VZCZCXRO4628
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHSL #0208/01 0941515
ZNR UUUUU ZZH
R 041515Z APR 07
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC 0829
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 03 BRATISLAVA 000208 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR AALIKONIS 
USDOC FOR 4232/ITA/MAC/EUR/MROGERS 
 
TAGS: ECON ELAB EINV ECIN SOCI SCUL LO
SUBJECT: Slovak Labor Woes - Not Enough Workers! 
 
REF:  A) Bratislava 144 
B) Bratislava 95 
 
¶1. (U) Summary: Slovakia's strong economic growth in recent years, 
fueled by FDI, has significantly reduced unemployment.  In a picture 
common to the region, Roma, long-term unemployed, and older 
low-skilled workers are the remaining hard-to-erase pockets of high 
unemployment.  Labor mobility has affected the unemployment rate 
with large numbers of (previously unemployed) Slovaks leaving the 
country for the UK, Ireland, and other EU states.  However, there is 
much less mobility across regions of Slovakia.  Companies regularly 
look to neighboring countries for engineers and managers, but rarely 
hire low-skilled workers from the region.  Government plans to 
strengthen the labor code to 'protect workers' are out-of-sync with 
the on-the-ground reality that companies are doing all they can to 
retain current employees and find new workers in a booming economy. 
End Summary. 
 
ECONOMY BOOMING AND FIRMS NEED WORKERS 
-------------------------------------- 
 
¶2. (U) The Slovak economy has been among the most dynamic in Europe 
in recent years, with FDI playing a critical role.  According to the 
Statistical Office of Slovakia, the economy grew by 5.4% in 2004, 
6.1% in 2005, and 8.3% in 2006.  Unemployment has dropped from 14.3% 
in 2004 (and as high as 19.8% in 2001) to 9.5% in 2006, a record low 
(see Ref A).  Gross FDI inflow easily surpassed 100 billion Slovak 
Korunas in 2006 (more than $4 billion), including more than USD 500 
million from the U.S. 
 
¶3. (U) Real growth of wages has also been consistently strong, 6.3% 
in 2005 and 3.3% in 2006.  Anecdotal but consistent evidence from 
the Consular Section's non-immigrant visa interviews shows that both 
white-collar and blue-collar workers who have applied more than once 
in the last several years regularly show significant wage growth. 
This growth exists not only in isolated situations one would expect 
- such as a person who has gone from an administrative position in a 
struggling Slovak company to one in a foreign-company and has seen 
their wage double or triple - but in all sectors, professions and 
regions due to the booming economy.  Nevertheless, productivity 
growth continues to surpass wage growth and companies continue to 
invest. 
 
LARGE DIVISIONS BY AGE, RACE AND REGION 
--------------------------------------- 
 
¶4. (U) In line with the rest of post-Communist Europe, the newer 
generations and those with education and useful skills are doing the 
best in the new economy.  According to NGOs and the Ministry of 
Labor, now that unemployment is down to 9.5%, unemployed individuals 
mostly consist of a core of long-term unemployed who are older and 
were only prepared for unskilled manufacturing jobs that no longer 
exist.  Slovakia's Center of Labor, Social Affairs and the Family 
reports that those 45-54 are the largest group of unemployed (55 and 
over are often pensioners).  One NGO blames employer-hiring 
discrimination, but lack of modern skills seems a more convincing 
explanation. 
 
¶5. (U) The large Roma community, which is estimated by the 
Demographic Research Center to be 380,000, also stands out for the 
high levels of unemployment.  According to the existing Slovak 
legislation, it is strictly forbidden to register unemployment 
statistics of minorities, such as Roma (Act on protection of 
personal information), so accurate statistics are not available.  In 
a recent report on the living conditions of Roma in Slovakia the 
UNDP estimates that approximately 72 percent of Roma men and 51 
percent of Roma women are unemployed.  NGOs put unemployment in Roma 
settlements, mostly in south-central and eastern Slovakia, as high 
as 95 percent.  The unemployment rates of Roma are significantly 
lower in big cities, such as Kosice and Bratislava, where demand is 
strong, primarily in the manufacturing and construction sector, and 
Roma have benefited from social programs promoting employment. 
 
¶6. (U) The widely discussed east/west divide in unemployment rates 
exists, though it is more accurate to look at individual regions. 
Based on the latest February 2007 unemployment data, Bratislava 
region had a 2.2 percent unemployment rate, in contrast with Banska 
Bystrica region with 15.81 percent, while the city of Rimavska 
Sobota south central Slovakia stands out with the highest 
unemployment rate in all Slovakia of 28.59 percent.  Unemployment 
rates in cities close to highways (Trencin, Zilina, Nove Mesto nad 
Vahom, and Kosice) decreased significantly in the last years, thanks 
to the major foreign investors and their network of suppliers 
creating new employment opportunities. South-central Slovakia has 
the worst problems with long-term unemployment, mainly due to lack 
of access to transport infrastructure and thus a lack of foreign 
investment and job opportunities. 
 
 
BRATISLAVA 00000208  002 OF 003 
 
 
LABOR FLOWS OUT, BUT RARELY WITHIN THE BORDERS 
--------------------------------------------- - 
 
¶7. (SBU) Internal migration in Slovakia has had only a marginal 
effect on the diminishing unemployment rate.  Analysts agree that to 
date long-term unemployed workers have not been willing to 
permanently move to high-employment regions in order to find work. 
This is explained partly by strong family/social ties to home 
regions and lack of available housing in the growth regions; also, 
the spread between wages and social benefits is still not sufficient 
to motivate available employees to move.  Several companies are 
taking measures to attract workers from around the country. 
Approximately 20 percent of Volkswagen's workforce commutes back and 
forth each week from eastern Slovakia by train or bus, with the 
company providing transport costs and basic accommodation in 
Bratislava.  At Johnson Controls development center in Trencin, 
newly hired engineers are given an apartment rent free for their 
first six months so that they will have time to settle in and find 
their own place in the highly competitive housing market. 
 
¶8. (U) Official statistics on the number of Slovaks working in the 
EU are not available, as they do not count themselves as permanent 
emigres and do not register as such with the Slovak authorities. 
According to leading business daily Hospodarske Noviny, estimates 
are that 80,000 Slovaks live and work in the UK.  Non-official 
information suggests that a large number also work in Ireland. 
Among EU countries that have not yet opened their labor markets to 
Slovakia, Austria is a popular choice (for obvious geographic 
reasons) for legal and illegal work.  A recent newspaper article 
claims that about 27,000 Slovaks are currently working in Austria, 
Hungary and Czech Republic (combined), but even this number seems 
low.  No contacts were willing to guess at the number of Poles, 
Ukrainians and others who are here either legally or illegally, or 
who commute to work on a daily basis.  Companies indicate that they 
regularly look to the region for engineers and managers, but rarely 
hire low-skilled workers from surrounding countries. 
 
GOS REFORM PLANS OUT OF TOUCH WITH COMPANY NEEDS 
--------------------------------------------- --- 
 
¶9. (U) The coalition led by the center-left Smer (Direction) party, 
which has been in power since last summer, is less focused on 
unemployment issues than the previous, center-right ruling 
coalition.  In addition to comprehensive tax, pension and labor 
reform, the second Dzurinda government, beginning in 2002, 
introduced comprehensive unemployment benefits reform that required 
work-for-welfare, job training attendance, and proof of attempts to 
find work.  SMER has not addressed these issues, in large part 
because of the strong economic and job growth.  It is focused 
instead on revising the labor code to reinvigorate the role of 
organized labor unions by creating legislation that is more in line 
with Western Europe. 
 
¶10. (SBU) Several provisions of the proposed labor code, in 
particular sections dealing with overtime, seasonal work, and 
temporary workers, are seen as being out of touch with the 
on-the-ground realities faced by investors, especially in Western 
Slovakia.  Companies are increasingly having trouble finding 
qualified workers, and new investments are being announced each 
week.  The challenge of finding both skilled and unskilled workers 
was a consistent theme during Econoffs March 26-7 visit to six U.S. 
investors in Western Slovakia.  While just a few years ago 
recruiting meant posting a notice and waiting for applicants to 
apply in large numbers, companies are now putting significant 
efforts into recruiting new employees and holding onto experience 
personnel.  For example, Auto supplier TRW in Bytca worked through 
an employment agency to find employees when it started production a 
few months ago.  Managers at U.S. auto parts supplier Visteon in 
Nitra are concerned about the impact of new investments in the Nitra 
Industrial Area on their operations as more than 5,500 employees 
will be needed in the next two years at the new plants that are 
currently under construction.  In addition to making salaries more 
competitive, companies are looking to provide additional perks to 
find and keep employees. 
 
¶11. (SBU) Companies are also relying on overtime to overcome labor 
shortfalls.  At Sauer Danfoss in Povaska Bystrica the Human 
Resources director told Econoff that on average employees were 
earning 30 percent above their base salary due to the increased use 
of overtime.  U.S. manufacturer Emerson decided to cap its current 
operations in Slovakia at 3000 employees and locate new investments 
in Romania due to a shortage of available workers, particularly 
engineers and managers, in Slovakia.  The executive director at U.S. 
auto supplier Johnson Controls' Trencin development center opined 
that new investors do not have a solid grasp of the difficulties in 
finding skilled workers, and expected that many would fall short of 
their targets unless they could attract workers from Eastern 
Slovakia and neighboring countries. 
 
BRATISLAVA 00000208  003 OF 003 
 
 
 
¶12. (U) Comment - Although the proposed changes to the labor code 
have caused significant consternation throughout the business 
community, we expect the government will ultimately approve a 
watered-down version of the current proposal that will represent a 
reasonable compromise on the most controversial issues related to 
the flexibility of the labor markets.  From the perspective of 
foreign investors, the GOS should instead be focusing its efforts on 
education reform, especially at the post-secondary level, to provide 
the education/skills that are necessary to maintain the growing 
manufacturing and service sectors.  U.S. firms are establishing 
their own relationships with Slovak technical schools and 
universities, but such programs have been hampered by an antiquated 
education system leaving companies largely reliant on in-house 
training for employees.  Promoting public/private partnerships and 
more interaction between U.S. and Slovak universities is also a top 
Embassy priority.  End comment. 
 
 
SILVERMAN