National youth program

2.2. Economic determinants for youth unemployment
One of the elements of the general economic image in Croatia is the wide-spread prevalence 
of grey economy, which significantly inhibits the growth of employment and economic 
development, the illegal employment being just one of the grey economy manifestation 
forms.
In addition to the broader economic situation, high youth unemployment rates are often 
an indicator of the rigid labour market, which is connected to the difficulties and costs of 
employing and dismissing employees. These characteristics of the labour market are also 
common in other transitional economies with inflexible labour markets. Simultaneously, 
they are significantly different from the characteristics prevailing in transitional economies 
with more flexible labour markets. The integration of Croatia into the European market 
will create strong competitive pressures in the entrepreneurial sector. Croatian economy is 
characterized by high unemployment and restricted changes in the number of workplaces, 
and the dynamics of opening new workplaces is slow due to a number of factors, including 
the inflexible labour market. Extremely strict regulations regarding the protection of 
employment, which restrict the fluctuation of workplaces, and relatively high labour cost 
per unit, that discourage employment and investment, are only some of the key examples 
of the labour market rigidity. The drop in employment and growth in unemployment means 
that in Croatia fewer workplaces are opened than closed. The source of unemployment 
problems in Croatia is not closing a large number of workplaces, but a small number of 
new workplaces. The rate of opening new workplaces in Croatia is only 3.5% compared to 
almost 10% in Lithuania or 7% in Bulgaria (Rutkowski, 2003).
In western European countries the growth of unemployment was primarily conditioned 
by technological and organizational innovations, rapid growth in application of new 
technologies that changed the structure of professions, i.e. IT revolution and its complex 
consequences for overall economy. In Croatia, we notice several factors of unemployment 
typical for developing countries, among which the structural unemployment is prominent. 
The characteristics of structural unemployment are low economic activity and disproportion 
of supply and demand of workforce (with the excess on the supply side). In Croatia we also 
notice high and visible urban unemployment due to migration processes in the direction 
village – town and latent rural unemployment. In rural areas, the important factors of 
unemployment relate to lower technological and economic development caused by the 
consequences of war. The stagnation of the Croatian labour market is also manifested in 
limited employment.
Bearing in mind the stated information, we may conclude that we may divide neuralgic 
points of the Croatian employment system, that have to be dealt with, into several levels: 
(1) societal which includes raising public awareness of the problems of young people in 
the contemporary society and incentive to young people to improve their social position 

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through their own initiatives, i.e. to transit from inactive to the active part of life; (2) the 
development of an efficient professional informing and counselling system, i.e. the 
development of life-long vocational guidance (career guidance) which includes the 
development of programs for improving skills of professional development management;
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(3) facilitating the approach to the educational system – professional training, retraining, 
professional advanced education in order for a person to acquire knowledge and skills 
necessary on the labour market – work on bringing Croatian economy closer to the 
knowledge based economy and helping young people in launching their own business 
activities through the incubator system; (4) developing voluntary work potentials found 
in the following areas: infrastructure renovation in the war-stricken areas, ensuring help 
for remote and isolated regions, afforestation and environment protection, re-socialization 
of treated addicts, care for people who need special care; (5) as a transitional country, 
Croatia is expected to combat against corruption, to have a transparent legal framework, 
to create an efficient infrastructure and to establish business friendly environment, i.e. the 
barriers to employment in smaller companies should be removed and self-employment 
(entrepreneurship) should be liberated from the existing barriers that restrict it (current 
law, corruption, bureaucracy). It is necessary to ensure mechanisms of extensive labour 
market research that would gather data from various sources (governmental and non-
governmental), as well as expert opinions, in order to create the monitoring system of youth 
unemployment and employment in Croatia, and it is therefore necessary to harmonize 
all policies influencing the youth employment with all strategic documents such as the 
National Employment Action Plan (2009 – 2010) in the area of employment policy.