Addressing Labor Market Duality in Croatia : A Single Employment Contract?

Most of the newly created jobs in Croatia are temporary jobs. This contributes to labor market duality: the growing divide between employees with secure, permanent jobs (referred to as insiders) and those with precarious, temporary jobs (referred to as outsiders). Dual labor market is inefficient from both the social and economic perspective. It contributes to inequality, and potentially slows down productivity growth. This Note considers policy measures to address labor market duality. It focuses on the proposal of a Single Employment Contract. By design, the single employment contract eliminates the divide between permanent and temporary contracts. All employment contracts are open-ended with employment protection increasing with seniority. Single Employment Contract is more flexible than existing permanent contracts, but provides workers with more protection than temporary contracts