Croatia Tackles Workforce Challenges Amid Population Decline and Technological Shift

As Croatia’s workforce ages and its population continues to shrink, the country faces an urgent need to adapt to a rapidly changing economic environment. B

Croatia is facing significant labor market challenges as it grapples with a shrinking and aging population, combined with the rapid pace of technological advancements. Over the past decade, the country has seen a substantial loss of nearly 400,000 residents, and projections suggest that this number could decline by a further 19 percent over the next 30 years. By 2050, the proportion of the population over the age of 65 could reach 30 percent, creating significant pressure on the labor market.

The country's current labor market is facing a profound shift, with many sectors struggling to attract skilled workers. Key industries such as tourism, construction, and manufacturing are experiencing labor shortages, further compounded by a lack of skilled workers in vital service sectors, including information and communications technology (ICT), healthcare, social services, and long-term care. These shortages are creating barriers to business investment, hindering the country’s green transition, and slowing the pace of innovation.

Demographic and Technological Pressures

As Croatia’s workforce ages and its population continues to shrink, the country faces an urgent need to adapt to a rapidly changing economic environment. By 2035, the country is projected to require over 300,000 workers to meet the demands of a workforce that is increasingly focused on green and digital jobs. With technological changes driving industry transformation, Croatia must position itself to meet future challenges by equipping workers with the right skills for a green and digital economy.

This changing landscape is particularly concerning for sectors that depend on skilled labor, such as tourism, construction, and healthcare, which have become increasingly reliant on technology. Without an adequate supply of skilled workers, Croatia risks falling behind in both its economic development and its efforts to ensure sustainability.

Government Actions and Policy Reforms

In response to these challenges, the Croatian government has implemented several strategic measures aimed at addressing workforce shortages and improving labor market conditions. Under the Recovery and Resilience Plan, the government has enacted reforms designed to improve adult education and better target active labor market policies. This includes focusing on reskilling and upskilling workers, particularly in green and digital industries.

Croatia has also launched the Demographic Revitalization Strategy, which seeks to counter the population decline and increase the overall fertility rate, while simultaneously improving the country's economic competitiveness. In addition, the government has introduced amendments to the Aliens Act, aiming to streamline immigration processes and attract foreign workers to help fill gaps in key sectors. Furthermore, employment programs for vulnerable groups, as well as grants for green and digital skills development, are being rolled out to address the country’s pressing needs.

European Commission and World Bank Collaboration

To bolster these efforts, the European Commission (EC) Representation in Croatia, in collaboration with the World Bank, recently organized the "Tackling Croatia’s Workforce and Skills Shortages" conference. The event brought together policymakers, international experts, and industry representatives to discuss the challenges and solutions related to labor and skills shortages. The conference also explored the EC's Union of Skills initiative, which aims to enhance education and training systems across Europe to create a more competitive and sustainable workforce.

According to Ivan Vidiš, State Secretary at the Ministry of Labor, Pension System, Family, and Social Policy, a crucial aspect of addressing these challenges is better cooperation with employers to identify specific competencies needed in growing sectors such as ICT, construction, tourism, and transportation. He emphasized the importance of tailoring educational programs to align with the real-world needs of the economy.

A Comprehensive Approach to Tackling Labor Market Shortages

The Croatian authorities are adopting a multifaceted approach to address the labor market and skills shortages. Key components of this strategy include:

• Increasing Labor Market Participation: Targeted services for underrepresented groups, such as youth, elderly, women, low-skilled individuals, and migrants, are crucial to boosting overall labor market engagement. For instance, outreach programs, expanded apprenticeships, and internships for young people can create more entry points into the labor market. Policies to support women's participation in the workforce, such as improved access to childcare and long-term care facilities, will also be important.

• Upskilling and Reskilling Programs: Developing skills for the green and digital economy is a top priority. The government plans to modernize curricula, build industry partnerships, and expand career guidance to ensure that workers are equipped with the skills needed to succeed in future industries. Upskilling and reskilling programs, especially in high-demand sectors like ICT and green technologies, will be central to overcoming labor shortages.

• Supporting Migrant Integration: Developing a new migration strategy and strengthening regulations on recruitment agencies are critical to attracting and integrating skilled workers from abroad. Investment in language and cultural training will help migrants adapt to the Croatian workforce, while expanding one-stop shops for integrated services will streamline their integration process.

• Lifelong Learning and International Partnerships: Boosting lifelong learning initiatives and fostering international collaborations through Global Skills Partnerships (GSP) can fill existing skills gaps. These initiatives aim to facilitate training and migration, enhancing the global competitiveness of Croatia’s labor force.

• Labor Market Information System (LMIS) Upgrade: To improve workforce development policies, the Croatian government is upgrading its labor market information system. This system will allow for better forecasting of skills needs, tracking labor market outcomes, and providing a user-friendly interface for stakeholders to access key data.

Investing in People for a Resilient Future

Zrinka Ujević, Head of the European Commission's Representation in Croatia, highlighted the importance of investing in education, upskilling, and reskilling as part of Croatia’s long-term strategy to improve competitiveness and inclusivity. The government is leveraging investments from the Recovery and Resilience Plan and the European Social Fund (ESF+) to support these goals.

Anna Akhalkatsi, World Bank Division Director for the European Union, emphasized that Croatia’s future growth hinges on harnessing the untapped potential of its domestic workforce and attracting foreign workers across the skills spectrum. By elevating the skills of both current and future workers, Croatia can enhance its economic growth and competitiveness in the global labor market.

 

The challenges facing Croatia’s labor market are complex, but with the right policies and concerted efforts, the country can navigate these obstacles. By focusing on education, skills development, and inclusive labor market policies, Croatia has the potential to build a resilient economy that adapts to demographic changes and technological advances. Through continued collaboration with international partners and the private sector, Croatia can strengthen its workforce and pave the way for a prosperous, sustainable future.