The Slovak „laboratory of reforms”. How to perform an overarching reform of the labour market.

Synthesis:

• The Slovak Prime Minister, Mikulas Dzurinda, during the work of his first coalition (1998-2002) could not- as a result of the presence of the post-communist party in it- introduce the overarching reforms of the labour market and of the public finance system. His actions focused on the regaining of the trust of the foreign investors towards the Slovak economy, which had been severely damaged during the reign of Prime Minister Meciar, who had had some authoritarian inclinations.
• In 2002, after the creation of a homogenous, when it comes to political program, coalition, Dzurinda could at last undertake the brave overhaul of the Slovak economy. Thanks to a coherent vision of the directions of the Slovak development as well as to parliamentary backing in two years the labour market was reformed and the public finance strengthened.
• Dzurinda can be regarded as a model reformer who does not lack the courage. While most of the Prime Ministers would not see any need for economic reforms during the time of prosperity, the Slovak chief of government introduced a series of brave overhauls of the labour market and of the social security system (including that of pension system) in the exact moment when the economy was booming. These reforms had a  wide scope. Slovakia thus became similar to the much richer Netherlands, where the process of reforms took much longer, namely two decades.
• The Slovak success found its reflection in the statistics concerning the labour market and public finance. At the time of economic growth, they managed to decrease the expenditures on social security in relation to GDP. As a result of these changes (among which was a fast increase of the age of retirement- 9 months a year which is 3 times faster than in Poland), the rate of women employment near the retiring age grew from 9.4% (1999) to 31.5% (2011), which means it tripled and among men of the same age the employment rate increased from 35.4% (2000) to 56.7% (2008), thus, it grew by two thirds.
• Three fundamental conclusions for Poland flow from the Slovak experience:

–          Firstly, because there is an interaction between the labour market institutions, there is a need to introduce wide-ranging reforms whose effects will be sustainable and visible for a long period of time.

–          Secondly, the rate of increase of the retiring age has a huge impact on the rate of economic growth (and the level of prosperity). The faster the age of retirement grows, the faster the economy grows too.

–          Thirdly, the real courage of the reformers is revealed when they introduce reforms at the time of prosperity (when allegedly there are no reasons for that) rather than at the time of recession.