Croatia Employers: “One in three now work for the State – this is unsustainable”

Zagreb

ZAGREB, 19 February 2026 – More than 60% of Croatian entrepreneurs feel a sense of uncertainty due to continuing global and domestic crises, while nearly one in three Croats now works for the state, a trend described as “long-term unsustainable” by Irena Weber, Director General of the Hrvatska udruga poslodavaca (HUP).

Speaking on HRT’s main evening news Dnevnik, Weber outlined mounting concerns within the business community, warning that structural imbalances and widening wage disparities could pose significant long-term challenges for the Croatian economy.

Weber noted that the high level of insecurity among business owners comes as no surprise, given that Croatia has faced five consecutive years of extraordinary circumstances, from the COVID-19 pandemic and the war in Ukraine to the energy crisis and sustained inflationary pressures.

“These are not normal conditions,” Weber said, stressing that both Croatian and European businesses have been operating in an environment marked by persistent shocks and volatility.

Although the uncertainty has not yet translated into negative macroeconomic indicators, she cautioned that caution is justified.

Croatia continues to outperform the European Union average in economic growth, but a broader slowdown across the EU is becoming increasingly evident.

“Entrepreneurs and the economy value predictability, stability and clear rules. They need long-term horizons in order to plan business processes in a stable and systematic way,” she emphasised.

Despite these pressures, the private sector has continued to raise wages, largely driven by intense competition for workers.

Croatia has faced a serious labour shortage for years, partly due to emigration and negative demographic trends. In response, private employers have increased salaries within the limits of productivity growth and profitability.

However, Weber pointed to a stark contrast in wage dynamics between the private and public sectors.

Last year saw record wage growth in Croatia, particularly in the public sector. The total public wage bill increased by 48%, a development Weber described as having a significant negative impact on the private sector.

“We simply do not have the capacity to raise wages in such enormous amounts,” she said.

Historic Wage Gap Between Public and Private Sectors

According to Weber, Croatia is now witnessing historically high differences between average wages in the public and state sectors compared to the private sector, exceeding 30%.

She highlighted structural concerns within the labour market. Currently, 23% of employees work in the public and state sector, while a further 9% are employed in companies owned by the state.

This means that nearly one-third of all employed persons in Croatia are effectively paid from the state budget or work in state-owned enterprises.

“Every third Croatian works for the state. This is not sustainable in the long term,” Weber warned.

Beyond wage disparities, Weber also raised concerns about other economic policies. She argued that price caps harm family farms and domestic agriculture, while proposed amendments to the Law on Foreigners should simplify the employment and integration of foreign workers, a measure seen as crucial in addressing chronic labour shortages.

With Europe’s economic outlook softening and global instability persisting, Croatian employers are calling for balanced policies that support competitiveness, productivity and sustainable long-term growth.