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Minimum wage system and the crisis response of social partners’ strategies in Croatia

In this paper we examine initiatives to reshape the minimum wage system in Croatia in response to the recent crisis and analyse the forces behind it, particularly the strategies of social partners. The current system was established by the Minimum Wage Act in June 2008 and it largely reflects the optimism of the previous booming period by including regular yearly updates with an automatic adjustment formula based on last year’s wage and GDP growth. The backward-looking adjustment rule has appeared particularly problematic in the crisis context and debate has been opened in the search for new solutions. Employers have proposed substantial changes in the system including the abolition of the national minimum wage and the return to collectively agreed minima, whilst trades unions have continued to press for further increases in the statutory minimum wage level due to increased social risks during the crisis. A weak tradition of social partnership in the country acts as a drawback in attempts to reach an agreement. The Government has taken a passive role and no changes in the system were enacted in spite of problems in implementation of the Act. The paper also examines the interaction between the minimum wage and collective bargaining, where it looks at experiences from three sectors: construction, retail and the clothing industry. Direct disincentive effect of the minimum wage system on bargaining is not found. In a wider context, however, it is possible that a highly protective labour regulation in Croatia has inhibited collective bargaining.

minimum wage; collective bargaining; crisis

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