Making work pay in Slovenia

Abstract

The paper analyzes incentives for making transition from non-employment to work as expressed by various financial indicators in Slovenia and compares them to the EU countries. It also provides an overview of the main features of making-work-pay policies and discusses reasoning for their implementation in Slovenia. The paper shows that in Slovenia, families and individuals who are not working have poor incentives to find a job – because for many, “it does not pay to work.” Unemployment benefits and cash transfers, coupled with high tax wedge, create high work disincentives. To address this issue, Slovenia should consider introducing into-work benefits, in-work benefits, or both. Presently such policies are virtually non-existent. In the light of international successful experiences with such policies and given the strong work disincentive created by unemployment, inactivity and low-pay traps, in Slovenia such policies have a great potential to stimulate transitions from non-employment to employment and stay in employment.