Public vs. private sector wage skill premia in recession: Croatian experience

Recent crisis in Croatia has more adversely affected private than public sector workers. However, the question is whether the pay schemes are more related to the nature of jobs in the public sector, where certain skills are in demand and consequently paid more than in the private sector. To shed some light on this issue, wages during the period 2008–2014 have been analysed in two sectors separately. For each sector wage skill premium was assessed by classifying workers into three skills groups: the first is related to abstract problem solving and organizational tasks, the second is relatively more routine-task intensive, while the third is primarily manual-task intensive. Additional emphasis is placed on the young workers (up to age 30). There are two reasons for this. The first is related to the adverse effects recent recession had on youth labour market outcomes throughout the European Union. Croatia, with the youth unemployment rate of 45.5 percent (age group 15–24) in 2014 is no exception to this problem. The second reason is related to the question of a specific active labour market policy (ALMP) measure design for inclusion of young people in the labour market by offering them internship/traineeship subsidized in the amount of an approximately minimum wage. The question remains whether such measure channels young workers into certain jobs and disrupts normal labour market competition due to its wide popularity.