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Croatia Raises Minimum Wage, Its Quota for Foreign Workers

FILE - A shellfish farmer sorts his catch near the town of Ston on the Peljesac Peninsula, southern Croatia, Sept. 25, 2017.

Croatia on Thursday raised its minimum wage by 5 percent and increased the number of licenses for foreign workers in 2018 in a bid to boost the competitiveness of one of the weakest economies in the European Union.

The government also slashed contributions employers have to pay on net minimum wages by 50 percent to reduce salary costs.

"These measures are going to favor both employers and workers," Prime Minister Andrej Plenkovic told a cabinet session.

The net minimum wage will from next year stand at 2,752 kuna ($429.63), while its gross value will be 3,439 kuna. This represents 43 percent of an average gross wage that in September amounted to 7,989 kuna.

"Our goal is to increase over time the minimum wage to 50 percent of an average gross wage," Labor Minister Marko Pavic said at the cabinet session. Some 75,000 people in Croatia receive minimum wages.

The government also increased to 31,000 from this year's 9,000 the number of licenses for foreign workers, most notably needed in construction, tourism, shipbuilding and metal processing.

Over the last few years, those industries have suffered from shortage of workers on the domestic market. Croatia's unemployment rate is 11.6 percent, or some 180,000 people. Its population is 4.3 million.

Most foreign workers come from European countries outside the European Union.

"These measures cannot solve the structural problems which hamper stronger economic growth, like Croatia lagging behind in modernizing its industrial sectors," said economic analyst Damir Novotny.

Croatia's economy is expected to grow a bit over 3 percent this year. Analysts say its longer-term growth prospects are at between 1-2 percent unless the country significantly improves the investment climate and public sector efficiency.