Professional paper
Proposal for a program of demographic renewal in Croatia
Mate Babić
Abstract
Croatia is currently in the process of transition in all respects: political, economic, social and demographic. The demographic trends are worrisome. Projections indicate a decrease of the population in Croatia, as well as the ageing of the population. In 2031 Croatia will have 17,1% fewer inhabitants than In 2001. The number of elderly persons will increase, while the younger population will decrease.
Influencing the labor supply is a long-term process. Its first results can be expected in 15 to 20 years. This is precisely why the policy must be enacted immediately. The basic idea of this proposal is that Croatia should stimulate the production of labor in the same way as capital is stimulated. In 2003 an investor with one million kuna earned a profit of 20% in the largest Croatian banks. Assuming that the owner of labor could make the same profit, the question arises how many children and which benefits should be provided per child? The author proposes that 500 kuna be allocated for the first child, 1000 kuna for the second and 1500 kuna for every other child. In order to earn 200, 000 kuna annually, a family must have 12 children. If we assume that labor should earn 16% of the equivalent of the average profit rate made by banks in Croatia, a family must have 10 children. The total cost of such a program would be 21,166 billion kuna. Since there are already 1,6 billion kuna earmarked for this purpose, the additional costs of the program would total 19,5 billion kuna. The financing could be secured by redesigning the budget. The most significant amount could be obtained by abolishing the refund of the VAT to importers. This would increase budget receipts by more than 12,5 billion kuna. The next step would be to abolish the VAT exemption of financial intermediaries and the institutions which manage gambling activities (lottery, automatic gambling machines etc.) This would amounted to 5,5 billion in 2004. Furthermore, the benefits of the second pillar of the state pension fund, which amounts to 3,5 billion kuna annually, could be used to finance this program. Thus, the financial resources which are necessary in fact already exist.The implementation of such a program in the end depends on political will, not on financial means. This program would be a long-term investment in the production of labor and demographic improvement in Croatia. The direct returns of this investment would flow into the budget in the form of taxes and payments. In addition, if the indirect social benefits are added (demographic stability, national security, preserving Croatia's national identity etc.), there is reason to believe that investing in this program would be profitable in the long run.
Keywords
Hrčak ID:
84047
URI
Publication date:
30.12.2004.
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