Availability of labor is increasingly becoming a constraint for Croatia's growth potential, with a
declining and aging population and low activity rates.
These trends have been driven by improvements
in life expectancy, persistently low fertility rates and high net out-migration rates of mostly young people,
with the latter having intensified since EU accession. This situation poses important short and long-term
challenges, such as labor shortages, an increasing financial strain on the pension system and the mounting
burden of long-term needs on health care services.
A low activity rate - especially of low skilled workers,
youth, women and older citizen - further aggravates the situation of the labor market.
Despite a relatively
high unemployment rate, the lack of workforce has already become acute, especially in sectors like tourism
and construction. Active labor market policies (ALMP) seem to have limited impact on increasing employ-
ment and there is a need for more substantial evaluation of their effectiveness. Furthermore, poor alignment
between the education system and the needs of the labor market is a longstanding issue which has not been
properly addressed.
83.
The quality of human capital is hampered by shortcomings in the provision of education and
healthcare.
Croatia has the lowest in the EU formal childcare coverage for children from age 3 to school
age (at 51 percent, versus the EU-28 average of 86 percent). The low share of preschool-age children in
formal childcare, due chiefly to the scarce availability of kindergartens, seriously affects the choices of
parents (primarily mothers) regarding their participation in the labor market. The effectiveness of basic
education is constrained by one of the lowest number of hours of instruction.
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At the same time, the school
network has not downsized in response to the 37 percent drop experienced in student numbers (since their
peak in 1985). In fact, with only 16 student per class, Croatia has the lowest average class sizes in Europe.
Croatia’s institutions of higher education suffer from a weak accreditation system, resulting in poor match-
ing with labor market needs. The quality of human capital is also affected by the health of the population.
Life expectancy in Croatia is below the EU-28 average. With a relatively low level of wages, only a third
of the population paying health insurance premia, and constantly rising costs (especially for the most ex-
pensive drugs) the health system is under constant financial distress. Additional important issues include a
large hospital network that needs rationalization to meet the changing patterns of diseases, the need to
strengthen the primary care network, an underutilized e-health system, and overall lack of coordination and
integration between different parts of the system.
Labor market
84.
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