Labour market performance in the Western Balkans continued to improve, albeit at a slower pace than the previous year and despite stronger economic growth in the region. According to the Western Balkans Labour Market Trends 2019 report, prepared by the World Bank and the Vienna Institute for International Economic Studies (wiiw), about 68,000 new jobs were generated between the second quarter of 2017 and the second quarter of 2018, compared to 231,000 a year earlier. In contrast, GDP growth in the region increased from 2.5 per cent in 2017 to 3.9 percent in 2018.
Albania and Montenegro reported the strongest job growth in the region, with 3.3 per cent each, followed by North Macedonia with a 2.1 per cent increase. The majority of new jobs were created in industry and services. Women continued to be underrepresented in Western Balkan labour markets, but more than half of the employment increase benefited them. On average, regional labour markets recorded improvements in activity rates (up 0.5 percentage points to 62.8 per cent) and employment rates (up one percentage point to 52.9 per cent), but they remained far below European standards.
Unemployment reached historic lows in most Western Balkan countries. The region also experienced a substantial decrease in long-term unemployment, from a peak of 1.5 million people in 2011 to 776,000 people in the second quarter of 2018. Still, unemployment remained a significant challenge in the Western Balkans, where levels were two to three times higher than in EU peer countries.
Wages and labour costs remain significantly lower in the Western Balkans compared to the EU, and there has been no clear convergence in recent years. “In addition to the positive though fading momentum in employment developments, the recent trends in productivity and wage
growth are worrying and need to be tackled by policy makers to assist both convergence and employment,” said Robert Stehrer, scientific director of the Vienna Institute for International Economic Studies.
The report finds that the taxation of labour income in the Western Balkans is comparatively high for low wage earners and workers with dependents, given the region’s low progressivity and infrequent use of family allowance in income tax regimes. Low-wage earners are at a particular disadvantage in the formal labour market in terms of their net take home pay and the relative high cost of hiring them compared with medium- or high-wage earners.
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