All countries of the Western Balkans are facing with a number of challenges regarding labour market and migration trends and related policies. Despite the fact that a comprehensive list of challenges is longer, we believe that the most important ones are related to addressing skills gaps and mismatches, transition of youth from school to the labour market, effectiveness of labour market institutions, rights of workers, and depopulation and brain drain. All these challenges are intertwined and effective policies need to be designed using strong evidence and understanding of mutual influence of different policies.
A significant degree of skills gaps and skills mismatches between supply and demand in the Western Balkans labour market are the biggest obstacles for increased performance and competitiveness of the WB-6 economies, affecting economic growth and employment prospects. Skills gaps are particularly pronounced in sectors that are driving forces of development of other sectors, such as IT. The situation is being worsened by increasing trends of emigration of professionals from these sectors. The key factors causing the mismatch between education and the needs of the labour market are: low level of cooperation between educational institutions and companies including extremely low level of practical work of students during their formal education, low investments in training by both companies and individuals with under-developed non-formal education and life-long learning programs, lack of skill assessments of individuals and their professional development planning and career guidance, as well as a lack of strategic planning of labour force at different levels of government based on forecasts of future trends in the labour market. Delays in alignment of the skills produced by the formal educational system with the needs of the labour market results in outdated curricula and teaching methods, which accompanied by low cooperation between education institutions and businesses leads to considerable skills mismatches and low employability of the labour force. The reform of education programs needs to be enforced and based on solid analyses of the labour market and forecasting the needs of employers for specific occupations and skills. This includes assessment of the relevance of programs and content that students acquire during formal education using different tools such as tracer studies.
The time of transition from education to the labour market stands out as an important indicator of weak labour market in the Western Balkan countries. The transition period is often characterized by excessive duration that creates adverse long-term consequences for labour market integration of youth. The main concern is that, without appropriate policies to address labour market transition, persistently high levels of unemployment and a rising share of unemployed workers facing long spells without a job will eventually result in widespread deterioration of human capital, discouragement and labour market withdrawal (including emigration), particularly among youth. It is necessary to work on the improvement of performance of PES and design active employment measures (ALMPs) that will contribute to a more effective transition to the labour market. In addition, the larger share of current budgets in ALMPs should be spent on trainings, instead on subsidies to employers which do not assure improved skills and increased employability of young people. To improve the effectiveness of ALMPs, it is highly recommended that their design is based on results of valid external counterfactual evaluations.
In a situation of increasing pace of transformation of the labour market and low capability of the formal educational system to respond quickly to such changes, non-formal education is of increased importance. This particularly applies for the new processes of digital and green transition that the Western Balkans is involved in since recently, but without appropriate response with regards to digital and green skills that need to be produced to support such a transition. To contribute to reducing the skills produced by formal education and open opportunities for acquiring skills and competencies required by the new labour market needs, non-formal education should be made more effective through accreditation of their programs based on evidence from the labour market, as well as through regular monitoring of their performance. In addition, ALMPs should recognize and support important role of non-formal education providers.
In addition to addressing current needs of the labour market, it is of equal importance to understand developments and plan activities that will support the labour market in the future. For this, forecasting tools that can assess the needs for specific occupations and skills in the medium-term are of utmost importance. Such tools, which also need to take into account worrying trends of emigration, can help in alignment of the strategic documents with availability of specific human capital nationally and at lower administrative units, as well as understand the human capital gaps that need to be addresses in the medium-term by educational policies, as well as through immigration.
ALMPs are a traditional employment activation mechanism used by public employment services across the region. Despite the fact that the Western Balkans countries already spend considerable amounts on ALMPs (still less than the EU countries, but more than comparable countries with similar level of development in other regions), the variety of active measures implemented in the region is quite limited, and their design is rather poor. The largest share of the total budget for ALMPs is spent of measures providing wage subsidies to employers, with eligibility criteria designed to clearly cherry-pick both employers and employees with the highest probability of success. Moreover, the programs are usually open for all applicants and are targeting neither groups of employees with less favourable labour market prospects nor sectors and regions with more needs for employment support. Training programmes, which have the potential to address the most important factors hindering the successful transition of young people into the labour market, such as skills mismatch and deterioration, and to address labour shortages, are largely underutilized. Consequently, WB-6 need to provide more subtle approach to employment support through better design and targeting of ALMPs, as well as through strengthening institutional capacities of public employment services to implement such programs and evaluate their impact. Evidence-based design of ALMPs can, using the currently available budgets, address more effectively the structural problems faced by the labour markets in the Western Balkans countries.
In addition to ALPMs, regular monitoring and evaluation of a wide range of employment and social policies which would inform their redesign can address other issues affecting labour markets in the Western Balkans. For example, the introduction or improvement of pro-natalist policies and support to young people starting a family is encouraged to address the low and declining natural increase rate which is strongly hitting in the region and reducing available labour force and consequently their development prospects. Moreover, the social policies need to be designed by taking into account the high rates of informal employment and inactivity in the region, and be designed to provide benefits that will target users based on their needs rather than their status, as well as by assuring inclusion of all vulnerable groups, including immigrants.
In addition to persistently high informal employment, recent labour market trends such as increased share of self-employed and platform workers are creating precarious employment positions for employees and putting an additional pressure on regulators to protect the rights of these workers. Although the detailed empirical insights are still missing, the available evidence suggests that some types of employees are in a more disadvantaged position than regular employees, considering that freelancers, informal employees, part-time workers, and temporary workers do not have the same access to unemployment benefits and have limited access to health and pension insurance. New forms of employment should be recognised by labour legislation and the rights of these workers effectively enforced. Revision of labour legislation in most of the Western Balkans countries needs to include new forms of flexible employment that require additional care to specify the nature, volume, duration of work, as well as health and safety at work. Regarding the enforcement, the work of labour inspectorates should be redesigned to ensure it is not based solely on repressive measures. Other macroeconomic policies (such as tax policies) should be redesigned based on evidence to create a more favourable environment for registered employment. Finally, workers should be supported in their unionisation efforts and in bargaining more favourable terms in collective agreements with employers. Specifically, the institution of minimum wages, despite being important from the perspective of both employees’ rights and governments fiscal policies, should be complemented by promotion of the concept of “living wage”. Such a concept should ensure a decent life for workers and contribute to reducing still high levels of in-work poverty in the Western Balkans. The region is still characterised by the weak social dialogue and unequal treatment of different types of employees i.e. (poor) fair conditions provided for employees in the labour market. Fostering social dialogue and workers’ rights in an active, consistent way should become the foundation of the economic development of the region. Improvement of capacities of all social partners to participate in the social dialogue by offering evidence and building a culture of informed decision-making is a much needed effort.
In a context of rapid depopulation of all the Western Balkans countries, caused by both very low fertility rates and high emigration, the labour force needs and skills gaps are already being addressed to some extent by immigration. However, immigration policies that will attract the labour force needed, particularly the ones forecasted as needed in the medium-term, are still lacking. Moreover, in light of the above discussion of labour rights, immigrants should be given a particular attention by policies that need to be designed and implemented to protect their rights. In addition to immigration, the countries of the Western Balkans still have an opportunity to attract return of their nationals, especially the highly skilled ones. Utilisation of this human capital potential is particularly important in the context of educational programs in the Western Balkans that are often obsolete and do not meet the needs of the labour market, whereas returnees can bring much needed skills they had an opportunity to acquire abroad. Moreover, they also often bring entrepreneurial skills and business connections that can contribute in generating new employment. For this to happen, more favourable policies towards diaspora of the Western Balkans countries need to be developed. As diaspora is often organised along ethnic lines that cross borders of countries, a regional approach and cooperation between all the countries of the region are desirable and strongly recommended.
To be in a position to produce the above-mentioned evidence for improvement of labour market policies, including development of skills assessment and career guidance, forecasting models and evidence for improved design of ALMPs, the main requirement is improvement in administrative data harmonisation and exchange between relevant institutions producing such data. In particular, countries of the Western Balkans are strongly advised to work on improving harmonisation of administrative data sources in classifications of occupations used, which are currently not harmonised even at the national level. Administrative data should be used more as appropriate and less expensive sources of data for producing evidence for policy design, including for impact evaluations of ALMPs.
This myriad of issues depicts the framework of WEBecon’s thematic pillar ‘Labor Markets & Migration’.