labor market performance and job creation programs in serbia presented by ivana aleksić and marko...
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Labor Market Performance and Labor Market Performance and Job Creation Programs in Job Creation Programs in
SerbiaSerbia
Presented by Ivana AleksiPresented by Ivana Aleksićć and Mark and Marko Paunovićo Paunović
Deputy Prime Minister’s Office Deputy Prime Minister’s Office
of the Republic of Serbiaof the Republic of Serbia
Conference on Labor Markets, Growth Conference on Labor Markets, Growth
and Poverty Reduction Strategiesand Poverty Reduction Strategies
May 27-28, 2005May 27-28, 2005
PRESENTATION OUTLINEPRESENTATION OUTLINE
Labor Market Performance in Serbia since Labor Market Performance in Serbia since 20012001– Employment trendsEmployment trends– Unemployment trendsUnemployment trends– Wage developmentsWage developments
Labor market policy measures Labor market policy measures – Nationally created and performed programsNationally created and performed programs– Externally supported programsExternally supported programs
ContextContextEconomic reforms…Economic reforms…– Improved macroeconomic stability and GDP growthImproved macroeconomic stability and GDP growth– Privatization continued and increased private sector Privatization continued and increased private sector
participationparticipation– Creation of a favorable investment climateCreation of a favorable investment climate– Economy and public institutions restructuringEconomy and public institutions restructuring– Tax reform finalization and changes in budget proceduresTax reform finalization and changes in budget procedures– Infrastructure modernizationInfrastructure modernization– Control mechanisms development and fight against Control mechanisms development and fight against
corruptioncorruption
Feasibility Study just approved by the ECFeasibility Study just approved by the ECEU integration and PRS implementation processEU integration and PRS implementation process
Consensus onConsensus on labor market labor market data: data sourcesdata: data sources
Labor Force Survey (LFSLabor Force Survey (LFS))
Living Standards Measurement Survey Living Standards Measurement Survey (LSMS(LSMS) )
National Employment ServiceNational Employment Service
Republic Statistical Office Republic Statistical Office
Public misperception of the scope of the problem
Employment TrendsEmployment TrendsEmploymentEmployment
– Formal and Informal Employment Formal and Informal Employment – Employment by Age Employment by Age – Employment by Gender Employment by Gender – Educational Level of Adult Population (25-65 years) Educational Level of Adult Population (25-65 years)
UnemploymentUnemployment– Unemployment by AgeUnemployment by Age– Unemployment by Gender Unemployment by Gender – Unemployment by Education Unemployment by Education
Wage TrendsWage Trends– Wages by Education Attainment Wages by Education Attainment
Key labour market indicatorsKey labour market indicators Key labour market indicators for working-age population (15-64) in 2002
Population Census
LFS (without temporary
active)
LFS (with temporary
active)
LSMS NES
Participation rate 64.8 64.2 68.4 64.6 -
Employment rate 50.3 54.2 58.5 56.6 -
Unemployment rate
22.3 15.4 14.5 12.4 26.3
•The major problem - relatively high participation and employment rates have been maintained thanks to comparatively high level of informal economic activity. •Indicative of the poor quality of jobs in terms of security, pay and overall working conditions
Formal and Informal EmploymentFormal and Informal Employment
Major problem – high level of informal economic activity
Active in 2002 or 2003
Formally employed in 2002 and 2003
Informally employed in 2002 or 2003
Total 76.2 29.4 29.9
By gender
Men 84.3 33.2 34.5
Women 68.2 25.6 25.3
By educational attainment
Low-skilled 66.2 17.1 35.7
Medium-skilled 81.3 33.5 28.6
High-skilled 87.8 53.4 15.7
Labor MobilityLabor Mobility
Significant fSignificant flows between employment, unemployment and non-lows between employment, unemployment and non-activityactivity – – more than 40% of the people have changed statusmore than 40% of the people have changed status
Indicator of well functioning labor market or of insecure short-term Indicator of well functioning labor market or of insecure short-term jobs?jobs?
Activity in 2003
Ac
tivity in
200
2
Formally Employed
Informally Employed
Unemployed Inactive Total
Formally Employed
29.4 6.1 1.9 5.3 42.7
Informally Employed
5.0 7.0 1.0 3.1 16.1
Unemployed 1.7 2.6 1.7 2.0 8.0
Inactive 3.2 4.0 2.2 23.8 33.2
Total 39.3 19.7 6.8 34.2 100.0
Employment by AgeEmployment by AgeParticipation rates and employment rates by age (2003)
Age
Participation Rate Employment Rate
SerbiaCentral Serbia
Vojvodina SerbiaCentral Serbia
Vojvodina
TOTAL 67.84 70.25 61.49 57.91 61.96 47.25
15-24 26.64 24.21 32.94 14.70 14.13 16.17
25-34 65.31 67.63 59.06 49.69 53.09 41.51
35-44 76.02 77.79 71.53 65.50 69.19 56.18
45-54 81.76 81.63 82.08 74.17 76.14 68.90
55-64 55.43 59.54 44.53 51.71 57.20 37.14
low employment rates for young workers (compared to EU) high employment rates for category over 55 highest unemployment in the most developed area (Vojvodina)
Employment by GenderEmployment by Gender Participation and employment rates by gender (2003)
GenderParticipation
RateEmployment
Rate
Total 67.84 57.91
Women 56.78 47.81
Men 79.07 68.18
Source: Gos, based on LFS (2003) and RSO
Participation rate and employment rate of women is around the average level of transition countries
Educational Level of Adult Educational Level of Adult Population (25-65 years)Population (25-65 years)
Educational attainment rate of population aged 25-65, 2002
Low Medium High
Serbia Total 36% 49% 15%Men 30% 54% 15%Women 41% 45% 14%EU-15 35% 43% 22%New Member States 19% 66% 15%
Source: ETF 2005, based on Serbian Census 2002, ETF Key indicators data base, Eurostat
relative disadvantage with respect to the EU average
Unemployment by AgeUnemployment by AgeSerbia
2002 2003 2003/2002
Total 13.44 14.63 108.86
15-24 42.53 44.83 105.41
25-34 25.51 23.50 92.12
35-44 12.14 13.83 113.95
45-54 6.83 9.28 135.87
55-64 4.30 6.72 156.15
Source: LFS (2002-2003), RSO
Youngest members of labor force - most affected by unemploymentHowever, it seems that transition favors young people, leading to changes in the age structure of population, especially in Central SerbiaThe pace of the restructuring was the fastest in Vojvodina
Unemployment by GenderUnemployment by Gender
Gender Unemployment rate1995
1996 1997 1998 1999 2000 2001 2002 2003
Total 12.9 12.2 12.3
12.8
13.3
12.1
12.2
13.3
14.6
Women 15.5 14.5 14.2 14.7 15.6 14.6 14.5 15.2 15.8
Men 10.8 10.4 10.7 11.3 11.4 10.1 10.5 11.8 13.8 Gender unemployment gap has been reduced significantly, mainly because:
unemployment rate for man has increased Women have opted out from the labor force more than men
Unemployment by EducationUnemployment by Education
Level of Education Share in unemployed
Republic of Serbia
Central Serbia
Vojvodina
Without Education 1.5 0.8 2.5
1-3 years of primary school 0.5 0.7 0.3
4-7 years of primary school 2.7 1.5 4.6
Completed primary school 19.4 17.4 22.4
Completed secondary school 66.4 68.9 62.5
2 years college 5.3 5.7 4.6
Completed university education 4.3 5.2 3.0 highest unemployment rates recorded in 2002 for those with completed secondary and primary education reforms of secondary education should be a priority
Structure of unemployed by education (2003)
Wage Developments since 2000Wage Developments since 2000
Problem - Statistical Overestimation of Wage Growth
Wage DynamicsWage Dynamics
July 2001-August 2004 estimated wage July 2001-August 2004 estimated wage dynamics (Arsic et al. 2005)dynamics (Arsic et al. 2005)
Wb = 1.00p + 0.69pr + 0.009tWb = 1.00p + 0.69pr + 0.009t
Reasons for positive trend coefficient:Reasons for positive trend coefficient:Reduction in gray economyReduction in gray economyAbolition of the system of double payrollsAbolition of the system of double payrollsReduction of in kind paymentsReduction of in kind payments
Wages by Education AttainmentWages by Education Attainment Average wage in EUR by years of education
0
100
200
300
400
500
600
0 4 8 11 12 13 14 16
indication of strong wage premium for university degree
Labor Market Policy MeasuresLabor Market Policy MeasuresContextContext
Unemployment rates high and likely to rise STUnemployment rates high and likely to rise STEmployment rates not high enoughEmployment rates not high enough
Legacy: Legacy: – predominantly passive measurespredominantly passive measures
Challenges: Challenges: – More specific active measures/ employment promotion More specific active measures/ employment promotion
approachapproach– Capacity building for government institutions mandated to Capacity building for government institutions mandated to
address the problemaddress the problem
Labor Market Policy MeasuresLabor Market Policy Measures Law on Employment and InsuranceLaw on Employment and Insurance: a: allows private employment agenciesllows private employment agencies
Changes to the Law on Tax on Changes to the Law on Tax on IIncome of ncome of CCitizensitizens: : privilegesprivileges/ favorable tax / favorable tax breaksbreaks for for firms opening new work placesfirms opening new work places (Ministry of (Ministry of FinanceFinance))
Policy of active employmentPolicy of active employment (National Employment Service and Ministry of (National Employment Service and Ministry of Labor, Employment and Social Policy)Labor, Employment and Social Policy)
Government’s Development FundGovernment’s Development Fund: loans to…: loans to…– the unemployed, the least developed regions, the unemployed, the least developed regions, SMEsSMEs
Ministry of labor, employment and social affairsMinistry of labor, employment and social affairs
National Employment ServiceNational Employment Service
Unemployment benefits and other Unemployment benefits and other passivepassive measuresmeasures - - more than 90% of total NES more than 90% of total NES expenditures expenditures – Coverage: up to 10% of total registered Coverage: up to 10% of total registered
unemployedunemployed
Other services: jOther services: job search assistance, ob search assistance, information support to the unemployedinformation support to the unemployed – Active measuresActive measures to to becombecomee priority priority
National Employment Service National Employment Service pprogramme for 2005rogramme for 2005
TYPE OF ACTIVITY No. peopleAllocated Funds
(EUR)
А. ACTIVE JOB SEARCH 8.912 63.898
А.1 JOB CLUBS 1.586 24.644
А.2 TRAINING FOR ACTIVE JOB SEARCH 7.126 37.856
А.3 MOTIVATION PROGRAM FOR ACTIVE JOB SEARCH 200 1.397
B. EMPLOYMENT FAIRS 6.710 69.700
C. PROGRAMS OF ADDITIONAL EDUCATION AND TRAINING 8.260 4.540.812
C.1 APPRENTICESHIPS, TALENTS AND VOLUNTEERS 4.327 2.763.992
C.2 TRAINING IN COMPUTER SKILLS AND FOREIGN LANGUAGES 1.864 860.029
C.3 AND C.4 PROGRAMS OF RE-TRAINING 222 166.193
C.5 ON THE JOB TRAINING 1.475 737.427
C.6 ELEMENTARY EDUCATION OF ADULTS 151 13.168
D. DEVELOPMENT OF ENTREPRENEURSHIP AND PROGRAMS OF EMPLOYMENT 25.650 4.672.500
D.1 JOB SUBSIDIES 1.850 1.687.500
D.2 SUBSIDIES FOR SELF-EMPLOYMENT 23.800 2.985.000
E. CENTER FOR PROFESSIONAL INFORMATION AND COUNCELLING 28.081
TOTAL FUNDS FOR ACTIVE LABOR MARKET PROGRAMS 49.532 9.374.992
Natioanal Employment Strategy Natioanal Employment Strategy (NES) 2005-10 (MoLESP)(NES) 2005-10 (MoLESP)
Adopted by the Government in April 2005Adopted by the Government in April 2005
Inspired by European Employment StrategyInspired by European Employment Strategy process of nationalization in order to adjust process of nationalization in order to adjust
guidelines to local labor market conditionsguidelines to local labor market conditions To be followed by National Action Plan onlyTo be followed by National Action Plan only
Revision of the first overarching goal of Lisbon Revision of the first overarching goal of Lisbon Strategy – achieve sustainable employment Strategy – achieve sustainable employment growth and increasing participation rate growth and increasing participation rate
NES GuidelinesNES Guidelines
Goal 1: Toward sustainable employment Goal 1: Toward sustainable employment growthgrowth
Goal 2: Toward improved quality and Goal 2: Toward improved quality and productivity of workproductivity of work
Goal 3: Toward more cohesive labor Goal 3: Toward more cohesive labor marketmarket
Background Regional Study 1Background Regional Study 1
Main assumption – without intervention, wider Main assumption – without intervention, wider labor market and hence greater general labor market and hence greater general inequalities on a usual pattern – Belgrade front inequalities on a usual pattern – Belgrade front runner, Vojvodina second, Central Serbia, esp. runner, Vojvodina second, Central Serbia, esp. Southern and Eastern regions heavily lagging Southern and Eastern regions heavily lagging behingbehingAnalysis covers 25 counties (okruga), without Analysis covers 25 counties (okruga), without KosovoKosovoPurpose: to rank regions according to relative Purpose: to rank regions according to relative labor market riskslabor market risks
Background Regional Study 2Background Regional Study 2
Indicators usedIndicators used– Socioeconomic statusSocioeconomic status (1. unemployment rate, 2. (1. unemployment rate, 2.
wages per employed, 3. GNP per capita)wages per employed, 3. GNP per capita)– Speed or restructuringSpeed or restructuring (4. change of share of (4. change of share of
employed in social sector in total employment, 5. employed in social sector in total employment, 5. share of employed in social sector in total share of employed in social sector in total employment, 6. FDI pc)employment, 6. FDI pc)
– Diversification of economic structureDiversification of economic structure (7. share of 3 (7. share of 3 main branches in total regional GDP)main branches in total regional GDP)
– Labor force qualityLabor force quality (8. composite index - share of (8. composite index - share of persons with higher education and share of persons persons with higher education and share of persons with less than primary education in total labor force)with less than primary education in total labor force)
Development Fund: support to regional development
Easier procedures for regular credit pay back for Easier procedures for regular credit pay back for private firms in less developed regionsprivate firms in less developed regions
Participation of the Fund higher and interest rate Participation of the Fund higher and interest rate lower for less developed regionslower for less developed regions
Domestic product (% of average for RS)
Guarantee instrument
% of the project financed
Interest rate
<33% Mortgage and bank bill
Do 80% 1%
33%-50% Bank guarantee Do 60% 3%
50%-70% Bank guarantee Do 50% 4%
>70% Bank guarantee Do 40% 5%
Development Fund’s budget Development Fund’s budget for 2005for 2005
CSD EURO
TOTAL 5.350.000.000 66.875.000
Loans to SMEs 3.900.000.000 48.750.000
Loans to micro firms 220.000.000 2.750.000
Loans to the unemployed 600.000.000 7.500.000
Source: GoS, own calculation
Key problem: the lack knowledge and/ or reluctance in accessing the available funds.
Donor supported ALMPs, Donor supported ALMPs, employment and related programsemployment and related programs
Project title Funding Amount
Employment support programme. EAR €9 mil
Support for Human Resource Development Measures for Unemployed and redundant Employees in Serbia.
EAR €2 mil
Regional Socio-Economic Development Initiatives EAR €4 mil
Vocational Education and Training Reform Programme EAR €13 mil
SME policy/strategy assistance, and establishment of 7 regional enterprise development centres
EAR €3.6 mil
Municipal Support Programme EAR €15 mil
Capacity Building Fund – MoLESP UNDP
Beautiful Serbia UNDP US$2 mil
Employment Promotion ProjectWorld Bank, DFID US$2.75
mil
NES SIDA
Labour inspection project within MoLESP ILO&US Dpt. of Labor US$0.6 mil
Constraints to improving labor Constraints to improving labor market performance/ CLDSmarket performance/ CLDS
Slow economic developmentSlow economic development
Lack of labor market flexibilityLack of labor market flexibility
Limited reach of active employment Limited reach of active employment measuresmeasures
Local communities not engaged enoughLocal communities not engaged enough
Inadequate skills or lack of certain types of Inadequate skills or lack of certain types of skills among the unemployedskills among the unemployed
ConclusionsConclusions
Unemployment rates likely to go up until Unemployment rates likely to go up until completion of the privatization and restructuringcompletion of the privatization and restructuring– Employment promotion to remain high on the Employment promotion to remain high on the
government agendagovernment agenda
NES 2005-10 recommendations:NES 2005-10 recommendations:– Balanced regional development as a key to general Balanced regional development as a key to general
improvement of labor market performanceimprovement of labor market performance– Active labor market programs to be tailored at the Active labor market programs to be tailored at the
regional and local levelsregional and local levels