Making Work Pay for Western Balkan Countries: the case of Serbia and Macedonia

Serbia and Macedonia are countries with a troubled labour market situation. The employment rates of 45.8% for Serbia and 40.7% for Macedonia are far below the EU average, while the unemployment rates of 25% and 28.8%, respectively, are among the highest in the region and considerably higher than the EU-27 average (10.9 %).

Lower employment and increasing unemployment rates point to high flows from activity to inactivity, especially for women, young people and workers at the fringe of the labour market (Table 1).  Inactivity and informality is prevalent among low-educated individuals and those without or some working experience. Low educational attainment coupled with a negligible work experience generates low earnings capacity in the labour market. When earnings or potential earnings are low, incentives to seek employment or stay in employment are usually limited.

Disincentives for looking for a job are further aggravated by high tax burdens on labour income for low-wage workers and by a sudden withdrawal of social benefits once a person due to formalization. Therefore, the so-called mini-jobs and midi-jobs (mainly part-time jobs) are not economically attractive for low-wage earners and they opt for inactivity or informality.

For more see the attached Policy Brief.

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Policy Brief EN