Samardžija 2019). Some other studies have also documented different non-standard forms of employment, such as temporary, seasonal , self-employment etc. (Vukorepa et al. 2017; Murati 2016; Novaković 2016). However, besides new forms of fixed-term work, it seems that other forms of non-standard or precarious work are generally less wide-spread than in most other EU member states. Statistical data and available analyses on this topic seem to be insufficient.

Buković and Matković have explored trends and challenges regarding vocational education and training (VET) in Croatia (Buković and Matković 2018). Their findings point towards several strengths of the Croatian VET system: support for investment, high level of ownership among VET participants and graduates, widespread (if not extensive) experience of workplace training, as well as perception of relevance and quality that is not deviating from the EU average. However, VET in Croatia is hardly seen by citizens as an attractive or prestigious choice, and is perceived as lacking in terms of social inclusion and mobility. “Results also indicate strong selectivity and social stratification between general education and VET tracks. The fact that such views are shared by many who experienced Croatian VET system makes the matter even more salient. This is an issue worth addressing, via inclusion/mobility policies, but those need more sound evidence base” (Buković and Matković 2018).

Women in the labour market are protected in relation to pregnancy and motherhood. There is a statutory maternity leave starting from 28 days before the expected due date and lasting up to 70 days after birth. After that, parental leave is possible, for duration of 8 months, or to a maximum of 30 months for twins and for the third or subsequent child. However, women are frequently discriminated in relation to their pregnancy or caring needs. Although this is illegal, employers tend to question women about their intention of having children or they do not renew the contract if a woman becomes pregnant (Galić and Nikodem 2009).

Health Policies

As stated above, Croatia has a very high number of invalidity pensions , mainly due to the Homeland war in the 1990s. There are two categories of invalidity pensions within the first pillar system—for non-occupational and occupational risks—covering long-term benefits for those facing permanent loss of work capacity, whether total or partial (Stubbs et al. 2018). Entitlement to an invalidity pension requires fulfilment of the following conditions: partial or total disability and completion of the necessary qualifying period. There has been a change in the law, and from 2014 disability is assessed based on residual work capacity, involving reassessment every three years. There is also the possibility of random check-ups.

Pensioners receiving invalidity pensions (including war veterans) made up approximately 25% of the total number of pensioners (Stubbs et al. 2018). There has been a fall in the number of invalidity pensioners since 2015 which is a result of an administrative measure introduced in January 2015, whereby all ‘total invalidity pensions’ are to be converted to old-age pensions for all those beneficiaries reaching the age required for an old-age pension .

The Croatian health system is fiscally unsustainable . For many years, it has accumulated debts and almost every year there are partial health reforms which, unfortunately, have not yet resulted in a sustainable system. Comprehensive reforms are not yet on the horizon and if ever they occur, it is possible that they could be revoked under different political mandates.

Debate on Extended Working Life

As described above the opposition to extension of the working life is quite strong, and public debates do not touch any positive aspect of extension of working life. The main argument against rising of pensionable age is that the life expectancy in Croatia is lower than in the EU: for women it is 2.5 years lower, and for men it is 4.3 lower. The same argument is put against the gender equalisation. The idea to introduce a possibility to work after 65 (which at the moment is mandatory pensionable age in public sector) has been also put on hold and not included in the most recent legislation change.

Conclusion

This chapter has shown that although some data and research exist, in Croatia there is a large gap in terms of data, research and policies which address issues such as the working life of older population, active ageing , and the gender and health implications of extended working life , and the pension system. In parallel with the process of post-communist transformation and in particular with the process of ‘Europeanisation’, concepts of active aging, gender equality , quality of the working life and extended working life have entered the Croatian social and political milieu, but they have so far not resulted in any clear and effective policies. It is hard to predict if, how, and when this can be changed in the future but an important step in this direction is to provide more data and research, in turn stimulating public debates on these issues.