Autor: Jan Muś

Analityk w Zespole Bałkańskim Instytutu Europy Środkowej w Lublinie

(Un)Employment in the Western Balkans

Before the outbreak of the pandemic the unemployment in the Western Balkans dropped significantly, but it is still unclear how the pandemic will affect the labor market in the region. There is some hope due to the idea of “near-shoring”.
(Un)Employment in the Western Balkans

Belgrade, Serbia (jbdodane, CC BY-NC 2.0)

According to the data collected by the Vienna Institute of International Economic Studies, between 2012 and 2019 the whole region noted a significant drop in unemployment, from 23.9 per cent to record low 10.3 per cent. Most importantly, the biggest decrease in unemployment was on the largest labor market of the region — in Serbia, by 13.9 pp. Serbia was followed by North Macedonia with a drop of 13.5 pp and Bosnia and Herzegovina 12.3 pp. With 5.16 million of labor force these three countries (BiH 952,3 thousand, North Macedonia 962,5 thousand, Serbia 3.25 million) compose bulk of the regional labor force, which in 2019 was estimated for 7.371 million. Other countries noted less significant decline with the worse situation in Kosovo, where unemployment rate was down from 30.3 in 2012 to 25.2 per cent in 2019, which is still the highest unemployment rate in the region. The figures for Montenegro were 19.7 and 14.3 per cent and for Albania 13.4 and 11.5 per cent respectively.

The positive factor is a significant drop in the long-term unemployment, which in the region decreased by 684 thousands from 1.334 million. In Serbia decreased by 383 thousand, in BiH by 145 thousand, and in North Macedonia by 126 thousand. Number of persons inactive on the labor market also fell: from 7.322 million to 6.754 million, mostly in Serbia with 473 thousand, and BiH with 126 thousand.

Average gross wages show some positive trends. Between 2012 and 2019 Serbia noted increase from EUR507 to EUR638, North Macedonia from EUR498 to EUR605, Montenegro from EUR727 to EUR770, Bosnia and Herzegovina from EUR659 EUR723, Albania from EUR270 to EUR427.

The number of unemployed in the region dropped during this period from 1.72 million to 979 thousand. Again, the numbers are visible in three countries, where the unemployment dropped the most: by 420 thousand in Serbia, by 167 thousand in Bosnia and Herzegovina, by 124 thousand in North Macedonia. Other countries note only symbolic cutback: by 11 thousand in Albania, by 10 in Kosovo and by almost 8 thousand in Montenegro.

The contradiction between the numbers and percentage points can be explained by migrations to Western Europe. During this period the working age population fell in Serbia by 340 thousand and 304 thousand in BiH. The most significant increase in the labor force was noted in Kosovo with 168 thousand of new persons, as well as Albania — increase by 72 thousand, and North Macedonia by 15 thousand.

According to Majlinda Bregu, Secretary General of the Regional Cooperation Council (RCC) more than 700 000 jobs have been created in the period 2012-2019. And demographics is not the only problem of the region. „Brain drain is the biggest challenge of this new decade that should dictate/shape the current and future policy agenda of our economies. Another important concern is the skills mismatch between what the education system equips youth with, and what the labor market requires. Education system should radically change and challenge the conventional thinking that education is about getting knowledge to education with primary economic value.” Experts estimate that so far the brain drain has costed the potential GDP of ca. EUR900m due to lower consumption, production, and less jobs.

Global Competitiveness Report for 2019 places the Western Balkan states in the tail of European group. Bosnia and Herzegovina (the 92nd position out of 141 countries), as the last one between such countries as Ecuador (the 90th), Botswana (the 91st) and Egypt (the 93rd). Albania and North Macedonia occupy the 81st and 82nd place respectively, being with Jamaica, Trinidad and Tobago, Barbados and Dominican Republic. Serbia (the 72nd) and Montenegro (the 73rd) are not doing much better. Except for North Macedonia, all these countries dropped in this ranking comparing to the previous year.

A good example of that would be is the number of self-employed. Partly, these are freelancers doing creative work, such as lawyers, artists, consultants. The practice shows, however, that being self-employed means being a member of precariat. That means limited access to social services, demanding hours of work, stress, lack of paid holidays, and in general lower life quality. In the Western Balkans the number of self-employed increased from 1.19 million to 1.47, mostly in Serbia, where it increased by 142 thousand and in Albania with just over 100 thousand.

Until 2019, we witnessed two trends: decrease of unemployment, accompanied by decrease of quality of the available employment and the labor force. However, these trends will be a subject to reformulation of public policies and re-directing funds in the post-pandemic world. As noted by the experts from the Vienna Institute for International Economic Affairs, “this is a crisis without precedent in the post-transition period, and the institute’s forecasts are subject to an unusually high degree of uncertainty. A much more negative scenario than the currently projected is quite possible. This would include a mixture of further waves of the virus, a longer-than-expected waiting time for the vaccine, and policy missteps in the big three pillars of the global economy: the US, China and the EU. Chances for a more favorable outcome, on the other hand, are quite slim, but cannot be ruled out completely”. Post pandemic picture of the labor market in the Western Balkans will be also affected by this uncertainty.

The pandemic brought additional, unexpected expenses to already over-stretched public finances and placed another burden on the already inefficient social systems of particular countries. The economies, which hardly made it through the 2008-2009 crisis, did not have a chance to fully recover and now will have to deal with new challenges. Adding the European recession means an increase in unemployment and reduction of the state spending for another years to come.

It is not all that bad. Experts predict “near-shoring” of manufacturing by Western European companies in the coming years. Central and Southeast Europe is a perfect place to relocate some of the factories. And this includes some of the Western Balkan states, probably Serbia and North Macedonia in the first place. If the process will be accomplished within a few years, the employment in the Western Balkans might rise again.

Jan Muś works as analyst in the Balkan Department at the Institute of Central Europe in Lublin

Belgrade, Serbia (jbdodane, CC BY-NC 2.0)

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