The topic of the final paper is the challenges of the labor market in the Republic of Croatia. The subject of this paper is the labor market in the Republic of Croatia. The paper will explain the labor market, which is ultimately a place where the state of the national economy can be assessed, since the goal of any economy is the well-being of its citizens, ie the highest possible standard of living. The aim of this paper is to explain through a theoretical framework the basic concepts related to the labor market and the policies that are implemented. Some features of the labor market can also be read as (in) compatibility with the education system, which should be an instrument for its improv ement, ie the improvement of the entire national economy. The main role in the labor market in Croatia is played by the process of gradual reduction of the labor force, which is considered to be a consequence of negative demographic trends and emigration. Also, the supply decreases over time, thus increasing the average age of the workforce. One of the key factors is the process of globalization and modernization of the economy that affects the demand for labor. The negative consequences are manifested in high unemployment, but also a lack of necessary skills and knowledge. The result of these processes is considered to be pronounced and long-term unemployment, disconnection of supply and demand according to the number of qualifications, occupations, but also according to the skills and knowledge required for flexible companies. The number of reduced labor force and activity rates lead to the untapped human resources for development.