The Slovenia Times

Economist calls for social consensus on raising productivity


Presenting his idea for the social pact at a session of the management board of the Chamber of Commerce and Industry (GZS) in Ljubljana on Tuesday, Mramor, a former finance minister, said the pact was necessary because of the challenges of the ageing population.

"Analyses of the existing pension system show that it is not sustainable. This is why we cannot avoid a worst-case scenario brought about by population ageing without a social agreement."

The usual response to the current situation is "to call for structural reform, which means lowering pensions to a level that is still acceptable."

"Unless we take actual measures, we will all have some EUR 500 in monthly pension without exception. This is a worse-case scenario, which would cause enormous social discontent, political instability and a downward economic spiral."

The rise in productivity by 2060 should be significantly higher than it is now, at some 2%, and should reach some 10% around 2045, which is not feasible.

"That is why we must find additional sources for generating the GDP," Mramor believes.

Possible measures include expanding the years of service and raising productivity. "In Slovenia we work more than others, but we don't do enough."

The Ljubljana Faculty of Economics has already made calculations of the impact of the young entering the labour market two years earlier on average and retiring seven years later. It will present its proposals by autumn.

The proposals are also to take into account changes in health care, long-term care, net migrations and the rise in productivity at companies.

Mramor thinks now is the best time for Slovenia to reach a social consensus, given that the economic growth is stable, employment rate high and there is not much pressure on the society.

The only problem he sees is the minority government coalition, but he believes this too could be overcome.

"To increase productivity, political decision-making should be more long-term, political influence in state-owned companies reduced, public finance should be healthy and staff more highly trained."

The efficiency of research and development, and of the public administration should also be increased, Mramor said. Diversification should be encouraged and companies should focus on end products.

"When a crisis comes, the cycle is much deeper in the countries that are sub-suppliers. If in Germany GDP drops by 2% during a crisis, in Slovenia it will drop by 8%," he illustrated.

The idea is to have employers, employees and government define the things that each must do and set measurable goals, according to Mramor. Employers should make production lean, owners commit to reinvesting, trade unions should agree to tie wages to productivity, and to flexible security.

But the most could be done by the state, starting by cutting red tape, Mramor said.


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