Coronavirus to Cost Thousands of Jobs, Steep Drops in Wages

Total Croatia News

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March 31, 2020 — The coronavirus’s first non-medical victims are 8,000 workers facing unemployment, as well as 300,000 others facing steep paycuts down to minimum wage, according to Vecernji List.

The stark The Tax Administration yesterday said it received 39,047 requests from companies and craftsmen to delay their payment of taxes; one-third of the requests came from the hotel and catering industry.

In addition to companies and entrepreneurs who are banned from working, others with a drop in income of more than 20 percent, including the self-employed can count on government assistance in paying wages.

Prime Minister Andrej Plenkovic’s government met on Monday to create a new package of measures to alleviate the problems of entrepreneurs during the coronavirus epidemic. The measures reportedly include a freeze on administrative fees and compulsory contributions to the Ministry of Economy. Officials expect the plan will be adopted this week.

Under the proposal, oft-lamented fees would not be charged over the next three months, with an option to extend the measures if necessary. The cutback on compulsory payments would also include government fees for water usage, radio frequencies, and membership fees for the Croatian National Tourism Board, among others.

Sources told Vecernji some fee cancellations experienced headwinds, particularly the compulsory charge for Croatian Radio Television (HRT) service.

The Economic Ministry says some of the benefits now being discussed will be permanently abolished, in line with the plans for administrative relief already in the works before the crisis.

There are also rumors from Brussels that the minimum support given by the European Commission will be raised from the current €200,000 will be raised to €1 million.

In the two weeks of isolation, the number of unemployed citizens registered with the Employment Service increased by more than 6,000, but also information that three thousand workers had found a job. The fees cancellations would come as many small businesses worry for their future.

Croatia has approximately 100,000 active legal entities and about 80 thousand craftsmen. Already in the first week of implementation of the coronavirus measures, every fourth craftsman and every fifth company requested a tax deferral. 

The hospitality and tourism sector had 12,804 requests, the most of any.  More than 800 entrepreneurs from the health and social care systems, 762 from information and communication activities, and 639 from real estate businesses are also seeking a delay.

There is a lot of focus on public sector salaries as well. The Institute for Public Finance calculated that reducing public sector salaries would do more harm than good at the moment. 

Cutting the salaries of employees in institutions and companies where the government is the predominant employer would bring relatively modest savings of 0.38 to 1.22 percent of GDP annually, while the negative consequences would be much greater.

The negatives include a fall in citizens’ living standards, a fall in spending, a loss of staff, the collapse of public institutions, and an even greater decline in GDP. However, the authors of the analysis do not dispute that, when the crisis is over, public sector wage cuts will eventually come to a head.


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