Croatia Currently Lacks Nearly 200,000 Foreign Workers

It has been clear for some time that the lack of workforce is becoming a key obstacle to stronger growth, not only in the short term. However, the rapid increase in the number of required workers was rarely predicted.

In his recent analyses, the chief economist of HUP, Hrvoje Stojić, has gone the furthest, warning that, alongside the ongoing energy crisis, geopolitical risks, worsening consumer sentiment in the euro area, high inflation, excessive tightening by central banks, volatility in financial markets, and poorer financing conditions, the main threat to medium-term growth remains unfavorable demographic trends coupled with a labor shortage – he claims that Croatia currently lacks at least 200,000 foreign workers to meet labor market needs.

– There are no signs of slowing down; infrastructure projects and the entire construction sector are performing excellently and positively diverging from trends in Germany and the rest of the EU. Tourism continuously absorbs a large number of workers, not just in summer, and there are no longer enough people in the regional pool who want to work.

Our reality is that both in Croatia and in the region, people are living better and do not want to work in poorly paid jobs. However, people from third countries are not only filling these gaps; there are more and more of them not only in industry but also, for example, in banking, where they work in some simpler jobs. Therefore, this year’s needs for around 200,000 workers are expected – Stojić specified.

And what are the actual numbers? Since 2018, when the faster upward trend began, the number of workers arriving in Croatia has increased fourfold, from just under 33,000 to 133,000 in 2023, and this is not the final figure, as of September.

As specified by the Ministry of the Interior, in 2022, by December 31, a total of 124,121 residence and work permits were issued, of which 79,458 were for new employment, 27,827 for extensions, and 16,836 for seasonal workers. In 2023, as of September 30, 133,014 residence and work permits were issued.

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– The Ministry of the Interior is not responsible for maintaining databases on employed persons in the Republic of Croatia, nor on foreign nationals. For further information on the number of foreign workers currently employed, you can contact the Ministry of Labor, Pension System, Family, and Social Policy.

In accordance with the Foreigners Act, certain categories of third-country nationals based on approved residence, for example, permanent residence or long-term residence, temporary residence for the purpose of family reunification with a Croatian citizen, a third-country national with approved permanent residence or long-term residence, etc. (Article 89 of the Foreigners Act) can work in the Republic of Croatia without the obligation to obtain a residence and work permit. According to the Ministry’s databases, as of September 30, 2023, 128,736 third-country nationals have a valid residence and work permit – they explain at the Ministry of the Interior.

In the ‘called’ Ministry of Labor, however, they do not have details. They only say that residence and work permits for foreign workers are issued mainly in the construction, tourism, and hospitality sectors, and from 2021 to September 2023, about 70 percent of residence and work permits were issued in these sectors.

They do not know how many agencies are involved in this. – Temporary employment agencies are employers, just like all other employers, and recruitment agencies are intermediaries that are not directly involved in the process of issuing residence and work permits, so the Ministry does not have data on the employment of foreign workers through these agencies.

According to the Ministry of the Interior, by the end of September 2023, 133,014 residence and work permits were issued, primarily for citizens of Bosnia and Herzegovina, Serbia, and Kosovo. It is expected that foreign workers from these countries will continue to be the most represented, and the number of foreign workers in the Republic of Croatia will depend on the availability of domestic labor and the needs of the economy – they state from the Ministry of Labor, which also does not want to predict how many workers might actually arrive this year or what the real needs are.

However, the Croatian Chamber of Economy (HGK) has no problem making estimates. Josip Zaher, president of the Zagreb Chamber and the person responsible for the recently largest conference on the employment of foreign workers, says: – Based on our analyses and research within HGK, we estimate that by the end of the year, the needs for up to 180,000 foreign workers will be expressed. It is important to understand that Croatia, like many other European countries, is facing demographic challenges and a labor outflow. Additionally, economic growth and the development of certain sectors have created additional demand that the domestic labor force cannot meet.

Thus, foreign workers are key to maintaining growth and competitiveness. Despite seasonal fluctuations, construction still has significant labor needs due to increased investments in infrastructure and renovation, as well as new investments in residential construction and logistics, especially considering the extended weather conditions favorable for outdoor work. Furthermore, industry, logistics, and trade are economic sectors that currently show a high demand for foreign labor.

It is important to note that Croatia has a pronounced seasonal component, especially in tourism, which can create a perceived drop in demand during the winter months. However, the need for labor in other sectors often increases to compensate for this seasonal variability – Zaher points out, adding that part of the problem is also the fact that once workers enter Croatia, and thus the EU, they can easily move to other member states where wages are more attractive.

– This is a consequence of the freedom of movement of labor within the EU and Croatia’s entry into Schengen. However, we expect that this trend will decrease with the entry into force of the amendments to the Foreigners Act, which plan to extend the validity of work permits from one to three years and facilitate changes of occupation with the same employer as well as changes of employer in the same occupation within the validity of the residence and work permit.

It is also important to emphasize that Croatia is continuously working on improving working conditions and attractiveness for foreign workers, both through legal frameworks and various economic initiatives. In addition to extending the validity of work permits, it is necessary to improve the working and living conditions of foreign workers. This includes ensuring quality accommodation and food, access to healthcare and education, and protection against discrimination – Zaher concludes.

Thus, this year Croatia could host at least 150,000 foreign workers while the real needs range between 180,000 and 200,000, and the trend will remain strongly upward.