At the time of the fall of the Iron Curtain, Slovenia was in a privileged position relative to the other members of the former Socialist Federal Republic of Yugoslavia (SFRY) as well as many other Central and Eastern European (CEE) countries. It was the wealthiest part of the SFRY and had more contact with Western markets (Silva-Jáuregeui, 2004). Slovenia, however, also inherited a large public debt burden and hyperinflation. Real output was already declining even before independence because of a crisis that engulfed the Yugoslav federation at the end of the 1980s. Transitional reforms therefore had already begun at the end of the 1980s, resulting in strong restructuring processes in the Slovenian economy and society. These entailed privatisation processes, the decline of traditional industrial sector, an expansion of the service sector and, as a consequence, a massive loss of jobs for the less qualified industrial labour force. Old institutions of individual social subsystems have been also changed or abolished in line with requirements of the market economy. Economic and social restructuring was accompanied by the loss of the employment security and a reduction of social rights provided by the state. The country's underskilled labour structure and the failure of the education system to provide appropriate skills to labourers prevented the labour force from adjusting rapidly enough to the economic and social changes, resulting in an unemployment explosion. Because of rigidities in the Slovenian labour market and the nature of employment relationships, the heaviest burden from the reduction in employment opportunities was carried by young first-time job seekers, most of them in the middle of the transition from school to work. This phenomenon is reflected by the high youth unemployment rate and youth's high share in the flexible labour force (Kanjuo-Mrčela and Ignjatović, 2004).

In the second half of the 1990s, however, the economy started to recover, and unemployment began to decline. This economic growth, which by 2005 had turned into an economic boom, decreased the unemployment rate among all social groups, increased the activity rate of the population and transformed Slovenia into one of the most successful new members of the European Union (EU). Despite this success, the increasing share of highly educated workers in the population and the persistent lack of stable employment opportunities for young people reveal that Slovenia needs to invest in overcoming structural unemployment.