This study furnishes proof in support of
the hypothesis that Croatian employees are experiencing persistent worsening of
the labour standard alongside the rising divergence in their earnings
distribution. The research disclosed five mutually reinforcing tendencies
investigated through a widely used Theil index and functional income
distribution. The empirical analysis demonstrated the deterioration of the
labour standard apparent through the continuous decline in the labour share of
income concurrent with productivity growth. The net pay inequality reported a
radical increase and stabilization on a higher plane with a nominal improvement
brought about as a result of the layoffs predominantly affecting the lower tail
of the distribution. Consequently, the lesser earning dispersion came at the
expense of the overall rise in inequality. The gross inequality indicated an
increasing pattern highly and positively correlated with the movement of the
highest earners experiencing a triple-digit population surge. The rising
between-county pay inequality throughout the period suggested a strong bias toward excessive centralization, evident with the capital city
being the exclusive county consistently reporting above-average earning levels.
Lastly, the between-sector pay inequality exhibited an overall decline. This
isolated case, however, remains a dominant driver of inequality, given that the
lowesthighest earning sector range is approximately double that of the
between-county range. These findings are detrimental to the Croatian worker’s
wellbeing and they pose a challenge to the national policymakers who must
counter adverse tendencies in order to circumvent the current exodus of skilled
workers, and restore long-term macroeconomic stability.