Labour Market in the former Yugoslav Republic of Macedonia

A Study
for
The European Commission
Employment, Social Affairs and Equal Opportunities DG

October 2009

This report was financed by and prepared for the use of the European Commission,
Directorate-General for Employment, Social Affairs and Equal Opportunities. It does not
necessarily represent the Commissions official position.
Contractor:
Euro Balkan Institute

www.euba.org.mk

Authors:

Nikica Mojsoska-Blazevski, PhD

Jasna Najdova, MSc.
Aleksandar Stojkov, MSc.
Ljiljana Asenov

TABLE OF CONTENTS

EXECUTIVE SUMMARY .................................................................................................... 5

............................................................................................................ 10
REZYME E SHKURTR................................................................................................... 16
RSUM BREF................................................................................................................ 21
KURZE ZUSAMMENFASSUNG....................................................................................... 26
LIST OF ABBREVIATIONS............................................................................................... 31
LIST OF TABLES.............................................................................................................. 34
LIST OF FIGURES ........................................................................................................... 35
INTRODUCTION .............................................................................................................. 36
1.

ECONOMIC SITUATION, DEVELOPMENTS AND CHALLENGES .......................... 37

1.1.

Recent economic developments............................................................................. 37

1.2. The impact of the global economic turmoil on unemployment and the Macedonian
policy response................................................................................................................. 40
1.3.

Macroeconomic policies ......................................................................................... 43

1.4.

Structural Reforms by state-owned enterprises...................................................... 45

2.

LABOUR MARKET SITUATION, DEVELOPMENTS AND CHALLENGES ............... 46

2.1.

Population, labour force, employment and unemployment..................................... 46

2.1.1.

Population and labour force participation ............................................................ 46

2.1.2.

Employment......................................................................................................... 49

2.1.3.

Unemployment..................................................................................................... 52

2.2.

Quality and productivity at work.............................................................................. 54

2.2.1.

Wages and productivity ....................................................................................... 54

2.2.1.1.

Wages............................................................................................................... 55

2.2.1.2.

Productivity ....................................................................................................... 59

2.2.2.

Flexible forms of employment.............................................................................. 60

2.2.3

Informal sector ...................................................................................................... 63

2.2.4. Skill and educational structure of labour force........................................................ 66

2.2.5

Equal opportunities ............................................................................................... 72

2.2.6

Health and safety at work ..................................................................................... 78

2.3.

Social and territorial cohesion................................................................................. 80

2.3.1.

Vulnerable and disadvantaged groups ................................................................ 80

2.3.2.

Regional disparities ............................................................................................. 87

3.

EMPLOYMENT POLICIES: SITUATION, DEVELOPMENTS AND PRIORITIES...... 89

3.1.

Human resources development.............................................................................. 89

3.1.1.

Pre-school and basic education........................................................................... 90

3.1.2.

Upper secondary education................................................................................. 92

3.1.3.

Tertiary education ................................................................................................ 93

3.1.4.

Adult education and training ................................................................................ 96

3.2.

Wages, taxes and benefits...................................................................................... 97

3.2.1.

Wage formation ................................................................................................... 97

3.2.2.

Taxes and social security contributions ............................................................. 101

3.2.3.

Income support for the unemployed .................................................................. 104

3.2.4.

Child benefits ..................................................................................................... 107

3.3.

Employment services and active labour market programmes .............................. 109

3.3.1.

Public employment service ................................................................................ 109

3.3.3.

Private employment services and temporary employment agencies................. 121

3.4.

Legal provisions, employment protection legislation, and labour inspection ........ 123

3.4.1.

Labour Law ........................................................................................................ 123

3.4.2.

Anti-discrimination ............................................................................................. 123

3.4.3.

Equal opportunities ............................................................................................ 124

3.4.4.

Health and Safety at Work................................................................................. 126

3.4.5.

Employment protection legislation (EPL)........................................................... 127

3.4.6.

Informal sector and labour inspection................................................................ 130

3.5.

Good governance ................................................................................................. 133

3.5.1.

Capacity-building ............................................................................................... 133

3.5.2.

Cooperation between the labour market institutions.......................................... 137

3.5.3.

Strategic approach to employment policy .......................................................... 138

3.5.4.

Social dialogue .................................................................................................. 140

REFERENCES ............................................................................................................... 154

Annex 1 Planned and realised active programmes, participants and spending in 2008 160
Annex 2 Conducted survey on main stakeholders and the results................................. 162

EXECUTIVE SUMMARY
The team of the International Centre for European Culture The Euro-Balkan Institute
has been awarded a contract by the European Commission which aims at providing an
analytical support to the negotiation process for the accession of the former Yugoslav
Republic of Macedonia to the EU in the area of labour market adjustment and
employment policies. As agreed with the beneficiary, this research project maps and
examines the main economic developments in the country, assesses recent labour
market developments and current employment policies, and offers a number of policy
recommendations.

Economic situation, development and challenges

Unemployment in the former Yugoslav Republic of Macedonia was already high at the
onset of the transition, estimated at 20%, but further increased during transition, a trend
that was reversed in 2006. The rise in unemployment was due to employment loses as
well as the modest rise in participation rate. These developments suggest that the
emergence and development of the new private sector was insufficient to absorb the
decrease in employment caused by the restructuring of state-owned companies,
notwithstanding the effect or pressure of rising working-age population.
The unfavourable business climate during the transition has not only discouraged new
business start-ups, but also promoted the blossoming of the informal economy. To
discourage the sizeable shadow economy and spur the development of private, and
particularly, small and medium-sized enterprise sector, the authorities substantially
reduced the personal-income and corporate tax rates at the beginning of 2007.
Additionally, considerable efforts have been devoted to improve the business
environment over the last few years. Business entry has been simplified through the
introduction of a one-stop shop and the opening of markets to competition. An intensive
reform agenda is being implemented in the judiciary with legislation and procedures being
completely overhauled, and the infrastructure and capacities of courts and judges being
upgraded. Also, the authorities initiated the regulatory guillotine which has eliminated a
number of administrative obstacles to doing business. However, further improvements
are necessary to ensure business-friendly environment with no obstacles (not just
legislator but also practical) for firms

Key labour market developments

The Macedonian labour market suffers from low activity, low employment rates, high
unemployment and (quantitative and qualitative) mismatch between supplied labour and
demanded skills.
Labour force participation rate remains low by international standards, reflecting the low
employment coupled with high unemployment rate. Low participation is supported by the
sizeable net inflows of remittances and free health insurance provided for the registered
unemployed (which might not be jobseekers). Gender participation gap is relatively large.
Main factors influencing low participation of women are: the tradition and cultural habits in
the country, low education and skills, ethnicity combined with the education, availability
and cost of child care services and care for older family members, labour market
discrimination against females, etc. Young, rural and unskilled females are less likely to
be active in the labour market. From a policy perspective, an important finding of the

report is that gender participation gap declines with the education level, where females
with tertiary education are more active on the labour market than respective males. In this
regard, policies to improve educational attainment of women, especially of those from
ethnic minorities, as well as provision of accessible and affordable childcare and other
dependants care might increase their participation (and employment).
Young workers also have low participation rate which can be regarded positive if young
workers were inactive because of being full-time students and investing in their education
in light of relatively high returns to education.
Early retirement schemes offered in the 1990's and beginning of this decade had only a
temporary effect on the labour supply so that participation rates of older workers (55-64
age group) increase continuously which can be regarded as a positive development given
the ageing population and its likely future pressure on the pension system. However,
higher activity of older workers is currently undesirable given that net employment growth
is insufficient to absorb new labour market entrants.
Employment rate in the former Yugoslav Republic of Macedonia is only two-thirds of the
EU-27 average employment rate though in recent years it follows an increasing trend.
Low employment implies an insufficient utilisation of labour in the former Yugoslav
Republic of Macedonia. The authorities have set a national employment target of
achieving employment rate of 48% by 2010. However, this target (which is lower than the
EU set target) seems unrealistic given that the economy has to generate more than 86
thousands jobs in two years period that is about 14% of the employment level in 2008.
Similar to other Western Balkan countries, the labour market in the former Yugoslav
Republic of Macedonia has been assessed as rather not inclusive in practice, despite
existing employment and equal opportunity legislation. Inclusiveness for particular
groups, such as very young and very old workers and ethnic minorities remains a
challenge for the country, having in mind the excessively large unemployment rates for
these segments of the population.
Unemployment in the country is very high at 34% in 2008, highest across the Europe.
There are positive recent movements, but at a very modest pace.
There are several possible reasons for the high and persistent unemployment in the
former Yugoslav Republic of Macedonia, namely: (i) specific regional economic and
political factors influencing the countrys transition; (ii) privatisation method based on
substandard Managers-Employees-Buy-Outs; (iii) labour market flows dominated by low
rates of job creation; (iv) high non-wage labour costs and diversion to informal economy
and (v) demographic pressures from high pool of potential labour market entrants over
the next years.

Employment policies
Low employment affects literally all groups in the labour market, especially those with
lower education. Furthermore, gender gap in employment is relatively high and persistent.
Though self-employment can be viewed as an effective tool for reducing unemployment
in a low job-creation environment, it also reveals low social security since starting an own
business in the former Yugoslav Republic of Macedonia is often subsistence, lowproductivity strategy, and predominantly takes place in the informal economy. In this
regard, government policies should further promote entrepreneurship and support
business start-ups, but higher consideration should be paid to targeting certain groups, as
well as to the sustainability of the businesses.

The use of part-time employment in the former Yugoslav Republic of Macedonia is much
lower than in the EU-27, which might reflect low living standard, though it can also result
from low demand for part-timers. To the extent that part-time employment might increase
flexibility and virtually create new jobs, and might increase alternatives for women, the
Government should reduce barriers to its greater. In this regard, the 2009 gross wage
reform and changes in the system of social contributions reduced the relative costs for
part-time workers.
Very high long-term unemployment in the country implies that virtually all unemployed
have difficulty in finding a job. However, administrative records of unemployed include
non-jobseekers and grey economy workers. Apart from these categories which should be
taken out of the statistics, persons with insufficient and/or inappropriate skills are main
groups at risk of (long-term) unemployment. A strong focus should therefore be placed on
skills acquisition and upgrading, trough formal and non-formal education system,
including training, retraining and work practice. The Government is doing a right step in
that direction with introduction of a compulsory secondary education, social cashtransfers conditional on secondary school attendance, increased spending (including
investments) on education. However, the remaining challenges in this area are getting all
ethnic groups, in particular Roma population and females from Albanian and Turkish
ethnic minority into education system, reforming the education, especially vocational
education and training system, and promotion of lifelong learning.
Youth unemployment is another challenge for the employment policy. Considerable
efforts are needed in several areas to help young people enter the labour market without
an unemployment spell. Firstly, microeconomic policies should boost job creation, while
more intensive economic growth along with a more flexible labour legislation should
ensure greater dynamics in the labour market. Secondly, given that lack of previous work
experience is one of the main disadvantage of young persons compared to the other job
applicants, active labour market programmes should help young persons to acquire
experience. Thirdly, there is a need for a greater adaptation of education and training
systems to the changing and increasingly demanding skill requirements. Fourthly,
relatively high (private) returns to education in the former Yugoslav Republic of
Macedonia probably provide sufficient incentives for individuals to acquire more
education, but government institutions must improve their ability to provide accurate
information on the demanded skills.
The information on demanded skills should be improved and be made an input into
designing the educational and training policy at all levels and segments. Such informed
policymaking, along with transmission of correct signals to students and their parents
would reduce the existing skill mismatch in the labour market.
Existing empirical studies (based on Labour Force Survey data) accentuate possible
negative impact of unemployment benefits on search intensity of unemployed in the
former Yugoslav Republic of Macedonia and the locking-in effect. The relatively low
proportion of registered unemployed that receive unemployment benefit, inter alia, is due
to the strict entitlement conditions that restrict benefits to people who have a sufficient
record of contributions from work. Although Macedonian regulation requires that the level
of unemployment benefit be reduced for any income earned while unemployed, it is a
means-tested benefit, it is rarely applied due to a difficulty in detecting such income, low
capacity and workload of the Employment Service Agency (ESA) staff. In this regard, the
introduction of a flat-rate unemployment benefit may simplify benefit administration and
produce savings in resources (including staff).
Administrative capacity for proper implementation and enforcement of the labour
legislation remains low and preparations in this area are moderately advanced. Capacity
of the main labour market institutions, the Ministry of Labour and Social Policy, ESA and

the State labour Inspectorate is in general low and insufficient to match the ambitious
employment strategies and plans. Moreover, there is insufficient cooperation between the
relevant labour market institutions.
The Employment Service Agency still lacks the required human (and technical) capacity
of a modern public employment service. Until recently, the ESA staff was burdened with
additional functions that might not be typical for a PES, that are registration of newly
opened and termination of existing contracts, as well as provision of free health insurance
for uninsured registered unemployed persons. From 2009, the provision of health
insurance for registered unemployed (except those receiving unemployment benefit) was
transferred from ESA to the Health Insurance Fund, but is still conditional on being
registered as unemployed. Hence, the benefit to ESA from this change would be in terms
of freeing its staff which can now be focused on the regular services of public
employment services, but the ESA register would still be burdened with non-jobseekers.
The ESA should seek to increase the search activity of unemployed, improve the
accuracy of the unemployment registry, pursue a more individualised approach to
targeted groups of the unemployed and boost self-help services for others with better
prospects of regaining employment. Also, there is a need for decentralisation of ESA
management, bottom-up approach in which local offices could propose and implement
active policies based on the local labour market needs, and greater involvement of
stakeholders in the employment policy on local level.
In order to make national data on active labour market policies (ALMPs) comparable to
data from EU countries, the authorities should align the national classification of active
programmes to that of the Eurostat which is based on the types of interventions.
Moreover, there is an urgent need for proper evaluation of the ALMPs, in order to
enhance their effectiveness.
Regarding the cooperation between the social partners' organisations, there is some
rivalry and tensions, which, among others, come from the representation issues and
participation vs. non-participation of some organisations in the Economic and Social
Council. One might argue that there are limitations to the strength of the social dialogue in
the former Yugoslav Republic of Macedonia given that about 40% of total employment is
in micro firms, and majority of other workers is concentrated in small companies with up
to 50 employees.

Priorities for action

Given the poor performance in the Macedonian labour market, there is a need for
implementation of a comprehensive policy package consisting of micro-level reforms,
appropriate mix and coordination of macro policies, and employment policies.
Microeconomic reforms should further improve business environment in order to ease
and make less costly establishment and growth of firms. These measures, along with the
measures for reducing labour costs, are likely to increase job creation given the current
insufficient demand for workers. The macroeconomic policies mix should preserve current
stable environment, though simultaneously allow for greater dynamics in the economy.
Policy-makers should be aware that major challenge for the macroeconomic policies on
the medium run would arise from the nominal (and real) convergence towards the EU. On
the supply side of the labour market, employment and broad economic policies should i)
provide incentives for greater labour market participation, and ii) ensure that skills and
knowledge of supplied labour are a good match to the demanded ones.

National priorities for action should be identical to those identified in the revised Lisbon
agenda for growth and jobs, in particular: i) attract and retain more people in employment,
increase labour supply and modernise social protection systems; ii) improve adaptability
of workers and enterprises; and iii) increase investment in human capital through better
education and skills. Within these broad categories, the study proposes 46 concrete
actions aiming to improve the labour market developments in former Yugoslav Republic
of Macedonia.

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REZYME E SHKURTR

Ekipi i Qendrs Ndrkombtare pr Kultur Evropiane n Institutin Evro-Ballkan, bri

marrveshje me Komisionin Evropian, i cili ka si qllim sigurimin e mbshtetjes analitike
n procesin e negociatave pr pranimin e ish Republiks Jugosllave t Maqedonis n
BE n fushn e harmonizimit t tregut t puns dhe politikave pr punsim. Si sht
rn dakord me shfrytzuesin, ky projekt i prcakton dhe hulumton ngjarjet themelore
ekonomike n vend, i vlerson ngjarjet e fundit t tregut t puns dhe politikat rrjedhse
pr punsim dhe jep udhzime.
Gjendja ekonomike, tender dhe nxitje
Papunsia n ish Republikn Jugosllave t Maqedonis ka qen n nivel t lart q prej
fillimit t tranzicionit, kur ishte 20%. Gjat tranzicionit papunsia u rrit edhe mandej, deri
n 2006, kur sht ndrprer ky trend negativ. Rritja e papunsis ishte rezultat jo vetm
i uljes s punsimit, por edhe rritja e aktivitetit n tregun e puns. Kto ngjarje flasin se
shfaqja dhe zhvillimi i sektorit t ri privat n shtet nuk ishin t mjaftueshm q ti
absorbojn puntort t cilt jan pushuar nga puna gjat transformimit t ndrmarrjeve
shtetrore, pa marr parasysh efektin prkatsisht trysnin e tregut t puns e cila vjen
prej rritjes s popullats aktive.
Klima e paprshtatshme afariste gjat tranzicionit jo vetm q e destimulonte fillimin e
biznesit, por edhe e nxiste ekonomin joformale. N fillim t vitit 2007 Qeveri
theksueshm i uli shkallt e tatimit personal t t ardhurave dhe t tatimit t fitimit me
qllim q t zvoglohet ekonomia e zez dhe t nxitet zhvillimi i sektorit privat, sidomos
sektori i ndrmarrjeve t vogla dhe t mesme. Prkrah ksaj, gjat disa viteve t fundit
jan br prpjekje t theksueshme pr prmirsimin e klims afariste. Procedura pr
hapje t firms (fillim biznesi) sht thjeshtzuar nprmjet vendosjes s sistemit
njsportel dhe mundsimit t konkurrencs n treg. N gjyqsi zbatohet agjend
intensive reformuese qllimi i t cils, para s gjithash, sht thjeshtzim i legjislatives s
komplikuar dhe udhheqjen m me efikasitet t procedurave gjyqsore, si dhe
prmirsim i infrastrukturs dhe kapaciteteve t gjykatave, dhe t vet gjykatsve.
Njkohsisht, organet kompetente iniciuan gijotinn rregullatore me t ciln sht
eliminuar numri i madh i pengesave administrative pr kryerjen e bizneseve. Megjithat,
prmirsimet e mtejshme, jo vetm n aspektin ligjor por edhe n aspektin praktik, jan
t domosdoshme q t krijohet mjedis afarist i prshtatshm pr firmat.
Tendencat kryesore n tregun e puns
Tregu i puns n Maqedoni karakterizohet me aktivitet t ult, shkall t ult t punsimit,
shkall t lart t papunsis dhe pabarazi kualitative dhe kuantitative midis forcs s
puns t ofruar dhe aftsive t krkuara.
Sipas standardeve ndrkombtare, shkalla e aktivitetit t fuqis s puns sht edhe
mandej e ult, duke e pasqyruar shkalln e ult t punsimit dhe shkalln e lart t
papunsis. Aktiviteti i ult sht i mbshtetur edhe prej t hyrave t larta neto nga jasht
dhe sigurimit shndetsor falas pr regjistrim t personave t papun, midis t cilve ka
edhe persona t cilt aspak nuk krkojn pun. N tregun e puns ekziston nj jaz
relativisht i lart gjinor n shkalln e aktivitetit. Faktort kryesor q ndikojn mbi
aktivitetin e ult t tregut t puns t popullats femrore jan: tradita dhe shprehit
kulturore n vend, arsimi i ult dhe aftsis, prkatsia nacionale n kombinim me
arsimin, qasja dhe mimi i shrbimeve pr kujdesin e fmijve dhe kujdesin pr antart
e moshuar n familje, ekzistimi i diskriminimit n tregun e puns, etj. T rinjt dhe grat e
paarsimuara, t rajoneve rurale, kan aktivitet mjaft t ult n tregun e puns. Nga

perspektiva e mbartsve t politiks ekonomike, raporti e thekson faktin se jazi gjinor

lidhet me arsimin, kshtu q grat me arsim t lart jan m aktive n tregun e puns
sesa popullata e meshkujve me arsim t lart. N kt aspekt, politikat pr prmirsim t
nivelit arsimor t grave, sidomos t atyre t pakicave etnike, si dhe sigurimi i shrbimeve
t kapshme dhe t volitshme (n aspektin e mimit) pr kujdesin e fmijve dhe kujdesin
e personave t tjer mund ta rris aktivitetin e grave (dhe punsimin e tyre).
Puntort e rinj, gjithashtu, kan shkall t ult t aktivitetit q mund t konsiderohet si
pozitive, nse t rinjt jan joaktiv sepse studiojn dhe investojn n arsimin e tyre,
duke marr parasysh kontributin (fitimin) relativisht t lart prej arsimit.
Skemat pr pensionim t parakohshm n vitet 90-t t shekullit t kaluar dhe n fillim t
ksaj dekade kan pasur vetm nj efekt t prkohshm mbi ofertn e fuqis s puns,
kshtu q numri i t punsuarve n mosh m t madhe (55-64 vjet grupi i t rriturve) n
mnyr t vazhdueshme sht rritur, q mund t konsiderohet si zhvillim pozitiv duke
marr parasysh vjetrsimin e popullats n vend dhe trysnin e ardhshme mbi sistemin e
pensionit. Megjithat, aktiviteti i rritur i puntorve m t vjetr n kt moment nuk sht
i nevojshm dhe i dshirueshm sepse rritja neto e papunsis nuk sht e mjaftueshme
q ti absorboj pjesmarrsit e rinj n tregun e puns.
Shkalla e punsimit n ish Republikn Jugosllave t Maqedonis sht vetm sa dy t
tretat e shkalls mesatare t punsimit n BE-27, edhe pse n vitet e fundit ka nj trend
rrits. Punsimi i ult n ish Republikn Jugosllave t Maqedonis nnkupton shfrytzim
t pamjaftueshm t fuqis s puns. Pushteti caktoi qllim nacional pr arritje t
shkalls s punsimit prej 48% deri n vitin 2010. Megjithat, arritja e ktij qllimi (i cili
sht m i ult se ai evropian) duket joreale duke pasur parasysh se ekonomia duhet t
hap 86 mij vende t reja pune n nj periudh prej vetm dy vjetsh, q sht rreth
14% e punsimit t prgjithshm (vende pune) pr vitin 2008.
Ngjashm si edhe vendet e tjera t Ballkanit Perndimor, tregu i puns n ish Republikn
Jugosllave t Maqedonis sht vlersuar si inkluziv i pamjaftueshm, edhe prkrah
norms ligjore ekzistuese n domenin e marrdhnieve t puns dhe mundsive t
barabarta pr punsim. Inkluziviteti pr grupe t caktuara t popullats, si jan t rinjt
dhe puntort shum t vjetr, si dhe pakicat etnike edhe mandej mbetet nxitje e madhe
pr vendin, duke i pasur parasysh shkallt mjaft t larta t papunsis t ktyre grupeve
t popullats.
N vitin 2008 shkalla e papunsis n shtet ishte 34% dhe ishte m e larta n Evrop.
Koht e fundit kemi lvizje pozitive, por ato jan me nj dinamik shum t vogl.
Ekzistojn disa shkaqe t mundshme pr papunsin e lart dhe t vazhdueshme n ish
Republikn Jugosllave t Maqedonis dhe kjo: (1) faktor rajonal-ekonomik specifik
dhe faktor politik q ndikuan n tranzicionin e vendit; (2) metoda e privatizimit me
blerje t ndrmarrjeve nga ana e puntorve dhe menaxherve; (3) dinamika e tregut t
puns ku mbizotrojn shkall t ulta t krijimit t vendeve t reja t puns; (4)
shpenzime t larta pr fuqin puntore t cilat pjesrisht e nxisin ekonomin e zez; dhe
(ndikimet demografike prej numrit t madh t pjesmarrsve t rinj potencial t tregut t
puns.
Politika pr punsim
Punsimi i ult sht karakteristik pr t gjitha grupet e tregut t puns, kurse sidomos i
atyre me arsim t ult. Prkrah ksaj, jazi gjinor n punsim sht relativisht i lart dhe
konstant. Edhe pse vetpunsimi mund t konsiderohet si mjet efikas pr uljen e
papunsis n mjediset ku krijimi i vendeve t reja t puns sht i ult, vetpunsimi
sht i lidhur edhe me sigurin e vogl sociale prandaj fillimi i biznesit personal n ish
Republikn Jugosllave t Maqedonis sht rezultat i pamundsis pr t gjetur pun

dhe burim tjetr t ekzistencs, sht veprimtari me produktivitet t ult q zhvillohet n

ekonomin joformale. N kt aspekt, politikat e qeveris duhet t promovojn edhe
mandej siprmarrjen dhe mbshtetjen pr fillim t biznesit, por m tepr vmendjen
duhet ta drejtoj n prcaktimin e grupeve qllimore pr t cilat do t jepet mbshtetja, si
edhe n qndrueshmrin e bizneseve t reja.
Punsimi me orar t shkurtuar pune n ish Republikn Jugosllave t Maqedonis sht
n nivel shum m t ult sesa n BE-27, q ndoshta kjo sht rezultat i standardit
jetsor t ult n vend, edhe pse kjo ndoshta sht pasoj edhe e krkess s vogl pr
puntor me koh t shkurtuar pune. Qeveria duhet ti ul barrierat pr zbatim m t
madh t punsimit me orar t shkurtuar pune duke pasur parasysh se ky lloj punsimi
mund ta rris fleksibilitetin e tregut t puns dhe n mnyr virtuale t krijoj vende t
reja pune, si edhe t mundsoj nj numr t madh alternativash pr punsim t grave.
Pikrisht n kt drejtim reforma e sistemit t rrogave dhe ndryshimet n sistemin e
sigurimit social i zvogluan shpenzimet relative pr puntort me orar t shkurtuar pune.
Niveli i lart i papunsis afatgjate n vend implikon at se praktikisht t gjith t
papunsuarit kan probleme n gjetjen e puns. Megjithat, n evidencn administrative
t personave t papunsuar numrohen edhe personat q nuk krkojn pun dhe/apo
personat q punojn n ekonomin e zez. Prkrah t gjitha ktyre kategorive q duhet
t hiqen prej statistiks, personat me kualifikime t pamjaftueshme dhe/apo joprkatse
jan target grupe t rrezikuara prej papunsis (afatgjate). Prandaj, fokusi ditor i politiks
duhet t vendoset mbi fitimin e aftsive dhe prsosjen e tyre dhe kjo nprmjet arsimit
formal dhe joformal, duke prfshir edhe trajtimin, rikualifikimin dhe fitimin e prvojs s
puns. Qeveria bri hap t vrtet n kt drejtim, me vendosjen e arsimit t mesm t
detyrueshm, transferime t kushtzuara n t holla (kusht sht vajtja e rregullt n
msim n shkolln e mesme), rritje e shtesave (duke prfshir edhe investimet) pr
arsimin. Megjithat, nxitjet n fushn e arsimit jan reformimi i mtejshm i arsimit,
sidomos i arsimit profesional dhe i sistemit t trajnimit, si dhe promovimi i msimit t
prjetshm, gjat ksaj sht me rndsi t veant t rritet pjesmarrja e t gjitha
grupeve etnike, sidomos t popullats rome dhe grat e pakics etnike turke dhe
shqiptare n arsim.
Papunsia e t rinjve sht nj nxitje pr politikn e punsimit. Ndryshime t theksuara
nevojiten n disa fusha q tu mundsohet t rinjve gjat futjes n tregun e puns t
gjejn pun menjher. S pari, politikat mikroekonomike duhet t nxitin hapjen e
vendeve t reja t puns, kurse prsri rritja ekonomike m intensive e plotsuar me
legjislativ m fleksibile duhet t kontribuojn pr nj dinamik m t madhe n tregun e
puns. S dyti, duke pasur parasysh se mungesa e prvojs paraprake i bn m t rinjt
jokonkurent n tregun e puns n raport me puntort e tjer, politikat aktive duhet tu
ndihmojn t rinjve q t fitojn prvoj. S treti, ekziston nevoja pr prshtatje sa m t
madhe t arsimit dhe sistemit t trajtimit dhe trajnimit n drejtim t krijimit t aftsive dhe
kualifikimet q korrespondojn me nevojat e firmave. S katrti, t ardhurat relativisht t
larta (personale) prej arsimit n ish republikn Jugosllave t Maqedonis sigurojn nxitje
t mjaftueshme q individt t marrin arsim m t lart, megjithat institucionet qeveritare
duhet ta prmirsojn aftsin e tyre pr sigurim t cilsis s informacioneve pr
aftsit e krkuara.
Nevojitet t sigurohen informacione m t sakta dhe n koh pr aftsit e krkuara, q,
gjithashtu, do t ishin input n prcaktimin e politikave t arsimit dhe trajnimit, n t gjitha
nivelet dhe segmentet. Krijimi i till i politikave, i bazuar n informacionet cilsore, s
bashku me sinjalet e drejta pr nxnsit dhe prindrit e tyre (pr at se far arsimi dhe
aftsisht krkon tregu), do t ojn n zvoglimin e mosprputhjes momentale t aftsive
t ofruara dhe t krkuara nga tregu i puns.
Studimet empirike ekzistuese (t bra n baz t t dhnave t Ankets mbi fuqin e
puns) flasin pr nj ndikim relativisht negativ t ndihms n t holla gjat papunsis

mbi intensitetin e krkimit t puns n ish Republikn Jugosllave t Maqedonis, si dhe

pr t ashtuquajturin efekt t mbylljes, mosdaljes prej statusit t papunsis (locking-inneffect). Prqindja relativisht e vogl e personave t papun t evidentuar q marrin
ndihm n t holla, midis t tjerash u detyrohet kushteve t rrepta t cilat e kufizojn t
drejtn e ndihms pr personat t cilt m par, pr nj periudh t caktuar kan paguar
kontributet pr sigurim n rast t papunsis. Edhe pse sipas norms ligjore t
Maqedonis lartsia e ndihms n t holla zvoglohet nse personi i papun merr ndonj
t ardhur, kjo pothuajse nuk zbatohet aspak n praktik pr shkak t vshtirsis t
zbulohet e ardhura e till, kurse edhe pr shkak t kapacitetit t pamjaftueshm dhe
madhsis s madhe t puns t t punsuarve n Entin e Punsimit n Republikn e
Maqedonis (EPRM). N kt drejtim vendosja e shums s njtrajtshme (e vetme) e
ndihms n t holla gjat papunsis pr t gjith ata q marrin ndihm mund ta
lehtsoj administrimin e ndihms dhe t krijoj kursim n kuptimin e resurseve t
nevojshme (prfshir ktu edhe resurset njerzore).
Kapaciteti administrativ pr implementimin e drejt dhe zbatimin e legjislacionit t puns
edhe mandej sht i ult dhe ekziston prparim i matur n kt fush. Kapaciteti i
institucioneve kryesore n tregun e puns, Ministria e Puns dhe Politiks Sociale, EPRM
dhe Inspektorati Shtetror i Puns sht n prgjithsi i ult dhe i pamjaftueshm pr
zbatimin e strategjive ambicioze dhe planeve pr punsim. Gjithashtu, nuk ka
bashkpunim t mjaftueshm midis institucioneve relevante dhe tregut t puns.
Agjencia e Punsimit ende nuk i ka kapacitetet e nevojshme njerzore (dhe teknike) q t
prbj nj servis publik modern pr punsim. Deri para pak kohsh, personeli i EPRMs ka qen i mbingarkuar me funksione shtes q nuk jan tipike pr nj agjenci
punsimi, si sht evidentimi i marrveshjeve t reja pr punsim dhe mbylljen e
marrveshjeve t vjetra, si dhe sigurimi shndetsor pr personat e papunsuar. Nga viti
2009 administrimi i sigurimit shndetsor pr personat e papun t evidentuar (prve
atyre q kan kompensim n t holla gjat papunsis) sht transferuar nga EPRM-ja te
Fondi i sigurimit Shndetsor, por edhe mandej e drejta e sigurimit shndetsor lidhet me
regjistrimin e nj personi si i papun n EPRM. Dobia pr EPRM-n nga kto ndryshime
n administrimin e sigurimit shndetsor sht n at se personeli i EPRM-s tani mund
t fokusohet n shrbimet e rregullta t shrbimeve publike pr punsim, por regjistri i
EPRM-s edhe mandej sht i mbingarkuar me persona q nuk krkojn pun.
Enti i Punsimit duhet ti nxis t papunt m intesivisht t krkojn pun, ta prmirsoj
evidencn e personave t papun duke prfshir vetm ata t cilt me t vrtet krkojn
pun, t zbatoj qasje individuale ndaj grupeve t caktuara t t papunve dhe ti
prmirsoj shrbimet pr vetndihm pr ata persona q kan m tepr shanse vet t
gjejn pun. Gjithashtu ekziston nevoja pr decentralizim m t madh t udhheqjes s
EPRM-s, qasje nga posht-lart ku kancelarit e EPRM-s mund t ofrojn dhe zbatojn
politika aktive n baz t nevojave t tregut t puns, si edhe prfshirja m e madhe e t
gjitha palve t prfshira n politikat e punsimit n nivel lokal.
Me qllim q t harmonizim dhe krahasim me t dhnat nacionale pr politikat aktive n
tregun e puns (PATP) me vendet antare n BE, pushteti duhet ta harmonizoj
klasifikimin nacional t programeve aktive me at t Eurostatit, q bazohet n llojet e
intervenimeve n treg. Prkrah ksaj, ekziston nevoj urgjente pr zbatimin e evalvimit t
detajuar t PATP-s me qllim q n t ardhmen t rritet efikasiteti.
N raport me bashkpunimin midis organizatave t partnerve social, ekziston nj
rivalitet i caktuar dhe tensione, t cilat, midis t tjerash, jan rezultat i kritereve pr
reprezentativitet, si dhe prej mospjesmarrjes s disa organizatave n Kshillin Ekonomik
dhe Social, prkundrejt pjesmarrjes s disa t tjerave. Nga ana tjetr duke pasur
parasysh se 40% e t puntorve jan t punsuar n mikrondrmarrje t cilat kan deri
n 50 puntor, mund t thuhet se dialogu social n ish Republikn Jugosllave t
Maqedonis nuk ka rol t madh n marrdhniet me tregun e puns.

Prioritete pr veprimtari
Duke pasur parasysh rezultatet e kqija n tregun e puns n Maqedoni, ekziston nevoja
pr zbatimin e pakos gjithprfshirse t politikave q prbhet prej reformave n
mikronivel, prkatsisht politikave t kombinuara dhe t koordinuara makroekonomike, si
dhe politikat pr punsim. Reformat makroekonomike duhet ta prmirsojn edhe m
shum klimn e biznesit, me qllim t lehtsimit t procedurave administrative pr fillimin
dhe rritjen e firmave. Kto masa, s bashku me masat pr uljen e shpenzimeve pr
fuqin e puns do ta nxitin krijimin e vendeve t reja t puns, duke pasur parasysh
krkesn momentale t pamjaftueshme t fuqis s puns. Politikat e koordinuara
makroekonomike duhet ta ruajn mjedisin vijues stabil, por njkohsisht dhe t
mundsojn dinamik m t madhe n ekonomi. Krijuesit e politika duhet t jen t
vetdijshm se pr nj afat mesatar, synimet kryesore pr politikn makroekonomike do
t dalin nga konvergjenca nominale (dhe reale) e BE-s. N raport me ofertn e tregut t
puns, politika e punsimit dhe politikat ekonomike m t gjera duhet t 1) sigurojn
nxitje pr aktivitet m t madh t tregut t puns dhe 2) t sigurojn se aftsit dhe
njohurit e ofruara korrespondojn me nevojat e tregut.
Prioritetet nacionale pr veprimtari duhet t jen identike me ato t cilat jan identifikuar
n Strategjin e rishqyrtuar t Lisbons pr rritje dhe vende pune, kurse ato jan: 1) t
trhiqen dhe t mbahen sa m shum persona t punsuar, t rritet oferta e fuqis s
puns dhe t modernizohen sistemet e mbrojtjes sociale; 2) t prmirsohet prshtatja e
puntorve dhe ndrmarrjeve; 3) t rriten investimet n kapitalin njerzor nprmjet
arsimit m t mir dhe aftsive. N suazat e ktyre kategorive m t gjera, ky studim
ofron 46 masa konkrete n drejtim t prmirsimit t gjendjeve n tregun e puns n
Republikn e Maqedonis.

RSUM BREF
L'quipe du Centre international pour la culture europenne sur lInstitut EuroBalkans , a sign un contrat avec la Commission europenne qui vise fournir un appui
analytique au processus de ngociations d'adhsion de l'ancienne Rpublique
yougoslave de Macdoine l'UE dans le domaine de l'ajustement du march du travail et
les politiques de l'emploi. Comme convenu avec le bnficiaire, ce projet localise et
examine les dveloppements conomiques fondamentaux dans le pays, value les
dveloppements rcents du march du travail et les politiques de l'emploi actuel, et
donne plus de recommandations.
Situation conomique, tendances et dfis
Le chmage dans l'ancienne Rpublique yougoslave de Macdoine tait dj lev au
dbut de la transition, estime 20%. Pendant la transition, le chmage continuait
augmenter jusqu'en 2006, quand cette tendance ngative a t suspendue. La
croissance du chmage tait due non seulement la baisse de l'emploi, mais aussi la
hausse de l'activit du march du travail. Ces dveloppements suggrent que lapparition
et le dveloppement du nouveau secteur priv dans le pays n'taient pas suffisants pour
absorber les travailleurs qui ont t licencis dans la transformation des entreprises
publiques, malgr l'effet ou la pression sur le march du travail venant de laugmentation
de la population active.
Le climat dfavorable aux entreprises pendant la transition, non seulement dcourageait
le lancement des entreprises, mais aussi encourageait lconomie informelle. Au dbut
de 2007, le gouvernement a rduit considrablement les taux de l'impt sur le revenu et
limpt sur les bnfices, afin de rduire lconomie souterraine et d'encourager le
dveloppement du secteur priv, en particulier le secteur des petites et moyennes
entreprises. En outre, des efforts considrables ont tait faits pour amliorer le climat des
affaires au cours des dernires annes. La procdure d'ouverture d'une entreprise
(business inscription) tait simplifie par l'introduction d'un guichet unique et louverture
du march la concurrence. Le pouvoir judiciaire est soumis au programme de rforme
intensive visant, principalement, la simplification de la lgislation complexe et le
droulement plus efficace des procdures judiciaires, ainsi que l'amlioration de
l'infrastructure et les capacits des tribunaux et les juges eux-mmes. En mme temps,
les autorits ont initi une guillotine de rgulation, qui a limine un grand nombre
d'obstacles administratifs pour faire des affaires. Toutefois, de nouvelles amliorations
sont ncessaires, pas seulement lgislateur mais d'un point de vue pratique aussi, pour
crer un environnement commercial favorable pour les entreprises.
Les principales tendances dans le march du travail
Le march du travail en Macdoine est caractris par la faible activit, le taux d'emploi
bas, un chmage lev et un dsquilibre quantitatif et qualitatif entre la main-d'uvre et
les comptences requises.
Selon les normes internationales, le taux d'activit de la main-d'uvre est encore faible,
refltant de taux d'emploi faible et de taux de chmage lev. Le taux d'activit faible est
soutenue par des afflux nets plus levs de l'argent de l'tranger et de l'assurance
maladie gratuit pour les chmeurs inscrits, parmi lesquels il ya ceux qui ne cherchent pas
de travail. Lcart de participation entre les sexes est relativement lev sur le marche du
travail. Les principaux facteurs affectant lactivit faible au march du travail de la
population fminine sont : les traditions et les habitudes culturelles dans le pays, une

ducation et des comptences insuffisantes, lappartenance ethnique combins avec

l'ducation, la disponibilit et le prix des services de garde d'enfants et de soins aux
membres gs de la famille, l'existence d'une discrimination sur le march du travail, etc.
Les jeunes femmes rurales sans ducation ont une activit trs faible dans le march du
travail. Du point de vue des titulaires de la politique conomique, le rapport souligne le
fait que l'cart entre les sexes dans l'activit est associ l'ducation afin que les
femmes ayant une formation suprieure soient plus actives dans le march du travail que
la population masculine de l'enseignement suprieur. cet gard, les politiques visant
amliorer le niveau d'ducation des femmes, notamment celles des minorits ethniques,
ainsi que de fournir des services de garde d'enfants et les soins des autres accessibles et
abordables (en termes de prix) peut augmenter l'activit des femmes (et leur taux
demploi).
Les jeunes travailleurs ont aussi un taux d'activit faible qui peut tre considr comme
positif si les jeunes sont inactifs en raison d'tudes et d'investissement dans leur
ducation, en tenant compte du rendement relativement lev (profit) de l'ducation.
Les rgimes de retraite qui sont offerts dans les annes 90 du sicle prcdent et au
dbut de cette dcennie, n'a eu qu'un effet temporaire sur l'offre de travail, de sorte que
le nombre de travailleurs gs (55-64 ans) est en constante augmentation, qui peut tre
considr comme un dveloppement positif tant donn le vieillissement de la population
dans le pays et la pression futur sur le systme de retraite. Toutefois, l'activit accrue des
travailleurs gs n'est pas actuellement ncessaire et souhait car l'augmentation nette
de l'emploi n'est pas suffisante pour absorber les nouveaux participants sur le march du
travail.
Le taux d'emploi dans l'ancienne Rpublique yougoslave de Macdoine nest que deux
tiers de taux d'emploi moyen de l'UE-27, bien que ces dernires annes il y a une
tendance la hausse. L'emploi faible dans l'ancienne Rpublique yougoslave de
Macdoine implique une utilisation de la main-d'uvre insuffisante. Les autorits se sont
fix un objectif national d'atteindre le taux d'emploi de 48% en 2010. Toutefois, la
ralisation de cet objectif (qui est plus faible compar celui de l'UE) ne semble pas
raliste tant donn que l'conomie doit gnrer plus de 86 mille demplois dans une
priode de deux ans, qui est denviron 14% du niveau demplois en 2008.
De mme que dans d'autres pays des Balkans occidentaux, le march du travail dans
l'ancienne Rpublique yougoslave de Macdoine a t valu comme n'tant pas assez
inclusive, en dpit de la lgislation existante dans le domaine du travail et des
opportunits d'emploi gales. Linclusivit pour certains groupes de population, tels que
les travailleurs jeunes ou trs ges et des minorits ethniques demeure un dfi majeur
pour le pays, en tenant compte du taux de chmage trs lev dans ces groupes de
population.
En 2008, le taux de chmage dans le pays tait 34% et tait le plus lev en Europe. Il y
a des mouvements positifs dans les dernires annes, mais a un rythme trs lent.
Il ya plusieurs raisons possibles pour le taux de chmage lev et persistant dans
l'ancienne Rpublique yougoslave de Macdoine, y compris: (1) des facteurs spcifique,
rgionale, conomiques et politiques qui influencent sur la transition du pays, (2) la
mthode de privatisation travers l'achat d'entreprises par les salaris et la gestion, (3) la
dynamique du march du travail domin par un faible taux de cration de nouveaux
emplois, (4) les cots salariaux levs, qui favorisent en partie l'conomie souterraine, et
(5) les pressions dmographiques par le grand nombre de nouveaux participants
potentiels
au
march
du
travail.
Politique de l'emploi
L'emploi faible est caractristique pour tous les groupes sur le march du travail, en

particulier pour les personnes avec un niveau d'ducation plus bas. En outre, l'cart entre
les sexes dans l'emploi est relativement lev et constant. Bien que l'auto-emploi peut
tre considr comme un moyen efficace de rduire le chmage dans les zones o la
cration de nouveaux emplois est basse, l'emploi indpendant est associ la scurit
sociale faible car le lancement dune nouvelle entreprise dans l'ancienne Rpublique
yougoslave de Macdoine est souvent le rsultat de l'incapacit de trouver un autre
emploi et un autre source de revenus, et il est une activit de productivit basse qui
prend place dans l'conomie informelle. cet gard, les politiques gouvernementales
doivent continuer promouvoir l'esprit d'entreprise et de soutenir le lancement des
entreprises. Pourtant une plus grande attention doit tre oriente vers la dtermination
des groupes cibles qui recevront lappui, et la viabilit des nouvelles entreprises.
Le travail temps partiel dans l'ancienne Rpublique yougoslave de Macdoine est
beaucoup plus faible que dans l'UE-27, qui est peut-tre le rsultat du bas niveau de vie
dans le pays, mme si cella peut tre la consquence de la demande rduite pour les
travailleurs temps partiel. Le gouvernement doit rduire les obstacles pour une plus
grande utilisation de l'emploi temps partiel en tenant compte que ce type d'emploi peut
accrotre la flexibilit du march du travail et virtuellement crer des nouveaux emplois et
de fournir un plus grand nombre dalternatives pour l'emploi des femmes. Il est cet
gard, la rforme du systme de salaires et les changements dans le systme de
scurit sociale a permis de rduire les cots relatifs des travailleurs temps partiel.
Le niveau lev de chmage de longue dure dans le pays implique que presque tous
les chmeurs ont des difficults trouver du travail. Toutefois, le registre administratifs
des chmeurs comprennent galement les personnes qui ne cherchent pas de travail et /
ou les personnes travaillant dans l'conomie informelle. En dehors de ces catgories qui
doivent tre exclues des statistiques, les personnes avec des qualifications insuffisantes
et / ou inadquates sont un groupe cible de risque soumis au chmage ( long terme).
Donc le focus principal de la politique doit tre mis sur l'acquisition des comptences et
leur perfectionnement, travers l'ducation formelle et informelle, y compris la formation,
le stage de rinsertion et lacquisition de l'exprience. Le gouvernement fait la bonne
dmarche dans cette direction, avec l'introduction de l'enseignement secondaire
obligatoire, les transferts d'argent conditionns (la condition est la frquentation rgulire
des classes l'cole secondaire), l'augmentation des dpenses (y compris les
investissements) pour l'ducation. Cependant, les dfis dans le domaine du systme
ducatif sont : une rforme supplmentaire de l'ducation, notamment lenseignement
spcialis et le systme de formation professionnelle, et la promotion de l'apprentissage
continu, o il est particulirement important d'augmenter la participation de tous les
groupes ethniques, en particulier les Roms et les femmes des minorits ethniques
albanais et turc dans lenseignement.
Le chmage des jeunes est un autre dfi pour la politique de l'emploi. Des modifications
considrables sont ncessaires dans certains domaines pour aider les jeunes entrer
sur le march du travail sans une priode de chmage. Premirement, les politiques
microconomiques doivent encourager l'ouverture de nouveaux emplois, tandis que la
croissance conomique plus intensive avec une lgislation du travail plus flexible doit
assurer une dynamique accrue du march du travail. Deuximement, tant donn que le
manque d'exprience de travail pralable est lun des principaux inconvnients des
jeunes par rapport aux autres demandeurs demploi, les politiques actives doivent aider
les jeunes acqurir de l'exprience. Troisimement, il y a une ncessit dune plus
grande adaptation de l'ducation et de la formation vers la cration des comptences et
des qualifications requises par les entreprises. Quatrimement, le revenu de l'ducation
(individuel) relativement leve dans l'ancienne Rpublique yougoslave de Macdoine
fournit probablement une motivation suffisante pour les personnes acqurir une
ducation suprieure, mais les institutions gouvernementales doivent amliorer leurpropre capacit fournir des informations de qualit pour les comptences requises.

Il est ncessaire d'assurer une information exacte et opportune des comptences

requises, qui auraient galement leur mot dfinir des politiques de l'ducation et de la
formation tous les niveaux et segments. Cette cration de politiques fondes sur des
donnes qualitatives, ainsi que les signaux corrects pour les tudiants et leurs parents
vont rduire lincompatibilit entre les comptences offertes et demands au march du
travail.
Les tudes empiriques existantes (bas sur les donnes d'une enqute sur la main
duvre) montrent l'impact ngatif ventuel de laide financire au temps du chmage sur
lintensit de recherche d'emploi dans l'ancienne Rpublique yougoslave de Macdoine,
ainsi que de leffet appel le blocage, la non-sortie du statut de chmage (locking-in
effect). Le pourcentage relativement faible de chmeurs inscrits qui reoivent une aide
financire en cas de chmage est due aux conditions strictes qui restreignent le droit de
l'assistance aux personnes ayant pay la contribution d'assurance en cas de chmage
dans une certaine priode au pass. Bien que la lgislation macdonienne exige que le
niveau des allocations de chmage est rduite de toute revenu gagn pendant le
chmage, cella nest pratiquement pas appliqu en pratique en raison de la difficult
dtecter ces revenus, et en raison de l'insuffisance des capacits et de la forte charge de
travail des employs de l'Agence pour l'emploi de la Rpublique de Macdoine (APERM).
cet gard, l'introduction d'une prestation de taux forfaitaire au cas de chmage pour
tous les bnficiaires peuvent faciliter la gestion des allocations et crer des conomies
de ressources requises (y compris ressources humaines).
La capacit administrative pour la mise en uvre correcte et la ralisation du droit du
travail reste faible et il ya des progrs raisonnables dans ce domaine. La capacit des
institutions cls du march du travail, le Ministre du Travail et des Affaires sociales, de
l'APERM et de l'Inspectorat national du Travail est gnralement faible et insuffisante
pour rpondre aux stratgies et aux plans ambitieux pour l'emploi. En outre, il y a une
collaboration insuffisante entre les institutions comptentes du march du travail.
Lagence pour l'emploi n'a pas encore les capacits humaines (et techniques)
ncessaires pour reprsenter un service publique moderne de lemploi. Jusqu'
rcemment, le personnel de l'APERM a t accabl par des fonctions supplmentaires
qui ne sont pas typiques pour une agence demploi public, comme l'enregistrement des
nouveaux contrats demploi et la terminaison des contrats existantes et l'assurance
maladie pour les chmeurs enregistrs. Depuis 2009, la gestion de l'assurance maladie
pour les personnes inscrites sans emploi (sauf celles qui reoivent une compensation
montaire pour le chmage) a t transfre de l'APERM la Caisse d'assurance
maladie, mais le droit l'assurance maladie est toujours associ l'inscription d'une
personne au chmage dans lAPERM. Le bnfice de lAPERM de ces changements
dans l'administration de l'assurance maladie est que son personnel peut maintenant se
concentrer sur les "services rguliers" des services publics de l'emploi, mais le registre de
l'APERM continuera d'tre charg avec des non-demandeurs d'emploi.
Lagence pour l'emploi doit inciter plus intensivement les chmeurs chercher un travail,
amliorer le registre de chmeurs en comprenant seulement ceux qui cherchent vraiment
du travail, appliquer l'approche individualise envers certains groupes de chmeurs et
stimuler les services d'auto-assistance pour ceux qui ont meilleures chances retrouver
un emploi eux-mmes. Aussi, il ya un besoin pour une plus grande dcentralisation de la
gestion de l'APERM, lapproche ascendante o les bureaux locaux de l'APERM
pourraient fournir et excuter des politiques actives en fonction des besoins du march
du travail local, et une plus grande implication des parties concerns dans la politique de
l'emploi au niveau local.
Afin de rendre les donnes nationales sur les politiques actives du march du travail
(PAMT) comparables aux donnes des pays de l'UE, les autorits doivent coordonner la
classification "nationale" des programmes actifs de celle d'Eurostat, qui se fonde sur les

types dinterventions sur le march. En outre, il est urgent de mettre en uvre

l'valuation dtaille de la PAMT en vue de renforcer leur efficacit dans l'avenir.
En termes de coopration entre les organisations des partenaires sociaux, il ya une
certaine rivalit et tensions qui, entre autres, sont le rsultat des critres de
reprsentativit, ainsi que la non-participation des certaines organisations dans les
domaines conomique et social, malgr la participation d'autres. D'autre part, en
considrant qu'environ 40% des travailleurs sont employs dans des micro-entreprises,
et que la majorit des autres travailleurs sont concentrs dans les petites entreprises qui
comptent jusqu 50 employs, on peut dire que le dialogue social dans l'ancienne
Rpublique yougoslave de Macdoine n'a pas un grand rle dans les relations du march
du travail.
Priorits d'action
Compte tenu de la faible performance du march du travail macdonien, il est ncessaire
de mettre en uvre un plan d'action global qui comporte des rformes dans le microniveau, des politiques macro-conomiques combine et coordonne de manire
approprie et des politiques d'emploi. Les rformes microconomiques doivent encore
amliorer le climat des affaires afin de faciliter les procdures administratives pour
ltablissement et la croissance des entreprises. Ces mesures, ainsi que les mesures de
rduction des cots du travail encourageront la cration de nouveaux emplois, en tenant
compte de la faible demande actuelle pour la main duvre. Les politiques macroconomiques coordonnes doivent prserver l'environnement actuelle stable, mais aussi
de fournir un plus grand dynamisme dans l'conomie. Les dcideurs politiques doivent
tre conscients que, dans le moyen terme, les principaux dfis pour la politique
macroconomique ressortiront de la convergence nominale (et relle), vers l'UE. En
termes d'offre sur le march du travail, la politique de l'emploi et les grandes politiques
conomiques doivent 1) fournir des encouragements pour une plus grande activit dans
le march du travail, et 2) garantir que les comptences et les connaissances offertes
sont correspondantes aux besoins du march.
Les priorits nationales d'action doivent tre identiques celles identifies dans la
Stratgie de Lisbonne rvise pour la croissance et l'emploi, en particulier: 1) d'attirer et
de retenir davantage les personnes au travail, augmenter la main duvre et de
moderniser les systmes de scurit sociale, 2) amliorer l'adaptabilit des travailleurs et
des entreprises, et 3) augmenter les investissements dans le capital humain en
amliorant l'ducation et les comptences. Au sein de ces grandes catgories, cette
tude propose 46 mesures concrtes visant amliorer la situation du march du travail
en Macdoine.

KURZE ZUSAMMENFASSUNG

Das Team des internationalen Zentrums fr europische Kultur beim Institut EuroBalkan hat mit der Europischen Kommission einen Vertrag geschlossen, der als Ziel
Gewhrleistung von analytischer Untersttzung der Empfangsverhandlungen der
ehemaligen jugoslawischen Republik Makedonien in EU im Bereich vom Arbeitsmarkt
und Anpassung der Anstellungspolitiken hat. Wie es schon mit dem Benutzer verabredet
ist, wird das Ziel dieses Projekts Lozieren und Forschen von wichtigsten wirtschaftlichen
Entwicklungen im Land, Bewertung von neulichen Ereignissen im Arbeitsmarkt und
laufenden Anstellungspolitiken sein, als auch viele Empfehlungen.
Wirtschaftlicher Zustand, Entwicklung und Herausforderungen
Schon am Anfang der Transition war die Arbeitslosigkeit in der ehemaligen
jugoslawischen Republik Makedonien sehr hoch, sie betrug 20%, aber der Trend der
Prozentvergrerung dominierte immer mehr whrend der Transition bis zum Jahr 2006.
Das Wachstum der Arbeitslosigkeit war nicht nur von Anstellungsmangel sondern auch
von niedriger Teilnahme herausfordert. Diese Ereignisse zeigten, dass Erscheinung und
die Entwicklung eines neuen Privatsektors trotz des Effekts oder des Druckes von
Vergrerung der Arbeitspopulation nicht genug war, um die von der Transformation der
staatlichen Unternehmen herausforderten Anstellungsverminderungen zu apsorbieren.
Whrend der Transition hat das ungnstige Geschftsklima den Beginn von neuen
Business Start up Input unmglich gemacht, es hat auch die illegale Wirtschaft
promoviert. Um den Einfluss der Schattenwirtschaft yu verkleinern und die Entwicklung
des Privatsektors, besonders, kleine und mittlere Unternehmen yu motivieren, hat die
Regierung am Anfang des Jahres 2007 einen Beschluss gefasst. Damit wurden die
Personal-und Gewinnsteuer verkleinert. Auerdem wurden in den letzten Jahren
bedeutende Anstrengungen ber Verbesserung des Geschftsklimas gemacht. Durch die
Einfhrung von Einschaltersystem und Ermglichen von Marktkonkurrenz ist der
Vorgang fr Erffnung einer Firma einfacher. Im Rechtswesen wird eine intensive
Reformagenda durchgefhrt. Das Ziel dieser Agenda ist vor allem Vereinfachen der
komplizierten Legislative und Leiten von Gerichtsprozessen als auch Verbesserung der
Gerichtsinfrastruktur und kapazitten und der Richter selbst. Gleichzeitig initierten die
zustndigen Organe eine Regulatorgillotine, mit der die grere Zahl von
Administrativhindernissen fr Geschftsfhren eliminiert ist. Trotzdem sind fr die
Firmen weitere Verbesserungen erforderlich, um eine freundliche Geschftsumwelt (nicht
nur von gesetzlicher sondern auch von praktischer Ansicht) zu sichern.
Hauptentwicklungen des Arbeitsmarktes
Der Arbeitsmarkt in Makedonien ist nicht genug aktiv, es gibt niedrige Anstellung, gre
Arbeitslosigkeit und quantitatives und qualitatives Ungleichgewicht zwischen der
Arbeitskraft und den erforderlichen Fhigkeiten.
Nach den internationalen Standarden bleibt das Teilnahmeprozent der Arbeitskraft niedrig
und damit wird das niedrige Anstellungsprozent und das grere Arbeitslosigkeitsprotent
gezeigt. Das ist wegen des vergreren Netozustroms an Geld und kostenloser
Krankenversicherung fr registrierte Arbeitslser, die wahrscheinlich keine Absicht

haben, zu arbeiten. Sehr gro ist auch die Geschlechtsungleichheit. Hauptgrnde fr

geringe Teilnahme der Frauen sind: die Tradition und die Kulturgewhnheiten im Land,
die niedrige Schulbildung und die Fhigkeiten, die ethnische Zugehrigkeit in
Kombination mit der Schulbildung, die Zugnglichkeit und der Geflligkeitpreis fr
Kinderversorgung und Sorgen um ltere Mitglieder der Familie, der Arbeitsmarkt
diskriminiert die Frauen usw. Es ist kaum mglich, die jungen und ungebildeten Frauen
aus den ruralen Gebieten aktiv im Arbeitsmarkt teilzunehmen. Aus politischer Perspektive
potenziert der Bericht die Tatsache, dass die Geschlechtsungleichheit nicht nit dem
Ausbildungsniveau entspricht, wo die Frauen mit Hochschulbildung im Arbeitsmarkt ein
greres Prozent als die Mnner mit Hochschulbildung haben. Durch die Verbesserung
der Ausbildungspolitiken fr Frauen, besonders fr die ethnischen Minderheiten knnen
die Frauen ihre Teilnahme (und Anstellung) vergrern.
Junge Arbeitnehmer haben auch ein niedriges Teilnahmeprozent und die Investition in der
Hochbildung lohnt sich.
Die Schemen fr vorzeitige Pensionierung, die in 90-en Jahren des vorigen Jahrhunderts
und am Anfang dieses Jahrzehntes angeboten wurden, hatten beim Arbeitskraftangebot
nur einen zeitweiligen Effekt. Die Zahl der lteren Arbeitnehmer (55-64 Jahre alt) stieg
kontinuerlich und das kann man als positive Entwicklung betrachten, obwohl diese alte
Population in der Yukunft wahrscheinlich einen Druck auf dem Rentesystem machen
wird. Trotzdem ist die steigende Aktivitt der lteren Arbeitnehmer in diesem Moment
nicht ntig, weil die Neto-Vergrerung der Anstellung nicht genug ist, um neue
Teilnehmer des Arbeitsmarktes zu apsorbieren.
Das Anstellungsprozent in der ehemaligen jugoslawischen Republik Makedonien ist nur
Zwei Drittel vom durchschnittlichen Anstellungsprozent von EU-27, obwohl es in letzten
Jahren einen steigenden Trend gibt. Die niedrige Anstellung in der ehemaligen
jugoslawischen Republik Makedonien bedeutet auch ungenugende Ausnutzung der
Arbeitskraft. Die Regierung hat Nationalstrategie fr Vergrerung der Anstellung und
des Prozents von 48% bis zum Jahr 2010 verabschiedet. Trotzdem ist die Erreichung
dieses Prozents (der gema europischen Standards kleiner ist) irreal, weil die Wirtschaft
mehr als 86 000 Arbeitstellen im Zeitraum von zwei Jahren anbieten soll, was mehr als
18% im Vergleich mit dem Jahr 2008 ist.
hnlich wie in anderen Lndern vom Westbalkan ist der Zustand auf dem Arbeitsmarkt in
der ehemaligen jugoslawischen Republik Makedonien als uninklusiv bewertet, obwohl es
Anstellungen und gesetzliche Mglichkeit fr Anstellungen gibt. Die Einbeziehung fr
besondere Gruppen, wie sehr junge und sehr alte Arbeitnehmer, ethnische Minderheiten,
ist immer noch eine groe Herausforderung fr das Land, weil das
Arbeitslosigkeitsprozent von diesen Bevlkerungsgruppen sehr gro ist.
Im Jahr 2008 war das Arbeitslosigkeitsprozent im Land 34% und war am grten in
Europa. In letzter Zeit gibt es positive Bewegungen, aber die sind sehr langsam. Es gibt
einige Grnde fr die groe Arbeitslosigkeit in der ehemaligen jugoslawischen Republik
Makedonien, die sind: (1) speziefische regionale, wirtschaftliche und politische Faktoren;
(2) Privatisierungsmethode basiert auf Unternehmergeist; (3) Bewegungen auf den
Arbeitsmarkt, die von uninnovativen Sektoren fr menschlichen Ressourcen determiniert
sind; (4) der niedrige Wert der Arbeit und Umlenken in die illegale Wirtschaft und (5)
demographische Drucke von der groen Zahl der potentiellen Teilnehmer auf dem
Arbeitsmarkt in nchsten Jahren.

Anstellungspolitiken
Das niedrige Anstellungsprozent beeinflusst auf alle Gruppen im Arbeitsmarkt, besonders
auf die mit niedrigerer Schulbildung. Auerdem ist die Geschlechtsungleichheit im
Anstellungsbereich relativ hoch und kostant. Obwohl man die Selbstanstellung in der
ehemaligen jugoslawischen Republik Makedonien als ein wirksames Mittel fr
Verkleinerung der Arbeitslosigkeit in ungenug entwickelter Arbeitswelt schtzen kann,
zeigt die eine niedrige Zahl von Arbeitnehmer, die Versicherung beim Beginn des
Selbstgeschfts haben. Dieses Geschft ist Hauptquelle der Existenz, aber es gibt keine
Entwicklungsstrategie und ist meistens in Rahmen der Schattenwirtschaft. In diesem Sinn
soll die Regierungspolitik mit der Promovieren vom Unternehmergeist und mit der
Untersttzung von Business Start-up Input weitermachen, aber sie soll sich mehr auf
Zielgruppen, als auch auf die Wirtschaft richten.
Das Nutzen von Teilzeitarbeit bei Anstellung in der ehemaligen jugoslawischen Republik
Makedonien ist kleiner als in EU-27 und das knnte auf den niedrigen Lebensstandard
beeinflussen, obwohl das als Folge von kleiner Nachfrage der Teilzeitanstellungen
erscheinen kann. Die Regierung soll die Barrieren verkleinern, die Teilzeitanstellungen
kann die Flexibilitt vergrern und neue Arbeitstellen schaffen und damit kann sie eine
groe Zahl von Alternativen fr Frauen ermglichen. Im Jahr 2009 haben die Reformen
und nderungen im Bruttogehalt und im Soyialbeitragssystem die Reformkosten fr die
Teilzeitbeschftigte verkleinert.
Die langfristige Arbeitslosigkeit im Land zeigt, dass alle Arbeitloser Schwierigkeiten
haben, eine Arbeitsstelle zu finden. Auf der statistischen Listen der Verwaltung stehen
auch Personen, die keine Arbeitsstelle suchen und auch Personen, die in der
Schattenwirtschaft arbeiten. Auer diesen Kategorien, die von der Liste gelscht werden
sollen, sind die Personen mit ungenugenden oder nicht bereinstimmenden
Qualifikationen eine risikoreiche Zielgruppe, die langfristig arbeitslos sind. Deshalb sollen
die Fertigkeiten und Fortbildung im Brennpunkt durch formale und unformale
Ausbildung, Schulung, berqualifizierung und praktische Erfarung sein. Die Regierung
macht einen wirklichen Schritt in diese Richtung durch Einfhrung von obligatorischer
Mittelschule, soziale Bargeldtransfer (bedingt) fr Unterricht in der Mittelschule,
Vergroerung der Kosten (inkl. Investitionen) fr die Ausbildung. Trotzdem sind die
anderen Herausforderungen im Ausbildungssystem Reformen in der Ausbildung,
besonders in der Fachausbildung als auch Promotion des lebenslangen Lernens fr alle
ethnische Gruppen, besonders fr Angehriger der ethnischen Gruppen der Roma und fr
Frauen der albanischen und trkischen Minderheit.
Die Arbeitslosigkeit der jungen Leute ist noch eine Herausforderung fr die
Anstellungspolitik. Um den jungen Leuten, die legal an den Arbeitsmarkt kommen, zu
helfen, braucht man in einigen Bereichen erheblichen Anstrengungen. Zuerst sollen
microkonomische Politiken fr neue Arbeitsstellen verstrkt werden. Man soll grere
Dynamik im Arbeitsmarkt in der Korrelation mit intensiverem Wirtschaftswuchs und
leichterem Zugang zu gesetzgebenden Prozessen schaffen. Zweitens, weil der Mangel von
frherer Berufserfahrung ein von den groeren Hindernissen fr die Arbeitslosigkeit der
jungen Leute, im Vergleich mit denen, die schon frhere Berufserfahrung haben, ist,
sollen aktive Programme fr die Entwicklung des Arbeitsmarktes den jungen Leuten
helfen, damit sie Berufserfahrung bekommen. Drittens, es gibt einen groen Bedarf fr die
grere Adaptation der Ausbildung und der Schulungssysteme, damit wrden ihre
Qualifikationen fr die Erfllung der Marktsforderungen verbessern. Viertens, relativ
groer personlicher Vorteil, den die Brger der ehemaligen jugoslawischen Republik

Makedonien bekommen wrden, wird den Personen genug Stimulationen schaffen, damit
sie bessere Ausbildung htten, aber die Regierungsinstitutionen mssen genaue
Informationen fr suchende Fhigkeiten anbieten.
Es ist notig, genaue Informationen fr suchende Qualifikationen zur Verfgung gestellt zu
werden, auch neue Ausbildungspolitiken sollen in allen Segmenten gemacht werden.
Solche Kreiren der laufenden Politiken zusammen mit dem Transfer von rechtzeitigen
Signalen, die vor allem zu den Schlern und ihren Eltern bestimmt sind, werden
Verkleinerung der nicht bereinstimmenden Qualifikationen bringen, die in diesem
Moment unwirksam auf dem Arbeitsmarkt sind.
Nach den bestehenden empiristischen Studien (auf Grund von LFS Angaben gemacht)
wird ein mglicher negativer Einfluss der Arbeitslosigkeit hervorgehebt, als auch die
Intensitt bei Arbeitssuche, die wirklich die Hauptfaktoren fr solchen Zustand, der in der
ehemaligen jugoslawischen Republik Makedonien anwesend ist, verstellen. Relativ
niedriges Prozent von registrierten Arbeitslosern, die Sozialhilfe bekommen, ist wegen der
strengen Bedingungen, die das Benefizrecht fr Leute, die nicht beweisen knnen, dass sie
frhere Berufserfahrung haben, bescrnken. Nach der makedonischen Gesetzverordnung
sind alle Einkommen der arbeitslosen Brger steuerfrei, weil man solche Einkommen
nicht so leicht herausfinden kann, wegen der Schwierigkeiten und ungenugender Kapazitt
der Beamten im Arbeitsamt. Die Einfhrung von gleichem Gewinn, wenn man arbeitslos
ist, kann das administrative Benefiz einfacher machen und im Teil von menschlichen
Ressourcen sparen.
Die Verwaltungskapazitt fr genaue Implementierung und Durchfhrung von der
Arbeitsgesetzgebung bleibt sehr klein und in diesem Bereich gibt es geringen Fortschritt.
Die Kapazitt der Hauptinstitutionen, die fr Durchfhrung dieser Verordnung verpflichtet
sind, in diesem Fall Ministerium fr Arbeit und Sozialpolitik, das Arbeitsamt und
Staatsinspektorat fr Arbeit, ist auch fr Durchfrung von Plnen und
Anstellungsstrategien klein und ungenug. Es gibt auch unzureichende Zusammenarbeit
zwischen den relevanten Institutionen des Arbeitsmarktes.
Das Arbeitsamt hat noch nicht die notwendigen menschlichen (und technischen)
Kapazitten, um ein ffentlicher, moderner Anstellungsservice darzustellen. Vor kurzer
Zeit war das Personal des Arbeitsamtes mit zustzlichen untypischen Funktionen belastet.
Diese Funktionen waren Registration von neuen und Lsen von bestehenden Vertrgen als
auch Gewhrleistung von Krankenversicherung fr die registrierten Arbeitslser. Seit dem
Jahr 2009 ist die Gewhrleistung von Krankenversicherung fr die registrierten
Arbeitslser (auer diesen, die Sozialhilfe bekommen) vom Arbeitsamt zum
Krankenversicherungsfonds bergetragen, aber das ist noch immer mit der Anmeldung der
Person als Arbeitsloser im Arbeitsamt bedingt. Mit dieser nderung wird sich das
Arbeitsamt von dieser Pflicht befreien und das Personal des Arbeitsamtes kann sich an
ordentliche Dienstleistungen der ffentlichen Anstellungsdienste fokussieren, aber das
Verzeichnis im Arbeitsamt wird noch immer mit diesen Personen, die keine Stelle suchen,
belastet sein.
Das Arbeitsamt soll sich auf Aktivitten fr zunehmende Durchsuchung von Arbeitslosern
richten, es soll die genaue Zahl der Arbeitsloser feststellen, einen individuelen Zugang fr
arbeitslosen Zielgruppen haben, die Aktivitten fr Selbsthilfe und andere
Dienstleistungen sollten auch vergrert werden, damit die Chancen fr Wiederanstellung
verbessert werden. Die Arbeitsamtverwaltung soll auch dezentralisiert sein, buttom-up
Zugang (von dem Beginn), wo die Lokalbros aktive Dienstleistungen auf Grund von

Bedrfnissen des Lokalarbeitsmarktes anbieten und implementieren knnten und auch

grere Einbeziehung von der Leitung in der Lokalanstellungspolitik.
Um Nationalberichte mit Angaben fr Aktivpolitiken des Arbeitsmarktes (ALMPs), damit
man sie mit den Berichten aus EU-Lnder vergleicht, vorzubereiten, sollten die Behrde
die Nationalklassifikation der Aktivprogrammen mit denen von Eurostat, der auf
verschiedenen Investitionssformen basiert, bereinstimmen. Auerdem gibt es dringendes
Bedrfnis ALMPs regelrecht beurteilt yi sein, um ihre Leistung yu vergrern.
In Bezug auf Zusammenarbeit zwischen Organisationen der Sozialpartner gibt es Rivalitt
und Spannungen, die aus der Vertretung und der Teilnahme von einigen Organisationen in
Wirtschafts- und Sozialrat im Gegensatz zu nicht teilnehmenden Organisationen
hervorgehen. Es gibt eine Behuptung, dass es in der ehemaligen jugoslawischen Republik
Makedonien Beschrnkungen des Sozialdialogs gibt, weil etwa 40% von der Arbeitskraft
in microwirtschaftlicher Sphre ist und die Mehrheit von anderen Arbeitnehmer in kleinen
Unternehmen, die bis 50 Angestellter haben, konzentriert ist.
Wirkungsprioritten
Weil die Leistung der Arbeitskraft im makedonischen Arbeitsmarkt sehr schwach ist, ist
ntig die Durchfhrung von einem umfassenden politischen Paket, das aus Reformen auf
Microniveau, aus entsprechender Kombination und Koordination von Politiken auf
Makroniveau, als auch aus Anstellungspolitiken besteht. Die Microkonomischen
Reformen sollen in der Zukunft das Geschftsklima verbessern, um die
Verwaltungsprozeduren beim Grnden und natrlich bei der Entwicklung der Firmen zu
erleichtern. Diese Manahmen zusammen mit den Manahmen fr Verminderung der
Arbeitskraftkosten sollen die Zahl der Arbeitstellen vergrern, weil es ungenugende
Arbeitskraftforderung gibt. Die Mischung von makrokonomischen Politiken soll die
laufende stabile Mitte erhalten, aber gleichzeitig sollen sie grere Dynamik in der
Wirtschaft ermglichen. Die Autoren der Politiken sollen bewusst sein, dass es in mittlerer
Frist fr makrokonomische Politik eine groe Herausforderung von nomineller (und
tatschlicher Konvergenz) zu EU hervorgehen wrde. Im Bezug auf Arbeitsmarktangebot
sollen die Anstellungen und weitere Wirtschaftspolitiken 1) Motivation fr grere
Teilnahme im Arbeitsmarkt sichern und 2) sich versichern, dass die Qualifikationen und
Wissen auf dem Arbeitsmarkt konkurent sind.
Die Wirkungsprioritten sollen identisch mit denen, die in revidierter Strategie von
Lissabon fr Wachstum und Arbeitstellen identifiziert sind, sein, besonders: 1) Anziehung
und Anhalten von mehreren beschftigten Personen und Vergrerung von der
Arbeitskraft als auch Modernisierung von Sozialschutsystemen; 2) Verbesserung von
Anpassungsfhigkeit der Arbeitnehmer und der Unternehmen; 3) Vergrerung der
Investitionen in menschlichen Ressourcen durch bessere Ausbildung und Qualifikationen.
In Rahmen von diesen weiteren Kategorien bietet diese Studie 46 konkrete Wirkungen,
um die Entwicklung des Arbeitsmarktes in Repiblik Makedonien zu verbessern.

LIST OF ABBREVIATIONS
ALMP

Active Labour Market Programme

ALE

Adult Life-long Learning

CARDS

Community Assistance for Reconstruction, Development and Stabilization

CB

Central Bank

CBEEE

Curriculum-based external exit examinations

CEE

Central and Eastern Europe

CEEC

Central and Eastern European Countries

DB

Doing Business

EAR

European Agency for Reconstruction

EBITDA

Earnings before Interest, Taxes, Depreciation and Amortization

EBRD

European Bank for Reconstruction and Development

EC

European Commission

EC DGE

European Commissions Directorate-General for Employment, Social

Affairs and Equal Opportunities

EES

European Employment Strategy

ELEM

Macedonian Power Plants, Joint Stock Company

EODS

European Occupational Diseases Statistics

EPL

Employment Protection Legislation

ESA

Employment Service Agency

ESAW

European Statistics for Accidents at Work

ESC

Economic and Social Council

ESF

European Social Fund

ESM

State Electricity Company

ETF

European Training Foundation

EU

European Union

EURES

European Employment Services Network

GCA

General Collective Agreement

GDI

Gender-related Development Index

GDP

Gross Domestic Product

GEM
HDI
ICT
ILO

Gender Empowerment Measure

Human Development Index
Information and Computer Technology
International Labour Organization

IMF

International Monetary Fond

ISCED

International Standard Classification of Education

ISCO

International Standard Classification of Occupations

IPA

Instrument for Pre-Accession Assistance

IT

Information Technology

JAP

Joint Assessment of Employment Policies

LFS

Labour Force Survey

LTU

Long-term Unemployment

MEBO

Management-employee buyouts

MEPSO

Macedonian Transmission System Operator

MLSP

Ministry of Labour and Social Policy

MST

Mathematics, Science and Technology

NAPE

National Action Plan for Employment

NATO

North Atlantic Treaty Organization

NES

National Employment Strategy

NMS

New Member States of the European Union

NUTS

Nomenclature of Territorial Units for Statistics

ODIHR

OSCE Office for Democratic Institutions and Human Rights

OECD

Organization for Economic Cooperation and Development

OHS

Occupational health and safety

OP

Operational Plan

PES

Public Employment Service

PHARE

Poland and Hungary: Assistance for Restructuring their Economies Programme

PISA

Programme for International Student Assessment

PIT

Personal Income Tax

PPP

Purchasing Power Parity

SEAF

Small Enterprise Assistance Funds

SEE

South Eastern Europe

SEEC

South Eastern European countries

SLI

State Labour Inspectorate

SSO

State Statistical Office

TAIEX

Technical Assistance and Information Exchange Instrument of the

Institution Building unit of Directorate-General Enlargement of the
European Commission

TFP

Total Factor Productivity

TWA

Temporary Work Agencies

UI

Unemployment Insurance

UNDP

United Nations Development Programme

UNICEF

United Nations International Children's Emergency Fund

USAID

United States Agency for International Development

VAT

Value Added Tax

VET

Vocational Education and Training

WAP

Working-age population

WB

World Bank

WHO

World Health Organization

LIST OF TABLES
Page
Table 1
Table 2
Table 3
Table 4
Table 5
Table 6
Table 7
Table 8
Table 9
Table 10
Table 11
Table 12
Table 13
Table 14
Table 15
Table 16
Table 17
Table 18
Table 19
Table 20
Table 21
Table 22
Table 23
Table 24
Table 25
Table 26

Labour force participation rates in selected non-EU and EU economies,

2000-2008
Unemployment rates by individual characteristics, 1996 and 2008
Unemployment rates by categories in selected CEECs (15-64 years of age),
2008
Nominal wage rates by sectors in the former Yugoslav Republic of
Macedonia, 2002-2008 (in %)
Informal employment by age, firm ownership, sector and strata in 2006
Informal employment by gender and working hours in 2005
Employment and unemployment by educational attainment in FYR
Macedonia, 2007 and 2008
Expected new employments in the firms surveyed by ESA in the next 12
months, according to the education level
Labour deficit in firms surveyed by ESA
Labour market indicators by gender and education attainment in 2007
Students with completed undergraduate studies in the former Yugoslav
Republic of Macedonia, according to scientific field and gender in 2006
Reported injuries for the purpose of disability insurance, 1995-2006
Unemployment by categories in the former Yugoslav Republic of Macedonia
and selected countries, 2007
Labour market indicators by age groups, 1996, 2007 and 2008
Unemployment, employment and population by ethnicity, in the former
Yugoslav Republic of Macedonia in 2002
Participation in education by ethnic group and gender, 1998/99-2001/02
Labour market indicators and GDP per capita by the 8 (NUTS-3) regions

47
51
51
55
62
63
65
67
68
71
72
77
79
81
81
82
86

Proportion of females (in percent of the relevant population), 2000/01 and

2006/07
Health and income support beneficiaries, 2003-2008
Unemployment benefit schedule
Distribution of LFS unemployment by duration and incidence of income
support, 2007
Number of beneficiaries of child protection rights
Allocated funds and participants in ALMPs, in 2008 and 2009
Employment Protection Legislation strictness, late 1990s and early 2000s
Facts about the State Labour Inspectorate
State Labour Inspectorate - Inspection supervisions for labour relations in
2008

34

89
101
102
103
104
109
115
123
127

LIST OF FIGURES
Page
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11
Figure 12
Figure 13
Figure 14
Figure 15
Figure 16
Figure 17
Figure 18
Figure 19
Figure 20
Figure 21
Figure 22
Figure 23

Real GDP in the Czech Republic, Hungary, Poland and in the former
Yugoslav Republic of Macedonia, 1990-2008 (1990=100)
Real GDP and employment index in the former Yugoslav Republic of
Macedonia, 1995-2008 (1990=100)
Labour productivity, real wages and unit labour costs in the former Yugoslav
Republic of Macedonia, 1995-2008
Exports of goods (in millions of US $) and growth rates of industrial
production (seasonally unadjusted, y-o-y), January 2007- August 2009
Real growth of private sector credit (y-o-y) and stock of foreign exchange
reserves (in millions of US $, end of period), January 2007- August 2009
Number of registered unemployed (actively seeking work), Jan 2007- July
2009
Number of registered unemployed due to layoffs, Jan 2007- July 2009
Employment by occupational category in FYR Macedonia, 2002 - 2004
Labour market developments during the transition in the former Yugoslav
Republic of Macedonia, 1996-2008
Net employment growth in FYR Macedonia, 1996-2008
Real gross wage, labour productivity and real unit costs in the former
Yugoslav Republic of Macedonia, 2000-2008 (index 100=2000)
Real wage growth and average wage level in the former Yugoslav Republic
of Macedonia, 2002-2008
Productivity growth by sectors in FYR Macedonia, 2002-2008
Open-ended and fixed-term contracts in the former Yugoslav Republic of
Macedonia, 2004-2008
Labour market characteristics by marital status in FYR Macedonia, 2008
Public expenditure on education in transition economies, average for the
period 2000-06 (in percent of GDP)
Net rates of pre-primary enrolments (ISCED 0) in the transition economies
(1989/90 -2007/08, as a percent of population aged 3-6)
Participation rates of female students in the tertiary education (ISCED 5) in
the European transition countries, 1989/90 - 2006/07 (in percent)
Percentage distribution by field of study in tertiary education in the former
Yugoslav Republic of Macedonia (school years ending 2000 and 2006)
Percentage distribution by field of study in tertiary education in the former
Yugoslav Republic of Macedonia and Europe (school year ending 2006)
Net enrolment rates across different ISCED levels in selected countries in
2007
Institutional organisation of the Employment Service Agency (ESA)
Organisational chart of the ESA

35

37
38
39
40
40
41
41
44
45
48
53
54
57
59
73
87
88
91
92
92
93
106
107

INTRODUCTION
The team of the International Centre for European Culture The Euro-Balkan Institute
has been awarded a contract by the European Commission which aims at providing an
analytical support to the negotiation process for the accession of the former Yugoslav
Republic of Macedonia to the EU in the area of labour market adjustment and
employment policies. In particular, it is designed to contribute to the "Joint Assessment
of Employment Policies" (JAP).
Our Technical Proposal was submitted to the European Commission on October 2008,
and the contract was signed by both parties in December 2008. The team met several
times to define an action plan. In line with the working plan, two members of the team
participated at a kick-off meeting in Brussels on January, 8th 2009, discussing in detail
the main issues of concern for the Final report.
As specified in the Technical Proposal, the study maps and examines the main
economic developments in the country, recent labour market developments,
implemented employment policies, as well as recent demographic and social trends.
Additional analysis of cross-cutting horizontal themes, such as gender inequalities,
regional disparities and discrimination affecting particular vulnerable groups is also
provided throughout different chapters. Special emphasis is given to the issues of
employability, labour market segmentation and life-cycle approach to work.
Specifically, the proposed study aims:
1. To provide an up-to-date information and analysis of recent developments in the
Macedonian labour market, and in particular, the participation rates, the employment
and unemployment rates, the inactivity rates and their developments in recent years.
2. To offer, in all parts of the analysis, a comparative view with respect to the EU-27
average, the new EU Member States, as well as the EU candidate countries and
other Western Balkan countries where useful.
3. To analyse the constellation of recent economic and labour market developments,
wages and productivity, informal sector influence, flexible working arrangements,
educational attainment of the labour force, and identify possible mismatch problems
between labour supply and demand.
4. To provide an in-depth analysis of the labour market based on the cross-cutting
horizontal themes, such as gender inequalities, regional disparities and
discrimination affecting particular vulnerable groups, such as ethnic minorities.
5. To assess the current employment policies; with a particular focus on the human
resource policies, combinations of flexibility and security; wages, taxes and benefits,
public employment service (PES) and active labour market programmes (ALMPs),
equal opportunities policies, as well as regional aspects of employment policies.
6. To examine in more depth relevant aspects of the unemployment across different
dimensions over the past decade, in order to expose the phenomenon of persistently
high unemployment burdening the country. Namely, the unemployment situation
(rates and trends) of specific groups of the population, such as female, first-time job

36

seekers, unskilled, ethnic minorities, rural, youth, prime-age and elderly workers.
7. To assess the adequacy and future sustainability of current employment policies, the
capacity of labour market institutions in particular the Ministry of Labour and the
Public Employment Services in terms of their cooperation and promotion of social
dialogue.
8. To identify the key employment policy challenges and good governance practices.
The study maps and surveys current macroeconomic, demographic and social trends in
the former Yugoslav Republic of Macedonia in order to provide a background analysis of
the current state of labour market and its perspectives. The investigation employs a set
of conventional socio-economic and demographic indicators to examine the recent
developments in the Macedonian labour market. Bearing in mind low activity, low
employment rates and high unemployment characterising the country labour market and
additionally the global economic and financial crises, the study identifies main
challenges and priorities for action for the forthcoming period. The analysis takes into
account the candidate status of the former Yugoslav Republic of Macedonia and its
priority of joining the EU, as well as priorities identified in the revised Lisbon agenda for
growth and jobs. It explores general economic, labour market and employment policies
and recommends concrete steps that would improve performance and outcomes in the
labour market, would increase employment, secure higher quality and productivity at
work and social and territorial cohesion, as foreseen with the overarching objectives of
the European Employment Strategy for the period 2008-2010.

1. ECONOMIC SITUATION, DEVELOPMENTS AND CHALLENGES

1.1.

Recent economic developments

The centrally planned system in the Central and Eastern European Countries (CEECs)
with its main characteristics of centrally set wages, prices and output, zero official
unemployment, centralised foreign trade and highly egalitarian income distribution,
proved to be both unsustainable and inefficient. It is not surprising therefore that the
transition to a market economy in early 1990s encompassed significant loss in real
output, fall in employment and rapid rise of inflation. Even so, the unprecedented
structural changes during the transition period brought sizeable efficiency gains in the
allocation of resources (Cazes and Nesporova, 2001). Unlike the rapid resumption of
economic growth rates in CEE transition economies, the transformational recession in
the former Yugoslav Republic of Macedonia has been rather prolonged (see Figure 1).
The initial stages of transition witnessed strong political and economic impediments to
output and employment growth, most notably, unfavourable initial position, adverse
external shocks and the insider model of privatization.
The former Yugoslav Republic of Macedonia started its transition as one of the poorest
regions of former Yugoslavia with a backward economic structure relying on a dominant
primary production sector as well as a significant level of external indebtedness
(Domadenik et al. 2003). On declaring independence in 1991, the country inherited high
inflation rate reaching 86% in April 1992 (month-on-month basis). Soon after, it faced

37

disruption to its payment system and business transactions with the former Yugoslav
Republics. Furthermore, the United Nations introduced trade sanctions against Serbia
and Montenegro in 1992, thus blocking the access of Macedonian goods and services to
their markets. These economies were the main export markets of Macedonian
companies accounting for 60% of total Macedonian exports prior to the disintegration of
ex-Yugoslavia, implying that the Macedonian economy has been highly vulnerable.
Additionally, Greece imposed a trade embargo upon the former Yugoslav Republic of
Macedonia as a political pressure following the dispute over the name and the flag of the
country, which blocked the access to the Greek market and the important port of
Thessalonica. These unfavourable external shocks caused a sharp and prolonged
decline in real output. Once the growth rates gradually resumed, the Kosovo conflict and
NATO intervention in Serbia in 1999 and the civil unrest in the former Yugoslav Republic
of Macedonia in 2001 again brutally halted the economic recovery.
Figure 1 - Real GDP in the Czech Republic, Hungary, Poland and in the former Yugoslav
Republic of Macedonia, 1990-2008 (1990=100)
210
200
190
180
170
160
150
140
130
120
110
100
90
80
70
2008 est

2007

2006

2005

2004

2003

2002

POL

2001

2000

1999

HUN

1998

1997

1996

1995

1994

1993

1992

1991

1990

CZ

MK

Source: Authors' calculations based on data from the EBRD online database.

Apart from the political instability, the unfavourable labour market outcome during the
Macedonian transition has also been a consequence of the model of privatisation.
Because of the prevalence of social rather than state ownership, the privatization in the
former Yugoslav Republic of Macedonia proceeded slowly and favoured the insiders
(Zalduendo, 2003). The management/employee buyouts as a dominant mode of
privatization left little room for new strategic investors and management turnover, which
had in turn negative implications for future growth and job creation. Another distinctive
feature of the Macedonian socialist system was that it allowed open unemployment so
that the unemployment rates had reached 20% even during the 1980s.
In the period 1990-1994, real GDP in the former Yugoslav Republic of Macedonia
declined by 5.5%, compared to the CEECs average of 3.1%, whereas employment
declined by 1.3%, below the average CEECs decline of 4% (Nesporova, 2002), pointing
to a more severe recession in the country but low adjustment of the labour market, i.e.
employment. Real GDP in the former Yugoslav Republic of Macedonia reached its
bottom in 1995 (80% of the 1990 level) with positive, though moderate growth rates
afterwards. Macedonian GDP grew on average by 2.3% annually in the period 19952000, whereas employment further declined by 1.4%, on average, per annum. As
measured by the recovery of the level of real GDP (in 1995 prices), the country
38

completed the transition process only in 2006 when it reached the pre-transition 1990
level, though, broadly in line with other transition economies, employment significantly
lagged behind output adjustment (Boeri, 2001). Figure 2 presents real GDP and
employment developments in the Macedonian economy in the period 1995-2008 with
1990 as a base year.
The comparison of output and employment developments in Figure 2 demonstrates that
productivity in the country economy has been growing since 1995, notwithstanding the
1998 and 2001 when employment lagged in adjustment to the decline in GDP caused by
the civil unrest. The overall productivity gains of 10% during period 1990-2006 are rather
modest, whereas in the analysed period, 1995-2006, productivity growth has been much
higher, 28%. According to Angel-Urdinola and Macias (2008), productivity growth in the
former Yugoslav Republic of Macedonia was not accompanied by employment growth,
except in 1999 and 2000, implying that productivity gains were achieved mainly by
destruction of unproductive jobs (massive labour-shedding programmes) rather than by
creation of productive jobs. Put differently, the sluggish economic growth in the country
produced low quality jobs in the informal economy or agriculture, with low productivity,
uncovered with the social security.
Figure 2 - Real GDP and employment index in the former Yugoslav Republic of
Macedonia, 1995-2008 (1990=100)
115
110
105
100
95
90
85
80
75
70
2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

GDP in 1995 constant prices

Employment

Source: Authors' calculations based on LFS and national accounts.

According to Zalduendo (2003), comparisons of aggregate productivity measures

neglect an important issue: the difference in performance between surviving companies
(state owned companies that undergo restructuring) and the new entrants. On one hand,
restructuring of surviving companies did not fully solve the problem of labour hoarding so
that productivity improvement was weak and hence further restructuring and shedding
labour came up latter on and more is expected in the years to come. In particular, most
of the privatisation agreements restricted layoffs for a certain period of time (usually 2
years). On the other hand, emerging firms generated an increase in labour productivity
that was mirrored in increased nominal wages by 38% between 1997 and 2000 - three
times higher than the rise in surviving firms.

39

Figure 3 - Labour productivity, real wages and unit labour costs in the former Yugoslav
Republic of Macedonia, 1995-2008
3a) Labour productivity and real net wages,
1995-2008

3b) Labour productivity and unit labour costs,

1995-2008

140

140

130

130
120

120

110

110

100

Real Unit Labour Costs

Source: Authors' calculations based on LFS and national accounts.

Furthermore, data on productivity and real net wages presented in Figure 3(a)
demonstrate low correlation between these two indicators, which is not surprising, given
the structural changes and the substantial non-wage benefits. The difference in the
patterns is more obvious from 2002 onwards, when productivity increase was not
followed by a real net wage increase leading to declining unit labour costs (Figure 3(b)).
The productivity increase stabilised in 2004 and even slightly declined, with a further
decline in unit labour costs. In 2006, unit labour costs were only 78% from the 1995
level, though about 8% above the 1990 level.

1.2.

2007

Labour productivity

2005

Real net w age

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

Labour productivity

2003

70
2001

80

1999

80
1997

90

90

1995

100

The impact of the global economic turmoil on unemployment and the

Macedonian policy response

Due to the limited capital account openness, the Macedonian economy was shielded
from the first wave of the global financial turmoil during the course of 2008. However, the
deepening global downturn was transmitted in the last quarter in 2008 through the trade
channel. Initially driven by sharp drop of world demand for metals, exports fell by 20%
(year-on-year basis) in November 2008 after five years of continued growth (Figure 4).
Then, fall in foreign demand for textiles, shoes and ores led to reduction of export by
43% in the first quarter of 2009. As a result, the industrial production declined by 8% in
the last quarter of 2008 and by 10% in the first quarter of 2009 (year-on-year basis).

40

The sudden stop in net international capital inflows and workers' remittances
accompanied by sizeable current account deficit of 14% of GDP led to depletion of
foreign exchange reserves and tightening of the monetary policy (Figure 5). Thus, the
bank-dominated financial system experienced fierce competition for deposits and a
sharp reduction in credit growth.

20

500

15

450

10

400
350

300

250

-5

200

-10

Figure 4 - Exports of goods

(in millions of US $) and
growth rates of industrial
production (seasonally
unadjusted, y-o-y), January
2007- August 2009

150

-15

100

-20

50

-25

0
2009:08
2009:07
2009:06
2009:05
2009:04
2009:03
2009:02
2009:01
2008:12
2008:11
2008:10
2008:09
2008:08
2008:07
2008:06
2008:05
2008:04
2008:03
2008:02
2008:01
2007:12
2007:11
2007:10
2007:09
2007:08
2007:07
2007:06
2007:05
2007:04
2007:03
2007:02
2007:01

Source: Monthly reports of the State

Statistical Office of the Republic of
Macedonia.

Growth rates of industrial production (seasonally unadjusted, y-o-y)

Exports of goods (in millions of US $)
40.0

1800

35.0

1600

30.0

1400
1200

25.0

1000

20.0

800

15.0

600

10.0

400

5.0

200

0.0

0
2009:08
2009:07
2009:06
2009:05
2009:04
2009:03
2009:02
2009:01
2008:12
2008:11
2008:10
2008:09
2008:08
2008:07
2008:06
2008:05
2008:04
2008:03
2008:02
2008:01
2007:12
2007:11
2007:10
2007:09
2007:08
2007:07
2007:06
2007:05
2007:04
2007:03
2007:02
2007:01

Real growth rate of private sector credit

Foreign exchange reserves

Figure 5 - Real growth of

private sector credit (y-o-y)
and stock of foreign
exchange reserves (in
millions of US $, end of
period), January 2007August 2009
Source: Monthly reports of the National
Bank of the Republic of Macedonia.
Note: Starting from January 2009
monetary statistics is compiled based on
the New Banks' Chart of accounts.

Reflecting weakening domestic demand, imports of goods (c.i.f.) in January-August 2009

fell by 34.1% compared to the same period last year. The economic slowdown in the
country has, however, not yet affected the labour market where the number of
jobseekers in July 2009 was almost the same as in July 2008 (see Figures 6 and 7).
This is in line with the past cross-country experience that labour markets respond to
economic development with a substantial lag (ILO, 2009a).
In October 2009, the real GDP estimates for 2009 were revised downwards: the Ministry
of Finance forecasts -0.6% growth rate that was revised downwards two times from
5.5% as projected in December 2008 and 1% in April 2009), the European Commission:
-0.7%, EBRD: -1.6%, the National Bank: -1.8%, whereas the IMF forecasts growth rate
of -2.5%.

41

Figure 6 - Number of
registered unemployed
(actively seeking work), Jan
2007- July 2009

300000
295000
290000
285000
280000
275000
270000
265000
260000
255000
2009:07

2009:05

2009:03

2009:01

2008:11

2008:09

2008:07

2008:05

2008:03

2008:01

2007:11

2007:09

2007:07

2007:05

Figure 7 - Number of
registered unemployed due to
layoffs, Jan 2007- July 2009

2007:03

2007:01

Note: The numbers exclude unemployed

persons that register solely for the health
care insurance.

7500
6500
5500
4500
3500
2500
1500
2009:07

2009:05

2009:03

2009:01

2008:11

2008:09

2008:07

2008:05

2008:03

2008:01

2007:11

2007:09

2007:07

2007:05

2007:03

2007:01

Source: Monthly reports of the

Employment Agency.

Although data on registered unemployment do not show worsening labour market

conditions, data on inflows into the unemployment registry do show that at the beginning
of 2009 the number of layoffs significantly increased. This tendency stabilized in recent
months. The past experience suggests that youth, low-skilled and older workers are
more likely to bear the burden of rising unemployment. Workers holding temporary
contracts are also particularly vulnerable to an economic downturn. The recession is
expected to disproportionately affect workers in certain industries: construction, textile
and shoe industries are among the most affected sectors in the economy. The dramatic
decline in the metal industry production, which is a significant GDP contributor, ceteris
paribus, is likely to lead to additional employment losses from closed down or declining
establishments. On the other hand, the relatively high EBITDA margins in the
telecommunication and banking industries in the first eight months of 2009 provide
assurance that these sectors are immune to the global economic crisis.

42

Nevertheless, 2009 is likely to witness mounting pressures for state subsidies and
increasing the public sector employment as a safety net during the global economic
downturn. The Government has so far launched three anti-crises packages,1 but they
have not explicitly included employment policies\measures, such as shortened working
week, work sharing, etc. As part of the anti-crises packages, two policies\measures can
be identified that would directly affect the labour market performance:
(1) reduced labour taxation through lower social contributions rates and higher personal
income tax exemption) along with reduced administrative burden on firms, that started in
January 2009, and contributions rates will be further reduced in 2010 and 2011. The
original aim of this measure was to reduce labour costs and stimulate job creation, but
now it is foreseen as a support to firms to cut production costs (and keep employments
stable) in view of the crises (see section 3.2.2).
(2) increased scope and funding for ALMPs which doubled in 2009 compared to 2008
which should improve the matching in the labour market, upgrade the skills of
unemployed and at least temporary reduce pressures on the labour market (and social
security system). To achieve the latter, the Government additionally to the initial increase
of spending on ALMPs, in May 2009 increased the funding for the public work schemes.
Moreover, the Government undertook a reform in the social security system and
introduced conditional cash transfers to poor households (conditional upon secondary
school attendance of their children) which should preserve declining educational
investments of poor in a period of economic slowdown. Initially, a possible condition of
pre-school attendance was discussed but unfortunately the network of public pre-school
institutions is very limited, and hence such policy was deserted.

1.3.

Macroeconomic policies

Despite unfavourable initial conditions, Macedonia implemented important reforms in key

segments of the economic system. The first-generation reforms, although implemented
with variable success, have been completed. In this respect, reforms pertaining to price
stability, price liberalisation, foreign trade liberalisation, and privatization have been
accomplished successfully, as is also confirmed by the EBRD transition indicators.
The Macedonian economy has enjoyed over ten years of price stability with an average
annual inflation rate of 2.7% in the last decade. This has been achieved by broadly
prudent fiscal policy during the transition period, with an important exception of 2001 and
2002, because of the surge in security-crisis-related expenditure. The authorities
implemented several IMF-supported adjustment programmes that targeted moderate
general government budget deficits between 0.5 and 1.5% of GDP. In addition, strongerthan-anticipated economic growth as well as weak capacity to administer capital
expenditure have occasionally resulted in surplus on the fiscal accounts. Low
government borrowing requirements have also led to a substantial reduction in public
debt levels, with the gross central government debt approaching 21 percent of GDP by
1

The first package was oriented towards companies with liquidity problems (through a tax amnesty), as well
as the successful firms who were supported through reduced import tariffs and custom duties, reduced
social contributions rates and changed profit income tax system in which profit tax is now paid only on
redistributed profit. The estimated cost of the package was 330 million. The second announced stimulus
package was a large 8-year infrastructure investment plan that would cost 8 billion. The third package
consisted of: revised budget with downwards adjusted revenues and expenditures (based on actual figures,
as well as the reduced GDP projection), credit support to companies through EIB credit line (which should
become operational in October, 2009) and other measures such as facilitation of external trade, etc.

43

the end of 2008. The size of the general government sector has not been excessive by
international standards, as measured either by the level of government expenditure or
the employment. The expenditures of the general government account for 34 percent of
GDP in the last five years, of which local governments absorb nearly 2.5% of GDP
(source: EBRD, 2009). In the future, as former Yugoslav Republic of Macedonia faces a
more stable environment, the authorities must devote greater attention to the role of
fiscal and monetary policy as mechanisms for creating the conditions for high and stable
growth rather than as instruments that are used primarily to offset random economic and
political shocks.
Over the last few years, the personal and corporate income taxes were reduced to a flat
tax rate of 10 percent (down from a progressive 15-18-24 percent personal income tax
and a 15 percent corporate income tax). A number of goods (medicines, agriculture
inputs, utility fees etc.) were moved from the normal 18 percent VAT rate to the
preferential 5 percent rate. Most recently, the authorities have initiated a major payroll
reform which also envisages a gradual reduction (by one third) of the social contributions
rates over the next 3 years. On the expenditure side, the authorities have considerably
increased spending on education, and allocated more funds for increased wages in the
public sector and pensions. At the same time, the authorities have been implementing a
very successful programme to improve revenue administration including establishment
of large-tax payers office, introduction of e-filing, etc.
Monetary policy has been largely constrained by the peg of the MKD Denar to the Euro.
The former Yugoslav Republic of Macedonia has been traditionally running trade deficits
of around 20% of GDP, which indicate serious structural competitiveness problems.
While the external sustainability remains a serious concern, the problem has been in
large part mitigated by sizeable inflows of private transfers (workers' remittances). Strong
growth in private transfers in 2006 and 2007 enabled the Central Bank to considerably
loosen monetary policy resulting in interest rates on CB bills of 4.7 percent in late-2007.
However, in response to the growing inflationary pressures as a result of the surge in
world food and energy prices in late 2007, the Central Bank started tightening the
monetary policy by increasing the interest rate on CB bills and introducing restrictions on
excessive bank lending to households. The strong deterioration of the external accounts
over the last 12 months prevents the implementation of larger fiscal stimulus packages,
despite the substantially reduced risk of inflationary pressures.
Considerable efforts have been devoted to improve the business environment over the
last few years. Business entry has been simplified through the introduction of a one-stop
shop and the opening of markets to competition (amendments to the banking law,
customs law, telecommunications law, etc.). An intensive reform agenda is being
implemented in the judiciary with legislation and procedures being completely
overhauled, and the infrastructure and capacities of courts and judges being upgraded.
Also, the authorities initiated the regulatory guillotine which has eliminated a number of
administrative obstacles to doing business and announced regulatory impact
assessment of proposed new legislation. Trading across borders was simplified through
the introduction of guarantees, simplified procedures and risk-based approach to
inspections. At the same time, the market exit (bankruptcy) procedures were also
speeded with the introduction of a new law. As a result, the country considerably
improved its ranking on the World Banks Doing Business indicator (including being the
top 3 reformer in DB-2009) and reached the 32nd position on the list of 183 countries. It
is not surprising therefore that the real GDP growth rates in the first two quarters of 2009

44

were -0.9% and -1.4%, respectively, representing a moderate reduction compared to the
experience of the European transition economies.

1.4.

Structural Reforms by state-owned enterprises

Similarly to other transition economies, state-enterprise restructuring in the former

Yugoslav Republic of Macedonia resulted in job destruction that affected unskilled bluecollar workers disproportionately more than skilled workers, though this happened in
rather late stages of transition (ETF, 2007a). In 2002 there were still more blue-collar
workers than white-collar workers in employment, and also the data from the Labour
force survey (LFS) indicated that the share of employment in manufacturing in the
country in 2002 was 28%, almost identical to the 29% figure reported in 1996. Thus,
despite the early completion of the privatisation process in the country, almost no
sectoral restructuring had taken place prior to 2002. However, the number of blue-collar
workers fell rapidly over the following two years and by 2004 there were fewer bluecollar workers than white-collar workers among employed.
Figure 8 - Employment by occupational category in FYR Macedonia, 2002 - 2004

Source: ILO Labourstat Database; ISCO-88 categories (adapted from ETF 2007-a).

Currently, in addition to the general government institutions, entities owned by the

Government do operate in other sectors as well. A number of entities at the municipal
level perform functions related to public utilities (water supply and sewage, waste
disposal). In addition, there are a number of State-level public entities which provide
goods and services mostly concentrated in agriculture and fisheries (Makedonski
Sumi), energy (ELEM - generation and MEPSO transmission of electrical energy,
GA-MA natural gas distributor), transport and infrastructure (Macedonian Railways,
Macedonian Airports, Makedonija Pat) etc. Finally, the government sector also
encompasses minority stakes in number of enterprises and financial sector institutions.
In sum, a massive sell-off of shares in 2006 substantially reduced the state-owned
portfolio, although various ownership stakes in other business entities are not negligible.

45

Most recently, the authorities transferred the ownership and operating rights over the two
international airports (Skopje and Ohrid) through a concession to Turkish TAV. In return
for operating the airports, TAV has to upgrade the two existing airports and build a third
airport in Stip. Unfortunately, the Turkish company have not yet started any work which
is against the contract with the Government because of the constrained access to credit.
The Government did not cease the contract but instead it prolonged it.
The role of Makedonija Pat, the public enterprise with a monopoly over road
maintenance and frequently criticized for inefficient operations will need to change very
soon. Namely, a new Law on Roads was adopted recently in order to increase
competition in the maintenance of public roads through allowing private companies to
operate in this area. Also, the railways sector is being reformed, largely along the lines of
the acquis for this area. So far, the split between infrastructure and transport has taken
place and efforts to improve the operations of the entities have been undertaken (labour
shedding, investments etc.). Privatization plans for the transport entity have been largely
put on hold for the time being, though private sector involvement will be allowed.
The oversight and monitoring over the operations of the state-owned enterprises
remains an issue of serious concern for the employment policy. The state encompasses
partial or complete ownership in 70 business entities with an estimated state-owned
capital in the enterprise sector at 11.1% of GDP in 2008. Furthermore, according to the
ILO data, the state-owned enterprises helped maintain up to 29,200 jobs, which is 22.8%
of the total public sector employment. A longer-term coherent strategy towards
rationalising the public business sector is needed in order to curtail the present practice
of soft budget constraints, to restrain sizeable quasi-fiscal deficits, to prevent further
asset stripping and to develop effective solutions for tackling the problem of overemployment.

2. LABOUR MARKET SITUATION, DEVELOPMENTS AND CHALLENGES

2.1.

Population, labour force, employment and unemployment

2.1.1. Population and labour force participation

The former Yugoslav Republic of Macedonia has a population of 2,022,547 inhabitants
(State Statistical Office, 2004) with 64.18% Macedonians, 25.17% Albanians, 3.85%
Turks, 2.66% Roma, 1.78% Serbs, 0.84% Bosnians, 0.48% Vlachos and 1.04% of other
nationalities. Given the demographic forecasts by the UN Population Division
(www.unpopulation.org), the total number of population could fall to 1,884,000 in 2050,
while the number of working-age population (15-64) is projected to fall from 69.3% in
2005 to 60.0% in 2050.
The socio-economic tensions associated with the relatively high and persistent
unemployment rate in the country have been mitigated by several adjustment
mechanisms, most notably, the large net international migration outflows and the
sizeable grey economy.
Figure 9 - Labour market developments during the transition in the former Yugoslav

46

Republic of Macedonia, 1996-2008

70
60
50
40
30
20
2008

2007

2006

2005

Employment rate

2004

2003

2002

2001

2000

1999

1998

1997

1996

Participation rate

Unemployment rate

Source: State Statistical Office, LFS, various years.

The falling employment in the first years of Macedonian transition was mainly due to the
lower participation rather than by higher unemployment, similar to the Hungarian
experience. In contrast, the adjustment in the first years of transition in Poland and
Bulgaria was primarily achieved through unemployment. After 1995, a rise in the
unemployment absorbed a greater proportion of the employment losses in Macedonia.

Box 1. Definitions and Labour Market Indicators

The LFS survey was conducted for the first time in 1996 and was with annual frequency, whereas
from 2004 it is conducted quarterly. In this study we report the most recent annual data which is
2008, on comprehensive basis. In addition, for the basic indicators we report data for 2009q1 that
are published in a quarterly LFS report. (Note: Quarterly LFS reports contain only basic indicators,
and not detailed information).
Working age population is composed of individuals in the age group 15 to 64 years old, which is
consistent with the Eurostat definition. However, in Macedonian LFS, most of the indicators are
reported both according to this Eurostat definition and by the ILO definition (age group 15-80). In
this report, most of the presented data and indicators are following the Eurostat definition, though
for some indicators there is no possibility to apply it. Hence, throughout the text we will note when
using the ILO definition.
Employed are those individuals who satisfy any of the following conditions: (1) the person did any
work for at least one hour during the previous week (with a remuneration that could have been
monetary or in-kind); (2) the person was temporarily absent from work because of holidays,
illness, paid absence for education or training, maternity leave, strike, work dispute, seasonally
work, etc.
Unemployed are those individuals who meet all the following conditions: (1) the person was not
working the previous week; (2) the person was actively looking for a job during the previous 4
weeks. The search is considered active if the person has done at least one of the following
activities: registered in the Employment Service Agency, tried to start an activity as self-employed,
contacted private employment agencies, placed advertisements, answered advertisements,
contacted employer directly, checked with relatives or friends, and participated in job
tests/interviews; (3) the person is available to start a new job in the next two weeks if one were
offered to his/her.
Indicator
Formula
Definition
Participation rate (%)
(LF=U+E))/WAP
Share of working age population that is active
in the labour market
Employment rate (%)
E/WAP
Share of employed in the working age
population
47
Unemployment rate (%)
U/LF
Share of unemployed in the labour force
Inactivity rate (%)
(WAP-LF)/WAP
Share of working age population not in the
labour market

Labour force participation rate in the former Yugoslav Republic Macedonia remains low
by international standards (Table 1). The relatively low participation rate in the country,
63.5% for population aged 15-64 in 2008, reflects: (i) the very low number of employed
which is only partially compensated by a high incidence of unemployment, and (ii) the
effect of sizeable net inflows of remittances (private transfers) from abroad. The
participation rate in the former Yugoslav Republic of Macedonia was quite stable during
transition mainly reflecting high and increasing unemployment. While participation rates
in other transition economies declined during transition, at least in the first years of
transition, due to voluntary and semi-voluntary quits, forced withdrawals or discouraged
workers effect, there are no available data for the country for that period since the LFS
data only goes back to 1996. In the period 1996-2008, overall participation rate
increased by 2.9 percentage points.
Table 1 - Labour force participation rates in selected non-EU and EU economies,
2000-2008
2000
2003
2004
2005
2006
2007
68.6
68.9
69.3
69.8
70.3
70.5
69.2
70.2
70.6
71.3
71.8
72.1
60.7
60.9
61.8
62.1
64.5
66.3
...
62.4
63.7
63.3
62.8
63.4

54.5
52.2
54.1
55.1
55.7
68.4
62.2
63.0
62.3
63.6
63.0
Source: Eurostat homepage and LFS data (State Statistical Office).

EU-27
EU-15
Bulgaria
Croatia
FYR Macedonia
Romania

2008
70.9
72.5
67.8
63.1
56.3
62.9

Female participation in the former Yugoslav Republic of Macedonia is relatively low due
to the traditional role of women in the society, particularly among females from ethnic
minorities such as Albanians and Roma. According to the LFS 2000 (the latest LFS that
published data by ethnicity), the participation rates of females from Albanian and Roma
speaking language were 11% and 36%, respectively, compared to 51% for Macedonian
speaking females. In addition, young, rural and unskilled females are mainly inactive.
Angel-Urdinola and Macias (2008) and ETF (2008) find that the most important reason
for female inactivity is household responsibilities. In particular, 55% of inactive females
are housewives, though the effect of this factor on inactivity is magnified at the lower
levels of education.
In 2008, female participation rate equalled 50.2%, that is 26.4 p.p. lower than that of
male's, which indicates a relatively high gender gap. In the period 1996-2008, both
males' and females' participation rates increased by respective 3.2 p.p. (4.3%) and 2.4
p.p. (4.9%). Section 2.2.5 provides detailed analysis of gender participation gap.
Young workers (aged 15-24) experienced a large fall in participation 17.1% (7.4 p.p.) in
Macedonia during the period 1996-2008, reaching 35.9% in 2008. In particular, many
young people decided to extend their studies due to: (i) the increased returns to
education in the course of transition (see Mojsoska, 2005) and (ii) the mounting difficulty
of school-to-work transition. In addition to insufficient job creation, employers in
Macedonia became unwilling to bear the costs of on-the-job training of inexperienced
youth given the existence of experienced unemployed applicants. Nesporova (2002)
explains that educational reforms in CEECs were often lagging behind changing labour
48

demand, so that the entrants often lacked the new competences required in the labour
market.
Participation rates among prime-age group (25-54) increased slightly by 3.1% (2.3 p.p.)
in the period 1996-2008, as a net effect of discouraged workers' effect and reduced
living standard pushing more entrants into the labour market. In 2008, the gap in
participation between genders in this group was significant 27.9 p.p., with prime age
female adults having much lower participation rate (63.9%) than men of the same age
(91.8%). Despite the widely offered early retirement schemes, participation rates for the
55-64 age group increased significantly during analysed period 1996-2008 (by 64.1% or
17.3 p.p.). The rise in participation rate for this age group was translated both into higher
unemployment and employment. The rising participation of older workers suggests that
early retirement had only a temporary effect on the intended reduction in labour supply,
since the increasing activity of workers that retired under that scheme cannot easily be
explained by a reduction in real pensions and/or by deterioration in the living standards
of Macedonian families. There is high chance that retired workers from this age group,
while still being able to work and productive, continued to work at least occasionally or
informally.
Regarding the rural/urban dimension, persons with family responsibilities (including
housewives) make up the largest group of inactive persons in rural areas, while in the
urban areas the largest group consists of pensioners. Angel-Urdinola and Macias (2008)
also indicate that there is a big "reservoir" of active population among the discouraged
workers.
In the period 1996-2008, the largest fall in participation experienced workers with lowest
educational level: participation rates for individuals (aged 15-80) with primary education
or less declined by 6.3% (2.5 p.p.), for individuals with secondary education 2.7% (2.0
p.p.) and for individuals with tertiary education 2.8% (2.3 p.p.).

2.1.2. Employment
A total of 609,015 persons were employed in Macedonia in 2008 with an employment
rate of 41.9% among population aged 15-64. As Figure 8 shows, employment rate has
been rather stagnant during transition, with a standard deviation of 1.65 units. In the
period 1996-2008, 71,424 new jobs were created that is 12% of total employment in
2008. Figure 10 shows year-to-year net employment growth.
Figure 10 - Net employment growth in FYR Macedonia, 1996-2008

49

60,000

10.0

50,000
40,000

5.0

30,000
20,000
10,000

0.0

0
-10,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-20,000

-5.0

-30,000
-40,000

-10.0
NEG, left axis

NEG as % of total employment, righ

Source: Authors' calculations based on LFS, various years.

In the period 1996-2008, the overall employment rate increased by 2.1% (0.8 p.p.), with
large gender differences: the employment rate of males decreased by 2.1% (1.1 p.p.)
and the females' employment rate increased by 8.7% (2.6 p.p.). The latter is mainly due
to increased number of unpaid family workers among women and/or it might reflect
changing economic structure with job creation taking place predominantly in traditional
female sectors, for example textile industry. The employment gender gap in the country
is therefore decreasing over time and is comparable to the average gap in the EU-27
and in candidate countries though still markedly above their levels (4.1 and 4.9. p.p.
above the gap in EU-27 and NMS-10, respectively). The difference in employment rates
between genders decreases with education so that higher-educated females had only
slightly lower employment rates than males in 2008 (62.2% and 64.4% respectively, data
based on 15+ age group).
Overall employment rates increase with education level, ranging from 26.2% for persons
with completed primary education or less, to 49.7% for individuals with secondary
education to a high of 70.1% for tertiary educated individuals, in 2008. Indeed, AngelUrdinola and Macias (2008) find that education is the main determinant explaining the
transition from unemployment into employment: those with secondary/university
education were 7/18% to transition from unemployment to employment. Similarly,
Mojsoska (2005) finds high returns to education in the country both in terms of
probability of being employed and wage rate, notwithstanding the issue of the relevance
of acquired education. This might occur because employers view higher educational
attainment of a worker as a signal for hers/his quality and productivity.
Young workers experience very low employment rate of 15.7% in 2008 (37.4% of the
national average), though this rate increased somewhat compared to 1996 (19.1% or 2.5
p.p. growth). The employment rate of the prime-age working group equalled 53.9% in
2008, and that of older workers 31.7%. Similar to the declining participation rate, the
very low employment rate among youth in Macedonia, can be attributed to the delayed
entry into employment due to difficulties in finding the first job.
Another important aspect is the incidence of self-employment due to its potential
effectiveness in reducing unemployment in a low job-creation environment, such as the
Macedonian labour market. The share of self-employment in total employment of 12.9%

50

in 2008 is higher than that in Estonia, Slovenia and Bulgaria but much below the share in
Croatia, Poland and Romania (http://epp.eurostat.cec.eu.int). Moreover, the rise in the
share of employers and self-employment in total employment can be considered as a
positive structural change during transition, if these new jobs are highly productive.
However, analyses of self-employment by economic sectors, reveals that it is mainly
disguised wage-employment rather than entrepreneurship with high-productivity activity.
Moreover, during downturns, these low-productivity self-employment or disguised wage
employment jobs are most likely to be destructed, so that declining GDP and rising
productivity is observed simultaneously (World Bank, 2007).
The need for employers to smoothly adjust their production and costs to changing
demand during transition produced new and diverse types of working contracts, mainly
flexible contracts such as fixed- and short-term contracts, temporary agency work, parttime employment, multiple-job holdings and 'civil law' (freelance) contracts (Cazes and
Nesporova, 2003). As in other CEECs, civil law contracts in Macedonia are regulated
under the national Law of Obligations, hence payments (i.e. wages) are subject only to
personal income tax. In essence, they are not working contracts. While the use of such
contracts increased during transition in Macedonia, there is no available data to confirm
this trend. Nevertheless, they were increasingly used from 2000 onwards even within the
public administration, because of limited opportunity to employ workers with regular
working contracts (legislative ban on public administration staff increase).2
A net increase in part-time jobs itself generates additional employment opportunities for
workers, predominantly young and female. In the former Yugoslav Republic of
Macedonia, 5.8% of workers in 2008 were working under such arrangement, which is in
the middle of the shares of part-time employment found in other transition economies,
though low by EU-27 standards. Till mid 2008 there was a regulatory barrier that made
part-time workers relatively expensive. In particular, there is a minimum reference wage
for payment of social contributions now set at 50% of the average wage in the economy
(65% until January 2008). However, for health insurance purposes, this minimum floor
was based on full-time employment, i.e. regular 40-hours working week, irrespective of
actual workers working hours. From 2009, the legislation was amended and now health
insurance is calculated on per hour basis, as the other two categories of social
contributions. Moreover, pressured by high and persistent unemployment, the new
Government that came into power in 2006, implemented deeper reforms in the social
security system, explained in more detail in section 3.2.2.
Whereas at the beginning of transition, part-time employment was more usual for males
than females indicating that it mainly served as a second job, in 2008 part-time
arrangements were more popular among women. In particular, 7.6% of total female
employment in 2008 was part-time employment, compared to 4.7% of male employment.
Higher proportion of females with part-time contracts might either be a result of their
choice where as a second breadwinner in a family they can afford to work less or might
indicate poor job opportunities for females. About 8.8% of youth worked under part-time
arrangement in 2008.

2
Total payment and number of persons hired under civil-law contracts in public administration cannot be
detected since they are part of a much broader category in the budget called goods and services. From
2010 onwards, there will be a separate category for freelance contracts in the budget classification.

51

2.1.3. Unemployment
Unemployment in the former Yugoslav Republic of Macedonia was already high at the
onset of the transition, estimated at 20%, but further increased during transition, a trend
that was reversed in 2006. The rise in unemployment was due to employment loses as
well as the modest rise in participation rate. In 2008, the unemployment rate of
population aged 15-64 equalled 34.0%.
Registered unemployment in the country is generally higher than the LFS measure of
unemployment partly because some inactive persons and informal economy workers
have an incentive to register as unemployed to gain entitlement to free health care. The
latter category of unemployed does not have other means of entitlement such as an
employed spouse, employed parents, etc. Since registered unemployment in general
depends on the incentives shaped by the benefit system, LFS is more appropriate and
internationally comparable measure of unemployment, hence the latter is in the focus of
this report.
The rise of unemployment during transition in the former Yugoslav Republic of
Macedonia suggests that the emergence and development of the new private sector was
insufficient to absorb the decrease in employment caused by the restructuring of stateowned companies, notwithstanding the effect or pressure of rising working-age
population (Zalduendo, 2003). Even the public sector reforms, inter alia, aiming to
downsize the government sector employees have stalled due to the lack of dynamic and
vibrant private sector.
Table 2 shows unemployment rates by individual characteristics in 1996 and 2008.
Whereas female participation and employment rates are much lower than those of
males, unemployment rates are similar, with a small gender gap of 0.7 p.p. This may
reflect the relatively high willingness of women to take up low-paid, secure public sector
jobs, jobs in unprofitable firms or in newly created small private firms (Munich et al.,
2004), since by tradition, they are second-income family earners.
Table 2 - Unemployment rates by individual characteristics, 1996 and 2008

National average
Gender
Men
Women
Age
15-24
25-54
55-64
Duration1
0-11 months
1-4 years
4+ years
Education
Less than primary

Share of all the

1996
2008
100
100

Unemployment rate
1996
2008
32.2
34.0

55.5
44.5

60.6
39.4

29.4
36.5

33.7
34.4

35.2
62.1
2.7

21.2
70.1
8.7

70.9
28.6
13.4

56.4
31.0
28.5

19.3
36.2
44.5

15.1
17.8
67.1

11.5

6.0

33.6

38.2

52

Primary
36.5
31.5
40.6
3 years secondary
15.3
13.4
34.0
4 years secondary
29.7
39.4
28.9
2
Tertiary
7.0
9.7
15.2
1) Data for working age population 15-80.
2) ISCED 4-6.
Source: Author's calculations based on LFS for different years

41.8
35.6
32.3
21.4

As in other CEECs, unemployment rates for both genders are highest for the young
labour force aged 15-24: unemployment rates decrease gradually with the age.
Table 3 - Unemployment rates by categories in selected CEECs (15-64 years of age),
2008
Country
EU-27
Bulgaria
Czech Republic
Hungary
Poland
Slovakia
Slovenia
Romania
NMS-103 (2006)
FYR Macedonia

Youth
(15-24)
15.5
12.7
9.9
19.9
17.3
19.0
10.4
18.6
24.3
56.4

Women

Unskilled1

7.5
5.8
5.7
8.1
8.0
11.0
4.9
5.0
11.9
34.4

11.6
14.9
19.4
18.9
12.8
39.6
6.6
8.6
21.5
42.0

National
average
7.1
5.7
4.4
7.9
7.2
9.5
4.5
6.1
11.0
34.0

LTU2 as %
of total Un.
37.0
51.7
49.2
46.5
33.5
69.6
42.2
41.3
n.a.
84.9

Notes: 1) ISCED (International Standard Classification of Education) 0-2.

2) LTU is unemployment 1 year and longer.
3) NMS-10 data are from year 2006.
Source: Authors' calculations; http://epp.eurostat.cec.eu.int; LFS data for the former Yugoslav
Republic of Macedonia.

In line with the international experience, young workers are more likely to be
unemployed: their unemployment rate was 1.7 times higher than the national average in
2008 which is lower proportion than in other CEECs, but at a much higher level (see
Table 3). Between 1996 and 2008, the youth unemployment declined by 18.9% (13.2
p.p.) whereas unemployment rate of the prime age workers (25-54) increased by 21.1%
(5.4 p.p.). Though older workers (55-64) have relatively low unemployment rate (28.5%),
it rose threefold in the analysed period. This may point to lower returns to experience
during mid-transition in terms of finding and/or retaining job as firms begin to favour
younger workers with higher education that is more compatible with the new production
and information technologies. Rising unemployment of older workers is also due to their
increased participation in the labour market after the period of generous early retirement
scheme.
Another specific feature of the labour market in the country is the high incidence of longterm unemployment (LTU), or unemployment for more than a year. Data clearly illustrate
that LTU is a serious problem stemming from the Macedonian labour market. During the
entire transition period, LTU was above 80% (84.9% in 2008) of total unemployment
which is well over the average level in EU-27 (37.0% in 2008) and higher than all other
CEECs (in the range from 33.5% in Poland to 69.9 in Slovakia in 2008). This indicates
the stagnant nature of the Macedonian labour market where (virtually all) unemployed
53

face difficulty in finding a job. In addition, the incidence of first-time jobseekers among
workers in the age group between 35 and 54 is nearly 30% meaning that even prime
age workers have difficulty in finding job and might have never held a job.
Unemployment in all transition economies hits disproportionately the unskilled, loweducated workers (Commander and Kollo, 2004). In other words, the probability of
unemployment incidence declines with the educational level. Similarly, Table 3 shows
that in the former Yugoslav Republic of Macedonia persons with only primary education
have higher probability of being unemployed than those with secondary education and
especially higher unemployment propensity compared to those with tertiary attainment.
Roma are most affected by unemployment3 and their unemployment rate in 2002 was
more than twice as high as the national average of 38.1%. Unemployment rates for
Albanians and Turks were also very high equalling 61.2% and 58.2%, respectively.
Among regions, highest unemployment rates were found in Polog region, East and
North-East region. Pelagonia, Skopje and South-East region (out of eight NUTS-3
regions) had lower unemployment rates than the average in the country.
Mojsoska (2005) explains several possible reasons for the high and persistent
unemployment in the former Yugoslav Republic of Macedonia, namely: (i) specific
regional economic and political factors influencing the countrys transition; (ii)
privatization method based on substandard Managers-Employees-Buy-Outs; (iii) labour
market flows dominated by low rates of job creation; (iv) high non-wage labour costs and
diversion to informal economy and (v) demographic pressures from high pool of potential
labour market entrants over the next years.
It should be noted though, that the relatively high informal economy in the country (see
section 2.2.3) might cause measurement problems in the labour market, in particular
understatement employment and/or overstatement of unemployment.

2.2.

Quality and productivity at work

2.2.1. Wages and productivity

From 2000 onwards, real wage growth generally followed the productivity growth, though
three sub-periods could be identified in that respect. In the period from 2000 to 2008, the
average real gross wage (i.e. nominal wage adjusted with GDP deflator) increased by
5.8%, while GDP per worker increased by 11.9%, indicating an improvement of real unit
labour costs (Figure 11). It should be noted however that this outcome is largely
influenced by the collapse in output associated with the 2001 crisis (4.5% real GDP
decline and 12.4% drop of productivity in 2001) and the sluggish recovery in 2002.
Excluding these events, real unit costs have improved even more: in the period from
2002 to 2008 average real gross wage in firms and institutions increased by 8.6%, while
GDP per worker increased by 18.6%. Most of the gains were achieved in the period from
3

Regarding ethnical and regional labour market characteristics, there are no available data from the LFS.
Data can be obtained from the 2002 Census of Population which, regarding the economic activity of the
population, used LFS definitions. This is the source of data presented in this paragraph.

54

2002 to 2005 when GDP per worker grew by 14.7% or at the annualized rate of around
4.7%. In the more recent years from 2005 to 2008 productivity growth slowed down and
grew by only 3.4% over the period, or at the annualized rate of 1.1%, mainly because
GDP growth was accompanied by an employment growth.
Figure 11 - Real gross wage, labour productivity and real unit costs in the former
Yugoslav Republic of Macedonia, 2000-2008 (index 100=2000)

Source: Authors' calculations based on State Statistical Office data

2.2.1.1. Wages

Net and gross wage grew at a similar pace during most of this period, with the exception
of 2007 and 2008 when the introduction of reduced and flat personal income tax4
resulted in a slower pace of growth of average gross wage. During the period 20062008, the average real net wage increased by 3.2%, compared to the reduction in the
average real gross wage of 1.3%. The payroll reforms introduced at the beginning of
2009 (expanding the definition of wage and harmonizing and reducing the contribution
rates) have widened further the difference between the average net and gross wage in
the economy. The relatively modest real wage growth in the period 2002 to 2008 was
probably one of contributing factors to employment growth, as reflected in the 8.5%
increase of registered LFS employment during this period (5.5% as measured using
National Accounts employment statistics - latest available data is for 2007).

Figure 12 - Real wage growth and average wage level in the former Yugoslav Republic
of Macedonia, 2002-2008

Namely, in 2007, the personal income tax rate was reduced to 12% replacing a progressive personal
income tax rate structure (15%, 18% and 24%). The tax rate was further reduced at the start of 2008 to
10%.

55

Source: Authors' calculations based on State Statistical Office data.

Annualized nominal (gross) wage growth in firms and institution in the period 2002-2008
was lower in the primary sector (3.4%) and somewhat higher in the broad industry
(4.8%) and service sectors (4.7%). Nominal wage growth was more pronounced in the
construction (5.2%) and utilities (5.5%) sectors, reflecting the economic recovery and
privatization of the state electricity company, but it was relatively moderate in transport
and telecommunications (4.6%), wholesale and retail trade (4.6%), manufacturing
(3.6%) and other market sectors.

Table 4 - Nominal wage rates by sectors in the former Yugoslav Republic of Macedonia,
2002-2008 (in %)
Sectors

Nominal gross wages

Nominal net wages

56

2008 :
2008 :
2002 average annualized 2002 average annualized
change growth
rate
change growth
rate
Total
Agriculture
Industry
Services

37.9
22.1
32.2
31.6

5.5
3.8
4.8
4.7

5.5
3.4
4.8
4.7

42.7
20.1
40.2
45.7

6.1
3.5
5.8
6.6

6.1
3.1
5.8
6.5

Agriculture
Fisheries
Mining
Manufacturing
Utilities
Construction
Trade
Hotels and Restaurants
Transport and Communication
Financial Intermediation
Real Estate, Renting and
Business Activities
Public Administration
Education
Health and Social Works
Other Services

20.8
23.6
32.2
23.3
35.3
37.5
31.3
40.2
30.7
30.3

3.3
5.8
4.8
3.6
5.4
5.5
4.7
5.9
4.6
4.5

3.2
3.6
4.8
3.6
5.2
5.5
4.6
5.8
4.6
4.5

26.5
19.0
39.0
26.8
42.3
42.7
37.5
45.3
36.8
37.6

4.1
5.0
5.7
4.1
6.2
6.2
5.5
6.5
5.4
5.5

4.0
2.9
5.6
4.0
6.1
6.1
5.4
6.4
5.4
5.5

11.2
65.5
35.6
31.5
16.3

1.9
8.8
5.3
4.7
2.6

1.8
8.8
5.2
4.7
2.5

17.2
67.0
41.8
37.7
22.6

2.8
9.0
6.1
5.6
3.5

2.7
8.9
6.0
5.5
3.4

Source: Authors' calculations based on State Statistical Office data.

Contrary to the modest wage growth in the private sector in the period 2002-2008,
nominal wages in the public sector grew much stronger. The largest increase was in the
public administration, national defence and social security, 8.8% (annualized), followed
by 5.2% in education and 4.7% in health care and social welfare. This largely reflects the
decompression of civil servants salaries during 2003-2005, some ad hoc increases in
wages in education, as well as the implementation of the 10% across-the-board
increases in salaries of public sector employees in October 2007 and 2008.
The average wage in the service sector over the entire period remained significantly
above the national average and also the industry average (higher by 9 and 12
percentage points in 2008 alone). In addition to the traditionally higher wage levels
associated with the profitable sectors such as utilities, telecommunications and financial
intermediation, from 2005 onwards also the average wage in the public administration
sector has exceeded the national average by more than 20 percentage points, reflecting
the government policy for administrative increase of public sector salaries unlike the
private sector where wages are largely determined by productivity gains. The generally
higher level of education of government employees could be another explanation for
such outcome along with the proposition that the private sector is not yet sufficiently
developed and restructured to absorb high skilled labour (Lehman, 2009).

57

Regarding the wage differentiation by education level, existing LFS data do not provide
information on average wages by different education (or occupational) groups,
preventing comparative or trend analysis of relative wages. Descriptive statistics derived
from 2006 LFS data by Angel-Urdinola and Macias (2008) show that average net hourly
wage for full-time wage earners with higher and university education is 28% greater than
workers with primary education or less and 44% greater than wage rate for workers with
secondary 4 years education, especially relevant among women. Also, several studies
(Mojsoska, 2005; Angel-Urdinola and Macias, 2008; Lehman, 2009) confirm significant
returns to education in the former Yugoslav Republic of Macedonia in terms of
probability to find (or retain) a job5. These studies find that returns to higher levels of
education in the country vary from 25% to 44%, and in general are higher in the public
sector and for workers with university education. It has been noted however, that albeit
substantial, the returns to education in Macedonia compare low to frontrunners, like
Hungary and Poland where returns vary between 70% and 90% (Yemtsov et al. 2006).
In terms of the equality in earnings distribution, the majority (around 63%) of all paid
workers in 2007 LFS received a net wage within a range of one decile above/below the
median, while vast majority of them (85%) were paid a wage within two deciles around
the median, in overall indicating quite compressed, i.e. evenly spread distribution of
wages typical of peers in the early transition. In this respect the Macedonian labour
market contrasts transition countries such as Hungary and Poland with earnings
distributions more similar to developed labour markets of OECD economies, and
characterised by much higher inequality (even prior to the EU entry) due to wage
differentiation that rewards generously acquisition of skills.
In addition, LFS data demonstrate that about 18.5% of wage earners in Macedonia in
2007 received wage that was below two-thirds of median wage of all workers, which is
used as a measure of the incidence of low pay. From gender perspective, the low-pay is
more widespread amongst females, with almost 25% of female workers having low
wages relative to the median wage, while only 13.5% of males.
Nevertheless, the analysis of the wage distribution by occupation reveals certain degree
of differentiation for skills premium. In particular, almost 20% of all highly skilled nonmanual employees (managers, technicians and professionals) in the former Yugoslav
Republic of Macedonia in 2007 received wages above the national average, only 7.4%
of middle-skilled employees (clerks and service workers) and 5% of low skilled (machine
operators and other manual workers). Another argument that the countrys labour market
responds to relative skills scarcity and productivity comes from looking at the relative
wages by sectors, as workers in the primary sector and in manufacturing have
comparatively lower wages, while workers in the energy sector and in financial
intermediation have wages far above the national average.

Results are based on an OLS regression of Mincer-earnings function applied by Angel-Urdinola and
Macias (2008) using 2006 LFS data for the (sub)-sample of workers aged 25-64. Results are interpreted in
comparison to workers with primary education or less (the omitted category).

58

2.2.1.2. Productivity
Despite the significant productivity growth at annualized rate of around 2.9% from 2002
onwards, the country still lags behind the EU average. GDP per worker in the former
Yugoslav Republic of Macedonia in 2008 was 57.9% of the EU-27 level. However in
comparison to the year 2000 there is an improvement of nearly 10 percentage points
(48.2%). Convergence of productivity mainly came as a result of restructuring in some
sectors (iron and steel, mining and quarrying), increased competition in others (banking)
and regulatory reforms (labour markets, business environment etc.) resulting in stronger
export growth and investments.
Figure 13 - Productivity growth by sectors in FYR Macedonia, 2002-2008

Source: Authors calculations based on SSO data.

Productivity growth by economic sectors, as measured by the change in real value

added per worker over the period 2002-2008, was strong in the primary sector
(agriculture and fishing) with 5.5% per annum and in the industry (manufacturing,
mining, utilities and construction) with 4.3% per annum. Productivity in the service sector
grew only modestly (0.7%), along with considerable expansion of employment in this
sector, most probably ensuing from the pronounced productivity growth in industry.
Given the relatively steady employment in industry, productivity growth was mainly
driven by output expansion. In particular, growth in the construction sector was 5.1% per
annum reflecting growing domestic demand and the ability of Macedonian construction
companies to penetrate foreign markets. In addition, strong growth was achieved in
manufacturing (4.1% a year) as a result of buoyant world economy, new investments
and technology absorption and in the mining (19.7%) as a result of restarted operations
of iron ore mines.
Productivity growth in the service sector has ranged from moderate in the transport and
telecommunications sector (1.4%) and the trade sector (2.0%) to rather low growth in the
financial sector (0.9%) and even less in the public sector (0.2% per annum).
Nevertheless, financial intermediation, real estate and business activities and transport
and telecommunications traditionally remain the most productive segments of the

59

economy with GDP per worker in these sectors in 2008 exceeding the national average
by 255%, 47% and 37%, respectively.
The collapse in output per worker during 2000-2002 was not matched by a reduction in
wages which resulted in an increase in real unit labour costs during this period.
However, stronger productivity growth in the next few years reversed the deterioration.
In the more recent years, real wage growth was in line with productivity per worker
leaving real unit costs largely unchanged. From a sectoral perspective, during 20002008, real unit labour costs fell considerably in mining and quarrying (-55%),
manufacturing (-29%), hotels and restaurants (-24%), trade (-19%) and construction (14%). As opposed to this, real unit labour costs increased in real estate and business
activities (46%), public administration (41%) and electricity, gas and water supply (23%).

2.2.2. Flexible forms of employment

Given that temporary and part-time work are recognized as important factors for labour
market flexibility, this section examines the classic forms of flexible employment
relationships. In the pursuit of the strategy of flexicurity, the European policy makers
consider a high incidence of these forms of employment as desirable. Nevertheless, the
argument for employment growth and easier labour market adjustment ensuing from
flexibility which firms gain might come at the cost of deeper labour market segmentation
and growing minority of workers without access to steady and well paid jobs. Therefore,
the flexicurity model of EU implies a policy strategy that promotes, at the same time
and in a deliberate way, the flexibility of labour markets while trying to preserve security
of employment and income.
The labour market in the former Yugoslav Republic of Macedonia is characterised by a
relatively high share of employees with temporary contracts6 relative to other countries in
the region, as temporary employment remained rather low in almost all transition
countries (Cazes and Nesporova, 2006). Surprisingly, until 2005 the former Yugoslav
Republic of Macedonia combined extremely rigid legislation7 for these contracts with
high and increasing proportion of temporary employment. This contrasts even more with
the new EU member countries, most of which have low share of temporary employment
(ranging between 3-10%, with notable exception of Poland and Slovenia), despite the
relatively liberal legislation for the use and termination of temporary contracts (EPL subindex of 1.4 for NMS-10 in 2003). This paradox may be explained by weak enforcement
of the legislation in the country. Another possible explanation relates to the use of civillaw (freelance) contracts8 to substitute for working contracts. Although civil-law
6

Temporary employment includes workers on fixed-terms contracts, agency workers, seasonal workers, as
well as those in other forms of irregular employment (civil-law or freelance contracts), whereas temporary
employment legislation establishes the rules for fixed-term contracts, possibility for their renewal, maximum
duration and the functioning of the temporary work agencies.
7
The EPL index for temporary employment for Macedonia in 2003 was 5.0 against EU average of 2.1 (on a
scale from 1 to 6 for the most flexible and the most stringent legislation respectively). The index remained
high 4.4 even after the amendments of the Labour Law in 2003 that allowed for greater use of fixed-term
contracts, for a period of up to three years. With the most recent changes of the Labour Law in 2008 the
maximum duration has been extended to 5 years.
8
As in other CEECs, civil law (i.e. freelance) contracts in Macedonia are regulated under the national Law
on Obligations and Acts hence payments (i.e. wages) are subject only to personal income tax. They are of
limited duration and do not require payment of social security contributions by the employer. They were

60

contracts may add to the flexibility, they cannot be regarded as being in the spirit of
European labour policies, but rather a ploy of evading the payment of social security
contributions by employers.
According to the LFS data, the share of fixed-term contracts rose from 13.6% in 1998 to
17.7% in 2003, and further to 22.3% in 2004, the latest available data, compared to the
EU-27 average of 10.4% for the period 2001-2004. During the transition, fixed-term
contracts were initially most commonly used for men, with a change in 2001 when there
was larger growth observed for women. Considering age groups, such employment is
more frequent among young workers, where it increased from 9.4% of employees aged
15-24 in 2000 to 44.3% in 2003, possibly revealing their disadvantage in terms of the
quality of employment, i.e. wage, training and promotion opportunities.
The Labour Law from July 2005 (Official Gazette No. 62/2005) increased labour market
flexibility through reduction of restrictions on fixed-term employment and gave equal
statutory rights to temporary, seasonal and part-time employees as full-time employees.
Moreover, the amendments to the Labour Law in 2008 (Official Gazette No. 108/2008)
further extended the maximum duration of contracts up to 5 years and simplified the
administrative procedures. In 2006, the Government introduced agency work as an
additional source of flexibility in the labour market with the Law on Temporary Work
Agencies - TWAs (Official Gazette No. 49/2006). Among other objectives, the agency
work was intended to substitute the use of 'civil law' (freelance) contracts. Section 3.3
analyses in more detail temporary work agencies and agency workers.
Additional source of data on fixed-term working contracts (including seasonal contracts)
based on ESA evidence indicates that the share of these contracts increased
significantly in recent years among the newly signed employment contracts. In particular,
after initial decrease of their popularity to the lowest of 34.8% in 2002, they become
more widespread in recent years, with their share in total newly signed employment
contracts rising to 57.6 in 2008. In absolute terms, the number of newly established
fixed-term contracts in 2008 was nearly three times their number in 2000, while gender
wise they were used somewhat more for women (53.3%) than men (46.7%). Such trend
may point to increasing labour market segmentation. It would thus be important to
assess the average duration of these contracts (tendency to increase or decrease) and
the extent to which these fixed-term contracts have a chance to be transformed into
permanent ones.
Figure 14 - Open-ended and fixed-term contracts in the former Yugoslav Republic of
Macedonia, 2004-2008

widely used even within the public administration because of limited opportunity to employ workers with
regular working contracts.

61

100%

140000

90%

100000

s truc ture

70%
60%

80000

50%
60000

40%
30%

40000

20%

number of c ontrac ts

120000

80%

open-ended
contracts
fixed term
contracts
open-ended
contracts (right)
fixed term
contracts (right)

20000

10%
0%

0
2004

2005

2006

2007

2008

Source: ESA annual statistics on newly signed employment contracts.

Part-time employment in the former Yugoslav Republic of Macedonia is used to a much

lesser extent than in the EU. Historically, the share of part-time in total employment was
fairly stable in the years of transition prior to 2002, at around 7%, and then decreased to
5.7% in 2003. In 2008 part-time employment constituted 5.8% of total employment,
which is in the middle of the shares of part-time employment found in other transition
economies and quite low by EU-27 standards (about 18% in 2008). Whereas at the
beginning of transition, part-time employment was more usual for males than females
indicating that it mainly served as a second job, in 2008 the share of part-time
employment among women was greater. Higher incidence of part-time employment
among women is similar to the EU practice, albeit the gender gap in Macedonia is lower
than in the EU. The share of part-time employment among men in the country in 2008
stood fairly below the average level for EU-27 level (4.7% vs. 7.8%, respectively), but
the gap between the national and EU average level was much higher for females (7.6%
vs. 31%, respectively).
Regarding age groups, part-time working arrangements in the country are more
widespread among youth (11.7% of youth employment in 2003, reduced to 8.8% in
2008) than in the prime-age working population (2554), 5.0% in 2008. In overall, parttime contracts are used the most (9.0% in 2008) among older workers (aged 55+), who
are likely to combine their formal inactivity with part-time employment in order to
increase their living standard, having retired under early-retirement schemes used in the
privatization process or being eligible for unemployment benefit until retirement age.
The possibility for a part-time work is a key factor in raising female participation and
employment. In particular, the decreasing role of traditional family support during
transition, the recent extension of the statutory retirement age for females, the limited
access to child and elderly care, all rise the importance of part-time employment
opportunities for females are important factors in determining the choice and opportunity
of females to participate in the labour market and to work. However, as suggested by
Mojsoska (2008) the low level of real wages in the former Yugoslav Republic of
Macedonia, measured as a share of a typical consumer basket in the average wage
which equals 70-75%, may make workers in the country reluctant to search for or accept
part-time (and formal) job offers.
Until recently, the obstacles to the use of part-time work existed on the demand side as
well. In particular, the old system for calculating payroll taxes was based on a minimum

62

reference wage (acting as a substitute to non-existing statutory minimum wage) so that

even if a worker earns less than the reference wage, contributions are paid (by the
employer) on the level of the reference wage. The reference wage for the health
insurance was defined as per regular working week (40-hours week), and not per hour
worked, hence making part-time workers relatively more expensive. The Health
Insurance Law was amended in mid 2008, introducing the per-hour minimum base for
the health insurance.
When analysing flexible working arrangements it must be noted that for certain
segments of the population this is the only option to access the labour market. Indeed,
the World Bank (2007) found that about one third of part-time work in the country in 2005
was involuntary (36.1%), which is higher than in the new EU members (31.0%) and EU15 (17.1%). Of those employed part-time on voluntary basis only 7.1% (most probably,
females) held part-time jobs in order to combine family duties and work. Additionally,
about 2.8% of registered employed in 2008 searched for another job either due to
temporary character of the present job (in 90% of cases) or insufficient working hours (in
10% of cases).
From a policy perspective, the age and gender structure of part-time and fixed-term
employment may suggest youth and female discrimination in terms of constrained
access to permanent/full-time jobs, on-the-job training and promotion prospects. Another
related issue is "employment" through the 'civil law' contracts where mainly young labour
market entrants who stay in such arrangements for longer period of time are excluded
from any social security and from any employment rights.
As several important steps have been taken only recently in order to promote flexibility, it
will be necessary to monitor the impact of these policies on the labour market outcomes
and prevent further segmentation.

2.2.3 Informal sector

Measuring the size of the informal sector is a difficult task, bearing inherent complexity
as a result of the variety of economic activities, definitions and methods of estimation.
The informal sector of the economy in the former Yugoslav Republic of Macedonia is
undoubtedly large, but different estimates vary between 15-45% of GDP for the period
after 2000.
Estimates for the period 1990-1993 indicate that the former Yugoslav Republic of
Macedonia started the transition with already much higher informal economy relative to
its peers, i.e. initial 34.5% of the official GDP against informal economy in all other
CEECs in the range from 13.4% (Check Republic) to 26.3% (Bulgaria) (Schneider,
2002). According to more recent estimates by Schneider (2007) the share of the informal
economy in GDP in the country was standing at high 36.9% in 2004-2005, and slightly
increased from 34.1% in late nineties. Similarly, the World Bank (2003a) placed the size
of the informal economy in the country at 40-45% of GDP at the onset of the current
decade. At any different measure, informal economy in the country is considerably
above the level estimated for most EU-15 countries, where the shadow economy is in
the range of 1-6% except for Greece (over 20%) and Italy (16-17%). It is also much
higher than most of the NMS, where the informal economy is in the range of 13-19%

63

(e.g. Poland, Slovenia, Hungary). On the lower range of estimates, the SSO data on
GDP adjustment for informal sector in 2007 was 17.2%.
Studies analyzing the employment in the informal economy suggest that informal labour
market remains sizeable and quite active, thus providing a possible explanation for the
high and persistent unemployment in the country and the underestimated GDP. In
general, informal employment has been relatively stable at a level of almost one third of
the labour force. Schneider (2002) found that the share of the informal labour force was
35.1% of working-age population in 2000-2001, which exceeded by large the size in
other CEECs. World Bank (2007) analysis comes to a similar estimate of informal
employment 32.9%, while other studies (e.g. Jackman, 2007) find evidence for
widespread informal employment among officially unemployed individuals with estimates
in the range from one third to one half of the pool of unemployed. Very large incidence of
registered long-term unemployment (where 50% of the unemployed evidently had an
uninterrupted spell of unemployment of 4 years or more) combined with data showing
that the extreme poverty, mainly caused by long spells of actual unemployment, is not
widespread in the country, seems to confirm the high informal economy among the
formally unemployed.
Even though largely underestimating the size of the informal sector, the official statistical
data give useful indication as to which sectors maintain informal activities. Thus, in 2007
the largest informal activity volumes were observed in the wholesale and retail trade,
construction and manufacturing sectors, and related mainly to underreporting of
economic activities. Other services such as transportation, renting, hotels and
restaurants also showed high degree of informal economy relative to their officially
reported volumes.
In addition to low job creation, the large size of informal economy in the country also
indicates low availability of quality jobs. Informal employment is probably the single most
important source of non-decent work. Analyzing job quality indicators by different
employment statuses based on 2006 LFS data, Angel-Urdinola and Macias (2008) found
that wage earners were much less likely to be informally employed (13%) than
employers (27%) and self-employed workers (73%), as proxied by those not being
registered in the pension fund. The authors also find that formal workers are more likely
to hold permanent job and work full-time, to work shorter working hours and have lower
likelihood of being underemployed and of keeping two jobs.
Table 5 - Informal employment by age, firm ownership, sector and strata in 2006
% Informal employment
(wage earners not registered
in Pension Fund)
Age group
15-24
33.8%
25-34
18.0%
35-54
9.5%
55-64
4.7%
Ownership
Private
20.7%
Public
4.5%
Sector

64

Primary
Secondary
Tertiary
Strata
Rural
Urban
Total

21.5%
9.5%
13.8%
23.4%
8.4%
12.9%

Source: Angel-Urdinola and Macias (2008) and estimates based on 2006 LFS data. Sample
restricted to wage earners only.

Across different demographic groups, informal economy was more widespread among
the young, among ethnic minorities, in the private and in the primary sectors and in rural
areas. These informal jobs indicated lower standards of quality in several aspects. While
the majority of formal workers were engaged with a written contract in permanent and
full-time jobs, a significant number of informally employed (52%) did not have
employment contract and worked on temporary jobs (77%). Moreover, informal workers
were less likely to hold full-time jobs than formal ones (89% vs. 98%) and more likely to
be underemployed: about 10 percentage points more informal workers wished to work
more in 2006 compared to formally employed workers, especially relevant for the youth
(18%) and adults in prime age 24-54 (15%).
From a gender perspective, a World Bank study (2008) found that most of those working
without a written contract or in unregistered firms (mainly employees and self-employed)
are men in working prime age, between 25 and 55. In particular, data show that the
share of male workers in informal jobs was 64% against 60% share in formal jobs (see
Table 6). Moreover, there is a difference in the type of informal work performed by
genders with females being mainly informally involved as unpaid workers in agriculture,
whereas males as self-employed or employers in unregistered firms.
Informal job (excluding unpaid family work) seems to be the point of entry to employment
for persons who previously have been inactive or unemployed. Indeed, about 17% of
those who worked informally in registered or unregistered firms did not hold a job one
year ago, compared to 6% of unpaid family workers and 5% of formal sector employees.
According to the ILO and Council of Europe (2006), which characterise labour market in
the former Yugoslav Republic of Macedonia as deeply rooted two-tier market, the
present gap between the formal employment and irregular forms of labour should be
addressed by appropriate tax policy and legislative changes, in particular further reforms
of EPL, reduction of the tax burden and simplification of tax regimes, as well as better
law enforcement through increased efficiency of the labour courts and labour inspection.
Indeed, the Government has so far addressed some of the mentioned issues, for
instance it reformed the payroll taxes system to reduce the tax wedge and administrative
burden on firms (see section 3.2.2), has strengthened the labour inspection and has
further increased the flexibility in the labour market through legislative changes.
However, there is a limited progress in the implementation capacity.
Table 6 - Informal employment by gender and working hours in 2005

65

Informal sector
Unpaid family workers
Employees: without written
contract, or unregistered
Employers or self-employed
in unregistered firms
Formal sector

Male/female
share
Femal
Male
e
64
36
38
62

% of total
informal
Femal
Male
e
100
100
21
65

Average hours
worked 1
Male
-42.1

Female
-41.5

68

32

29

24

48.2

42.5

89
60

11
40

50
--

11
--

43.4
44

38.7
41.9

Source: Taken from World Bank 2007: Estimates based on LFS 2005.
1) Main job only.

2.2.4. Skill and educational structure of labour force

The share of highly skilled workers in total number of employed persons in the former
Yugoslav Republic of Macedonia is considerably lower in comparison to the EU. While
the share of highly skilled non-manual workers (including managers, professionals and
technicians) in total employment was 39.1% in the EU in 2008, in Macedonia it was
merely 26.8%. This is a comparable level with Croatia, Bulgaria and Romania, but
lagging much behind other transition economies in the NMS group (in the range from
33.0% for Poland to 40.8% for Czech Republic). According to the LFS data, the share of
the highly educated (advanced studies and university level) among the employed
increased only slightly over the past decade from 17.5% in 1997 to 18.3% in 2008,
although rather low. This can be explained by the current sectoral structure of
employment in the country with more than half of the employment being concentrated in
sectors such as agriculture, trade and manufacturing industry, vastly dominated by lowskill, manual jobs. The reverse causation is also valid, i.e. low average level of
educational attainment of population also affects the structure of production and
employment in the country.
There has been some progress in recent years with the share of employment in the
primary and secondary sectors decreasing from 61.0% in 2001 to 55.0% in 2008, mainly
due to shrinking agricultural employment, against more jobs being created in the service
sector (mainly personal, public, health and education services) demanding higher skills.
Similarly, the share of highly educated individuals in the working-age population is low.
In 2008, only 10.8% of those in the working-age had education attainment above the
secondary level, which is almost two times lower than the EU-27 average (20.0%) and
also quite lower than peers, such as Bulgaria (18.3%) or average of NMS-10 (14.5% in
2006). At the same time, the former Yugoslav Republic of Macedonia has significantly
higher share of low-educated persons in the population 15+ than the EU. A rather high
46.4% of population above 15 years of age in 2008 had primary education or less, in
comparison to around 34.4% in the EU-27 and 24.4% in the NMS-10 (2006 data). As
regards the medium-educated tier (3 and 4 years secondary), 42.9% of the countrys
working-age population belong to this category which is similar to the level in EU-27
(44.4%), however considerably lower than the peers from the NMS-10 group (61.1% in
2006).

66

Individuals with higher educational attainment in the former Yugoslav Republic of

Macedonia experience better labour market outcomes. The link between education and
favourable labour market position in the former Yugoslav Republic of Macedonia
appears to be stronger, probably due to the relative scarcity of higher educated workers
in the country. For instance, according to the LFS 2007 data, the activity rate of the
population aged 25-59 with tertiary education was 92.1%, with upper secondary
education 84.5%, and with lower than that 55.9%. The respective rates for the EU-27
were 91.1%, 83.4% and 69.4%. It is interesting that the activity rates for higher educated
layers of the population are slightly higher in the former Yugoslav Republic of Macedonia
than in the EU, while worryingly large number of low educated opts not to participate in
the labour market. The latter might result from a relatively high informal employment in
this segment of the labour market.
Similarly, education and practically marketable qualifications emerge as a major
determinant of employment in the country, especially as young individuals turn into
adulthood. While majority (74.7%) of highly educated adults (age 25-59) were employed
in 2007, merely one third (32.5%) of the same age population on the low-education end
could find employment, against EU-27 average levels of 87.8% and 62.8% respectively.
In line with Commander and Kollo's (2004) observation that unemployment in all
transition economies affects disproportionately the unskilled, low-educated workers, the
probability of unemployment incidence in the former Yugoslav Republic of Macedonia
declines with the educational level. In 2007, unemployment rate of individuals aged 2559 with tertiary education was 18.9%, with upper secondary education 31%, and with
lower than upper secondary, 41.8%. The respective rates for the EU-27 were 3.6%,
6.1% and 9.5%. Moreover, Angel-Urdinola and Macias (2008) find that education is an
important determinant of the duration of unemployment: individuals with tertiary
education were 20% less likely to be unemployed for a period longer than 4 years, as
compared to individuals who have attained at most primary education.
These authors also find a link between education of a worker and his/hers probability to
change labour market status, so that individuals with university/secondary education are
18%/7% more likely to find a job (i.e. move from unemployment into employment) in
comparison to individuals with primary education or below. Transition from
unemployment to inactivity, that is an inflow into discouraged workers pool, is 5 to 7%
higher among uneducated workers (primary education and less) relative to workers with
higher education levels.
The above analysis shows that in addition to the factors mentioned 2.1.3, low and
inappropriate skills and education of supplied labour seems to be an important source of
high unemployment in the former Yugoslav Republic of Macedonia. Due to the mismatch
between required and available qualification, employment growth is fed mainly by an
increase in labour supply, while the decline in the number of unemployed is significantly
less dynamic.
The comparison of educational attainment of the labour force and the unemployed
reveals an important mismatch in the skill composition of labour supply and labour
demand in the former Yugoslav Republic of Macedonia. The share of less educated
workers in the overall labour supply is much higher than their share in the labour
demand, so that there is excess supply of those workers (see Table 7). Hence, workers
with only primary education or less have very high unemployment rates (42.6%) and the
lowest employment rates (20.8%). In this respect, poor labour market outcomes of low
67

educated workers can be reduced by enhancing their labour market position, through
additional education and training. From a society perspective, increased share of higher
and adequately educated workers in the overall labour supply would reduce insufficient
supply of highly educated workers and might lead to higher growth rates.
Table 7 - Employment and unemployment by educational attainment in FYR Macedonia,
2007 and 2008
2007
Employed
15.5
4.4

Unemployed
7.4
2.1

2008
"Excess
supply"
-8.0
-2.3

Employed
14.2
4.0

Unemployed
7.8
2.0

University education
Higher education
4 years of secondary
education
42.1
39.3
-2.7
42.1
39.4
3 years of secondary
education
12.1
15.3
3.2
12.3
13.4
Primary and lower
secondary education
20.7
29.5
8.8
22.3
31.5
Incomplete primary
education
4.2
4.7
0.4
4.3
4.6
Without education
1.1
1.7
0.6
0.7
1.5
Source: Authors' calculations based on LFS, State Statistical Office.

"Excess
supply"
-6.5
-2.0

Unfortunately, Table 7 demonstrates an unfavourable change in 2008, in that the share

of workers with higher educational attainment and skills was reduced compared to 2007
both in relative (by 1.3 percentage points) and absolute terms (by 4,509 persons)
compared to the previous year. The job losses occur in the fourth quarter of 2008, and
are concentrated in the transport, construction and the insurance sector.
.

Another form of mismatch arises from occupational structure of labour supply and
demand, at a particular educational level. The analysis of the outflows from the register
of unemployed shows that such differences exist at both upper secondary and tertiary
level of education (ESA Annual Report, 2007). Certain occupational profiles, such as
graduates in social and administrative sciences (mainly economics and legal studies),
economic technicians, sales workers and those with only general secondary education
(4 year gymnasium) remain in unemployment longer than persons from other
occupations. Similarly, Angel-Urdinola and Macias (2008) find that individuals who were
laid-off from working as operators, technicians, and clerical workers face higher
probability of being in very long-term unemployment. On the other hand, anecdotal
evidence seems to suggest that graduates in information technology, pharmacy,
engineering, construction and other technical subjects in general find job sooner.
Important input in the analysis of the occupational and skills mismatch in the country is
provided by the Skills demand survey conducted by the ESA (see Box 2 for details on
objectives, sample size and limitations of this study).
Box 2. ESA Skills demand survey: Objectives, sample description and limitations
The Skills demand survey was first time implemented in 2006 as part of the CARDS project
Technical assistance for support of employment policy Phase III Component 2 (further capacity
building of ESA and its regional centers), and is since implemented annually. The survey collects
information on planned new hires within the next 6-12 months and labour supply shortages

68

-2.7
1.1
9.1
0.3
0.8

reported by employers in all 30 local ESA centres countrywide, distinguishing data by size of
firms, industry, occupational categories and specific skills of workers in demand. The survey uses
a cross-country, cross-industry sample consisting of 1,445 firms with more than 10 employees
distinguished by small, medium and large companies, out of which 1,445 firms participated in the
survey (i.e. 88.9% response rate). Interviewed firms are mainly chosen from the for-profit private
sector (public sector is not included), from 8 different industries and 8 different (NUTS-3) regions.
For example, surveyed companies in 2008 represented 4.5% of all firms in the country and 48.5%
of all employees.
Findings of the survey done in 2007 and 2008 were utilised in designing active labour market
programmes within the national Operational Plan for Active Employment Policies. In particular, as
part of the Operational Plan, a pilot project for training of registered unemployed was
implemented, based on the occupations/skills that were found to be in insufficient supply. Training
was organised in cooperation between ESA and the national VET Center, where the latter
prepared the course design and was in charge of the delivery. In addition, within the CARDS
project, local action plans for employment are now being prepared based on the results from the
ESA skills survey.
As regards the limitations of the ESA survey, it should be noted that the sample was not fully
representative. For instance, the sample was not changed between 2006 and 2007, while in the
meanwhile some firms became inactive, some were downsized to less than 10 employees or
some grew from less than 10 to more than 10 employees. The choice over minimum number of
employees might also be questionable, if smaller firms demand different skills (occupation) from
larger firms. In addition, employers that responded to this questionnaire are most probably the
ones that require some services from the ESA and the ones that need mostly low-skilled workers,
i.e. results might be biased (towards low-skilled workers).

According to the 2008 survey, manufacturing industry and trade were found to be the
sectors with the largest absorption capacity, while medium-sized enterprises the most
active employers. Hence, most new employments in the surveyed companies in the next
12 month period (Q-1 2008 to Q-1 2009) were expected in the medium-sized enterprises
(above 50% of expected new employment), mainly in the manufacturing industry (76%),
followed by trade (9%), and in other sectors in the range from 5.3% (in construction) to
1.0% (in the financial sector). Within the manufacturing, most new jobs are expected to
be created in the textile industry for all levels of education and for various occupational
categories (low, semi-qualified and qualified manual workers, operators, technicians,
etc.).
In terms of demanded skills, survey results show that employer value previous work
experience and certain skills and knowledge. For instance, more than 50% of planned
new jobs required experience, which is especially the case for university-level positions,
and less for jobs demanding primary education. Among the demanded skills, knowledge
of foreign languages (mainly English) and computer literacy were identified as very
important, along with skills irrelevant of experience such as: communication and
organisational skills, and team work. The general knowledge of the prospective workers,
which remains low even after completion of the formal education, was singled out by the
employers as insufficient for workers employability.
Table 8 - Expected new employments in the firms surveyed by ESA in the next 12
months, according to the education level

Industry

# of
firms

Expected
hires

N/A

Education level required

Secondary
Primary
Secondary
and
advanced

University

69

studies
Agriculture,
forestry
Manufacturing
Construction
Trade
Hotels and
restaurants
Transportation,
communications
Financial
intermediation
Real estate and
personal
services
Total

34

389

524

217

51

99

22

9,552

2,686

6,214

348

304

72

662

267

331

17

47

147

1,094

114

682

80

211

45

285

23

205

53

46

315

11

248

47

126

20

170

17

103

12

38

895

12,593

3,336

7,834

568

847

125

Source: ESA Skills demand survey (June, 2008).

According to the level of education, the most demanded in short-term were found to be
workers with secondary education (62% of all new jobs planned by surveyed firms),
followed by primary education (27%) whereas the demand for workers with university
education was much lower (7%) and advanced studies (4%). This finding is in line with
the structure of the economy and prevalence of low value-added industries, though, as
argued in Box 2, it can be result of bias. The short-term labour demand by level of
education and sector is presented in Table 8.
With respect to the inflow of fresh labour force, the positioning of new labour market
entrants is highly unfavourable, as a result of the large number of gymnasium students
and university graduates from social and administrative sciences, who face difficulties
finding job (as evident in the ESA records). In particular, data on graduated students
show that in recent years most of the high school graduates are gymnasium students
(around 35%), followed by technicians in economics, machines, electro-technicians,
health and medicine, etc. Similarly, university graduates are from the faculties in the field
of economics (around 15%), technical and technological sciences, education,
philosophy, languages, medicine, mathematics and natural sciences, etc.
Only 21% of surveyed firms declared they faced difficulties in finding adequate workers
(i.e. labour force deficit), mostly related to a lack of work experience of the candidates.
The largest deficit of labour as declared by employers in 2008 relates to workers with
secondary education (79% of cases), for jobs mainly in the textile industry. At the same
time ESA records show that there is a concentration of unemployed workers in the same
or closely related occupations. This might imply that the lack of previous experience,
additional skills and knowledge (for instance, some generic skills), as well as the
detachment from the labour market, make these individuals non-employable despite the
available job vacancies in their occupation. The above clearly shows that the labour
market mismatch is not just in terms of educational and occupational difference between

70

labour supply and demand, but also in terms of the quality of education and training and
additional skills possessed by workers.
Middle-sized and large companies stated labour deficit more often than small firms.
Among sectors, the largest deficit was reported in the manufacturing industry, less in
trade, construction and hotels and restaurants (Table 9). Nevertheless, the deficit
reported in 2008 (2,435 workers) was twice smaller than in the 2007 survey, indicating
that employers could fill in vacancies more easily than before, if data are accurate.
Table 9 - Labour deficit in firms surveyed by ESA
# of firms
Industry

% structure

Total

No deficit

Deficit

No

Yes

Agriculture and forestry

Manufacturing
Construction
Trade
Hotels and restaurants
Transportation and
communications
Financial intermediation

66
796
131
244
78

59
576
112
220
65

7
220
19
24
13

89.4
72.4
85.5
90.2
83.3

10.6
27.6
14.5
9.8
16.7

84

75

89.3

10.7

15

14

93.3

6.7

Real estate and personal services

31

26

83.9

16.1

1,445

1,147

298

79.4

20.6

Total

Source: ESA Skills demand survey (June, 2008).

Based on the ESA survey it may be concluded that the mismatch problem is driven by
specific factors at different educational levels. For instance, for the lowest educational
level (primary education) it is mainly an issue of low qualifications and lack of specific
skills of non-qualified workers. At the next level (lower and upper secondary education)
the problem is mainly caused by lack of specialization of gymnasium graduates, while
lack of additional skills and working experience for all others. For the highest educational
level the mismatch is largely an issue of occupation choice and surplus of university
degrees in less market-oriented fields (social sciences instead of technical and
engineering).
While acknowledging the results from the ESA survey, which indicate that there is a
unmet demand (and insufficient supply) of workers mainly at lower educational and
occupational level, it should be noted that experience of some other transition countries
with an implementation of labour demand surveys shows that there is also insufficient
supply of workers at the upper end of skills distribution, mainly managers and other highprofile workers in the country. In Box 2 we explained the possibility of results being
biased. In order to overcome the limitations of the skill demand survey, as well as the
need to collect more detailed information on demanded skills in the former Yugoslav
Republic of Macedonia, the World Bank on behalf of the Government implemented in
2009 a Labour demand survey which results should be published by end 2009. Findings
from the Labour demand survey would be primarily used as support information for
formulation of the policy in the area of formal and non-formal vocational and general
education and training.
Labour demand survey has following advantages over the Skills demand survey of the
ESA:

71

- It includes a number of firms characteristics such as productivity, modern/traditional

firms (proxied by internet use), export orientation, etc. which help to determine how labor
demand varries by firm characteristics, something that the ESA survey does not allow
one to do;
- The aim of the Labour demand survey is to learn more about job creation and
destruction, an skills shortages differentiated by occupation, etc, issues that are of
marginal importance in the ESA survey and analysis.
- The sample used in the Labour demand survey is statistically representative and
derived by the State Statistical Office.
- Both surveys use different categorization of skills: ESA survey focuses on
skill/educational level while Labour demand survey uses standard international
classification of occupations and hence is more useful when interest is in occupational
demand;
- Labour demand survey focuses on vacancies (using the standard international
definition) while ESA survey seems to use a more vague and less well defined notion of
"worker deficit". In this respect, the Labour demand survey will be used, among others,
to calculate vacancy rates (vacancies/employment) by occupation, as a measure of the
unment demand for labor.
- Labour demand survey addresses the issue of training provision by firms, which is not
covered by the ESA survey;
- The Labour demand survey is meant to cover the whole economy (including the
government sector) to measure total labor demand, while the ESA survey covers only
for-profit enterprises and excludes small firms.
From a policy perspective, the quality of the labour in the country would become one of
the priority issues in light of the future EU membership. Unfortunately, as ETF Country
Report (2007-b) concludes, the country has been following an alternative path of lowskill specialisation, associated with low-level equilibrium of low growth, high
unemployment, informal work with insufficient technological change, not necessarily an
inferior path per se if it attracts sufficient foreign investments and keeps the economy
going. Eventually, however, a shift to a more high-skill path of development must follow,
with the route to EU membership necessitating a significant upgrading of the labour
force skills, education system and labour market institutions for an innovation-led growth.

2.2.5

Equal opportunities

2.2.5.1. Female employment, unemployment and labour force participation

According to LFS 2008 data, the difference between the employment rate of men and
women aged 15-64 in the former Yugoslav Republic of Macedonia was 17.8 p.p. This is
relatively high gap compared to the EU-27 average of 13.7 p.p. in 2008 and NMS-10
average of 12.9 p.p. in 2006, as well as higher than the gender gap in the peers in the
region (from 9.0 in Bulgaria to 14.2 p.p. in Croatia).
Cross analysis of data on the structure of employment by occupation and gender reveals
that most women and men worked in low skilled manual occupations in 20079, albeit
women did so at somewhat lower proportion (44.8% for women against 55.6% for men).
On the other hand, the share of women employed in highly skilled non-manual
9

Latest available data.

72

occupations (32.2%) was greater than the one for men (24.6%), which might be
attributable to the dominance of females in the public administration. Occupational
structure in the EU is somewhat different with largest proportions of women and men
working in high skilled occupations, and at similar levels (40.1% and 37.3%,
respectively, in 2007).
Moreover, sectoral analysis shows that unlike in the EU where vast majority of women
work in the service sector, in the former Yugoslav Republic of Macedonia only half of
employed women (50.4%) work in this sector, due to the relatively large role of
agriculture and industry in female employment.
Employment status by gender reveals that women in the former Yugoslav Republic of
Macedonia tend to be predominantly in dependent employment. It should be noted
though that more women (76.9%) than men (69.3%) worked as paid employees in 2007.
According to 2007 LFS estimates there were 85,005 men working as either selfemployed or employers, against only 18,895 women, corresponding to 23.7% and 8.1%
of the total male and female employment, respectively. In addition, significant 14.9% of
all employed women worked as unpaid family workers (mainly in agriculture), in contrast
to only 7.0% of men.
There are also important gender disparities with regard to wage earnings. According to
the SSO data (Statistical book Women and Men in the Republic of Macedonia, 2008),
the average net wage paid to men in 2006 was 27.4%10 higher than the average wage
paid to women, with most unequal compensation (gap around 20% and higher)
observed in sectors agriculture, manufacturing, trade, hotels, health and social work.
This is a considerable gap in comparison with the EU-27 average gap of 15% and also
in comparison to the relatively low gender pay disparities ranging from 8% to 17% in the
NMS and candidate countries in 200611. Furthermore, Angel-Urdinola and Macias (2008)
find that the wage differences between genders in the country are more pronounced in
the private sector, in rural areas and among low educated workers (primary education or
less). The observed wage gap could be attributed to differences in number of hours
worked, to occupational segregation of females or it can be simply result of
discrimination in wage level. Though further research needs to be done in order to
identify the relative importance of each of these factors, Angel-Urdinola (2008) finds
evidence that as much as 82.6% of the gender gap in the country is unexplained (by any
observable factor) pointing to a high discrimination against female workers.
Table 10 - Labour market indicators by gender and education attainment in 2007
Level of
Education
Total
No Education
Incomplete primary
Primary

Activity Rate (%)

Total
Men
Women
55.7
67.3
44.1
20.7
41.0
14.0
24.6
41.4
15.9
41.7
58.6
26.6

Unemployment rate (%)

Total
Men
Women
34.9
34.5
35.5
46.1
39.1
53.0
37.1
38.1
35.7
43.4
42.9
44.3

Employment Rate (%)

Total
Men
Women
36.2
44.1
28.4
11.1
25.0
6.6
15.5
25.6
10.2
23.6
33.5
14.8

10

The average net monthly wage for women of MKD 9,305 and for men MKD 12,816 was calculated for all
production sectors in 2006, for all employees, regardless of their status (paid and unpaid, full-time and parttime).
11
Data has been taken from the Eurostat Yearbook 2008. Gender pay gap refers to the percentage
difference between average gross hourly earnings of male and female paid employees, presented as
percentage of male gross hourly earnings and calculated for the population of all paid employees aged 1564 who work 15+ hours per week.

73

Primary or less (subtotal)

3-year Secondary
4-year Secondary
Secondary educ.
(sub-total)
Higher education
University degree
Tertiary educ.
(sub-total)

36.3
74.6
68.0

54.8
77.7
73.3

22.7
69.2
61.3

42.6
40.4
33.4

42.1
40.5
32.1

43.3
40.1
35.3

20.8
44.5
45.3

31.7
46.2
49.8

12.8
41.4
39.7

69.5
69.8
83.8

74.4
67.1
81.7

62.8
73.3
85.9

35.1
20.4
20.5

34.3
17.5
17.9

36.3
23.8
23.1

45.1
55.6
66.6

48.9
55.4
67.1

40.0
55.8
66.0

80.2

77.7

82.9

20.5

17.8

23.2

63.8

63.9

63.7

Source: State Statistical Office, LFS 2007.

Education attainment plays particularly important role in the employment and

participation of women in the labour market in the former Yugoslav Republic of
Macedonia. The difference between employment rates of men and women declines with
the level of education. According to 2007 LFS (see Table 10) the difference between
employment rates of men and women in the working age population (age 15+) was 18.9
p.p. at the level of primary education or less (31.7% for men, 12.8% for women), 8.9 p.p.
at the upper secondary education (48.9% for men, 40% for women) and 0.2 p.p. at the
tertiary level of education (63.9% for men, 63.7% for women). In comparison, the
respective figures for the EU-27, for population aged 15-74 in 2007 were 19.1, 12.2 and
4.3 p.p.
Regarding unemployment, unemployment rates of men and women by age group and
attained education are quite comparable, still young women (15-24) with no skills and
only primary education or less have the highest rate of unemployment. Surprisingly, at
tertiary education level, women have 5.4 p.p. higher unemployment rates than men.
There are few possible explanations for this, such as employers being reluctant to hire
female workers at higher job positions (for instance, managerial staff), occupational
choice of females, etc. Table 11 shows that university degrees of Macedonian women
are concentrated mostly in the field of natural sciences, medicine, social sciences and
humanities, with only few women in the technical-technological studies that are highly
demanded on the labour market.
Table 11 - Students with completed undergraduate studies in FYR Macedonia,
according to scientific field and gender (2006)

Natural sciences and mathematics

Technical-technological sciences
Medical sciences
Biotechnical sciences
Social sciences
Humanities
Religious sciences
Total

graduated students
women
men
261
95
290
620
483
142
168
197
2,240
895
578
223
1
6
4,021
2178

% structure
women
men
73
27
32
68
77
23
46
54
71
29
72
28
14
86
65
35

Source: State Statistical Office (2008) Women and men in the former Yugoslav Republic of Macedonia 2008.

The inactivity rate of women in the labour market of the former Yugoslav Republic of
Macedonia is almost twice as high as the one of men, which was analysed in section
2.1.1.

74

Main factors analysed in this and other studies influencing low participation of women
are: the tradition and cultural habits in the country, low education and skills, ethnicity
combined with the education, availability and cost of child care services and care for
older family members, labour market discrimination against females, etc.
For instance, Angel-Urdinola and Macias (2008) find that 55% of inactive females are
housewives; though the effect of this factor on inactivity decreases with higher education
attainment. In addition, inactivity is mostly widespread among young and unskilled
women in the rural areas and among members of the ethnic minority communities
(especially among Albanian, Turkish and Roma women).
Recent World Bank and ETF study (2008) explored constraints for labour participation of
unskilled women from minority groups in the former Yugoslav Republic of Macedonia
using in-depth qualitative data gathered from focus groups. In a nutshell, it concluded
that more importantly than objective factors, subjective factors related to the low level of
social development, conservative beliefs and what can generally be described as
traditions affect the size of the labour force, as many of these women do not even
search for jobs and meaningful employment (see section 2.1.1).
The difference between participation rates of men and women decreases with education,
varying between extremely low participation of women with primary education or less
and very high participation of women with higher and university education. Data from
2007 LFS show outstanding gender gap in participation (population aged 15+) of 32.1
p.p. at the level of basic education (55% for men, 23% for women), 11.6 p.p. at the
upper secondary education (74% for men, 63% for women) and 5.2 p.p. higher activity of
women at the tertiary level of education (78% for men, 83% for women). The
comparative figures for the EU-27, for population aged 15-74, in 2007 were 20.3, 12.0
and 3.6 p.p. It is expected that with the increase of their participation in the educational
system this difference will be gradually reduced.
In addition to the above mentioned factors influencing activity of women, ILO and
Council of Europe, 2006 suggest that women, especially certain groups of women, such
as older women, or women with young children, might face discrimination at hiring and
firing, and even when seeking services of employment agencies. Labour inspection is
unlikely to uncover these cases and legislation is not implemented. They also
acknowledge that child care is not always available, or it is not available in a flexible
enough way that would help parents (especially womens) labour force participation.
Another constraining factor to women participation is low availability of flexible forms of
employment (which reflect choice instead of discrimination).
Participation rate of women also varies with the marital status (see Figure 15). Highest
participation rates have married and divorced females, which might suggest that these
females have to work in order to support their families.
Figure 15 - Labour market characteristics by marital status in FYR Macedonia, 2008

75

70
60
50
40
30
20
10
0
Participation rate
Not married

Married

Employment rate
Widow

Divorced

Unemployment rate
Extra-marital community

Source: State Statistical Office, LFS, 2008.

Besides the above examined labour market disparities between genders, the UNDP
analysis gender imbalance from another perspective. According to UNDP Human
Development Report 2007/08 the human development index12 (HDI) for the former
Yugoslav Republic of Macedonia in 2005 was assessed at 0.801, thus giving the country
a rank of 69th out of 177 countries, while the gender-related development index13 (GDI)
measuring the degree of gender imbalance in the human development achievements in
the country for the same year was assessed at 0.795. In other words the GDI value for
the country represents 99.3% of its HDI value, and out of the 156 countries included in
the ranking, 64 countries had better ratio than the former Yugoslav Republic of
Macedonia. Also the country ranked 35th out of 93 countries in the gender empowerment
measure14 (GEM), with a value of 0.625.
GEM shows whether women take an active part in economic and political life. It tracks
the share of seats in parliament held by women; of female legislators, senior officials and
managers; and of female professional and technical workers- and the gender disparity in
earned income, reflecting economic independence. Differing from the GDI, the GEM
exposes inequality in opportunities in selected areas.
2.2.5.2. Family and work

12

Each year since 1990 the Human Development Report has published the human development index
(HDI) which looks beyond GDP to a broader definition of well-being. The HDI provides a composite measure
of three dimensions of human development: living a long and healthy life (measured by life expectancy),
being educated (measured by adult literacy and enrolment at the primary, secondary and tertiary level) and
having a decent standard of living (measured by purchasing power parity, PPP, income per capita).
13
The gender-related development index (GDI), introduced in Human Development Report 1995, measures
achievements in the same dimensions using the same indicators as the HDI but captures inequalities in
achievement between women and men. The greater the gender disparity in basic human development, the
lower is a country's GDI relative to its HDI.
14
GEM reveals whether women take an active part in economic and political life. It tracks the share of seats
in parliament held by women; of female legislators, senior officials and managers; and of female
professional and technical workers- and the gender disparity in earned income, reflecting economic
independence. Differing from the GDI, the GEM exposes inequality in opportunities in selected areas.

76

The possibility to combine family and work is an important factor in determining activity
of women in the labour market, as well as choices they face. Given the low participation
of females in the former Yugoslav Republic of Macedonia, improving (and implementing)
conditions for balancing family and working life must be also a government concern.
In the former Yugoslav Republic of Macedonia, females still bear the bulk of
housekeeping responsibilities, so for many of them balancing family and work is rather
difficult quest. Often women (mostly from Macedonian ethnicity) have to work in order to
support family, even longer and unsocial hours, and at the same time take care of
dependents (children and elderly) and do all household chores.
Division of household work (domestic chores, child and elderly care) between men and
women is an important determinant of females economic activity, types of jobs they
undertake and their ability to balance paid and family responsibilities. In 2004, the State
Statistical Office conducted a time use study in the former Yugoslav Republic of
Macedonia. The study shows that family responsibilities usually are not shared by
spouses; instead the bulk of activities are performed by females. Among employed
persons, the average time per day that females devoted to household chores (4.40
hours) is about 2.5 times greater than average mens hours spent on home tasks.
Moreover, employed parents spent with their children half the time of unemployed
couples. Clearly, if fathers participated more in the care for even very young children,
womens activity in the labour market would be easier, and gender disparities in this
regard would be reduced (ILO and Council of Europe, 2006).
Big changes, both economic and social, that occurred during transition, have influenced
the participation of females in the labour market and their ability to combine work and
family. In particular, while big state enterprises in the communist period had their own
daily care facilities, nowadays parents use public kindergartens which are less
convenient mainly due to working time, availability, location and quality of care
considerations. The kindergartens and nurseries' network, so far, has not been a major
determinant (or constraint) of female activity, since working mothers, traditionally, have
been able to count on help from non-working female relatives. However, this traditional
family support is becoming less available with urbanization, increased labour force
participation, and rural-urban migration. Also, it is likely to decline further with the
increased statutory retirement age for females. For instance, Angel-Urdinola and
Macias (2008) found that each child living at home younger than 7 years old reduces
female participation by 3%.
Availability and cost of child care is important for achieving true gender equality since it
affects the types of work that females can accept and hence their pay rates. Usual cost
per child both in nurseries and kindergartens is about 10% of the average net monthly
wage, with few other additional costs (i.e. hygienic items). In recent years, private daily
care centres emerged, but are still few in number and more expensive; their cost
approaches 50% of the average wage. The minimum age for child to be sent to a
nursery is 8 months, which is harmonized with the statutory 9-month maternity leave.
Opening and closing hours of nurseries and kindergartens support working parents, i.e.
they work from 6a.m. to 6p.m., whereas usual working time is 8-8.30a.m. to 4-4.30p.m.
In primary education classes last up to 3.30p.m., though schools organise care for the
children afterwards. However, after-school, holiday and emergency care are not much
developed, with parents relying on family support (grandparents). In addition, there are
no public (also private) childcare services in many regions and municipalities (only 33
77

out of 84 municipalities have public nurseries and/or kindergartens). Lack of labour

market data by municipality prevents further investigation in order to confirm the link
between the availability of childcare and females participation and employment. For
example, on a regional level, while there are nurseries and kindergartens in the Polog
region, the activity and employment rate of both females and males are lowest in the
country. This might suggest that social customs and traditions have greater impact on
labour market situation than the other factors.
In addition to the availability of childcare, the availability and access to elderly care is
also important for the labour market decisions of women, whether they will be active,
jobs they will accept, promotion and pay prospects. Data on public institutions for care
and assistance to elderly (data on private centres is not available) show that, despite the
ageing population, in the period 1995-2005 there was no change in the provision both in
terms of number of institutions and number of beneficiaries. There are only 4 such
institutions and about 480 beneficiaries (0.2% of total population aged 65+).
In the past, women mainly used to work in social services, public administration,
education, health and similar sectors with shorter and more flexible working hours
allowing better balance between family and work. Nowadays, females are overrepresented in some sectors with strong international competition (such as the textile
industry) where working conditions are poor and the use of shift work, night and holiday
work (and low pay) is rather high. Moreover, new job opportunities are open to highlyeducated females in international companies starting activity in the former Yugoslav
Republic of Macedonia or domestic successful firms, which pay higher wages, but also
demand much effort, including long working hours, high decision-making, etc. Females
accept these job opportunities as return on their education, but they face increasing
difficulty in balancing private life and career, given the fact that they continue to take
care of domestic tasks and dependents. Hence, flexible working arrangements are
especially important for employed women (such as job-sharing, reduced working hours
(without a pay), flexible working hours, flexitime, time banking, distance working, work
from home, etc). Currently, there are only few firms that allow flexible working hours
(flexible half-hour interval to come at and leave from work), while other forms of flexible
scheduling of work are not used, despite that they are regulated with the Labour Law.
Moreover, public administration, where majority of females work, does not allow
flexitime.

2.2.6

Health and safety at work

Heath and safety standards related to a job are important determinant of the quality of
the job and workers productivity.
The Law for occupational safety and health sets necessary requirements and obligations
in the area of health and safety at work, while the State Labour Inspectorate (SLI) is the
institution in charge of ensuring that legislation is respected and workers rights
protected. In 2008, the SLI employed 32 inspectors in charge of occupational health and
safety oversight. These inspectors conducted 14,924 inspections of companies from all
sectors, of which 12,180 were routine visits, 2,744 control checks and 285 interventions
upon requests of third parties for protection of rights in the area of health and safety at
work. A total of 4,926 decisions for various breaches of health and safety standards
were issued in 2008, however by the end of the year 70% of all documented breaches
were adjusted. The highest number of violations refers to breach of requirements for
78

mandatory health check of employees (17%); followed by breaches in training of

employees and equipment for first-aid (12%); fire and explosion prevention (12%);
training of employees in occupational health and safety (10%); safety of electrical
installations (9%); equipment for personal protection (9%). Furthermore, 96 decisions for
closedown of operations (mainly of manufacturing facilities, construction cites, trade
outlets and craft workshops) were issued in 2008 due to direct exposure of employees to
health and life risks as a result of unsafe equipment, technological processes and
improper working environment.
Besides SLI, the Institute of Occupational Health and occupational health units mainly
within the health centres (primary care facilities) also pursue specific occupational health
activities. The health units are currently more oriented towards occupational and curative
medicine rather than modern preventive OHS activities.
Official statistics for reported injuries for the purpose of disability insurance in the former
Yugoslav Republic of Macedonia show overall low level of incidences, and in general
decreasing trend from 1995 onwards. The total number of reported injuries in 2006
(latest available data, obtained from the Annual Report of the SSO) was 1,652 or around
60% less than in 1995 (4,251). Analysing changes over the given period (using index
1995=100) and disregarding outliers such as years 1998 and 2000 marked by sudden
increase, the general trend shows strong decreasing tendency in the number of injuries,
with year 1995 figure being the peak in the data series. Mainly, in the period 1995-2000
total injuries varied in a broad range between 2,600 and 4,300, while after year 2000 and
the significant drop in 2001 total injuries settled down around much lower level and
varied in a range between 1,400 and 1,900 in the period 2001-2006.
Similarly, the number of injuries per 1000 employees was quite stable at 6-7 between
1995 and 2000, decreasing down to approximately 3 injuries from 2001 onwards, which
is rather low. Industry and mining have been the major activities where injuries occur. In
general, around half of all injuries occur there, followed by construction, agriculture,
forestry and transportation sectors, though the declining trend is present across all
industries.
Another source of data on work place injuries comes from serious and fatal injuries
reported by employers to the State Labour Inspectorate. According to the Annual Report
of the SLI, there were 327 reported incidents in total in 2008, of which 315 cases of
serious injury (absence from work above 3 days) and 12 fatal injuries. During 2008 there
were 5 collective accidents, resulting in death of 2 persons. The largest number of
serious injuries occurred in the manufacturing industry (49%), followed by the
transportation sector (9%) and the construction (8%). Tourism sector and trade and
crafts accounted for 4% each in the total number of serious injuries.
Table 12 - Reported injuries for the purpose of disability insurance, 1995-2006
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2006:1995
change

Total

4,251

Industry and mining

Construction

2,491
534

3,909
2,286
474

2,925
1,755
279

3,531
2,028
366

2,603
1,355
346

3,643
1,974
437

1,547
813
170

1,383
741
187

1,385
736
148

1,830
961
215

1,957
975
223

1,652
967
134

-61%
-75%

Agriculture, forestry
and fishing
Transport and
communications

426

367

266

246

174

227

107

45

109

103

68

76

-82%

199

201

143

180

176

222

85

112

87

125

158

102

-49%

79

-61%

Trade and crafts

37

30

28

40

22

34

11

10

13

14

14

-78%

Hotels and catering

Other

93
471

80
471

34
420

81
590

69
461

89
660

37
324

28
260

10
282

38
374

38
481

39
326

-58%
-31%

Index (1995=100)

100

92

69

83

61

86

36

33

33

43

46

39

injuries per 1000

employees

Source: State Statistical Office, Annual Report.

Fatal injuries at work are in general very low in number, constituting 3.7% of all heavy
injuries reported to the SLI and close to the number reported in 2007 was 14.
Construction was the least safe sector with 4 fatal accidents, then follows the
transportation sector with 3 cases, while other sectors had 1 fatal injury each. In most
cases, injuries were caused by working procedures which did not conform to the rules
set out in the Law for occupational safety and health, and/or lack of workers
understanding of the main risks at work place and necessary safety measures.
Though official data show low incidence of injuries at work, they have to be treated with
caution because of possible underreporting in a high unemployment environment where
employees fear losing the job, as well as because of the inadequate reporting system,
despite the recent improvement in this area. For instance, official data provided by the
SLI was 18 fatal accidents in 2007 which were challenged by non-governmental
sources, whose evidence indicated 47 cases in the same year. Moreover, official data is
restricted to formal economy, whereas informal economy is not taken into account
though one would expect that health and safety standards in the latter are much lower
and the incidence of accidents higher.
In addition, there is no much public debate and interest of social partners in the area of
health and safety at work. This holds both for trade unions as well as for employers
organisations who do not have specially designated personnel to deal with and promote
occupational health and safety issues as a social and economical benefit to firms and
the country.

2.3.

Social and territorial cohesion

2.3.1. Vulnerable and disadvantaged groups

The EU Integrated Guidelines for Growth and Jobs (20052008) call for inclusive labour
markets for all jobseekers, including disadvantaged people. Employment regulations
(and equal opportunities legislation) are designed to protect workers from arbitrary,
unfair and discriminatory actions by employers. However, the existence of such statutory
requirements, especially where compliance is low and the market is deeply segmented,
does not ensure equal access to employment, nor does it ensure that the labour market
is inclusive.
Similar to other Western Balkan countries, the labour market in the former Yugoslav
Republic of Macedonia has been assessed as rather not inclusive in practice, despite
existing employment and equal opportunity legislation (ETF, 2007-a). Inclusiveness for
particular groups, such as very young and very old workers and ethnic minorities

80

remains a challenge for the country, having in mind the excessively large unemployment
rates for these segments of the population. According to the ETF report (2007-a) the
failure of the market to assimilate these categories into the pool of employed workforce
has been mainly seen as a result of the following factors: (i) tiered market structure in
which formal job opportunities are rare (ii) difficult access for young people and other
labour market entrants; (iii) discriminatory tendencies on the grounds of ethnicity; (iv)
disparities in educational achievement; (v) institutional influences; and (vi) absence of a
lifecycle approach to work.
In addition, several recent studies (Center for Economic Analyses (2005), EC DG
Employment (2007), WB CEM Report (2008-a), ETF Country Analysis (2008)) identify
particular vulnerable groups relating to low-income (working poor), unskilled and
discouraged workers turning inactive, as well as the large pool of long-term unemployed
in the country.
As in other countries in the region, young workers (aged 15-24) in the former Yugoslav
Republic of Macedonia are more likely to be unemployed in comparison to other age
groups (see Table 13). However, unlike peers and the EU average level, youth
unemployment in the country is very high, with a double-digit rate indicating that well
over half of the youth was out of employment in 2007. The reasons for this particular
labour market condition among youth include: (i) mismatch between labour market
needs and the educational and training system; (ii) employers demanding workers with
experience; as well as (iii) the massive upsurge of the grey economy, thus, many young
people are actually employed although officially registered as unemployed (EC DG
Employment (2007).
LFS data indicate there has been some improvement in this area over the past decade
with the youth unemployment rate decreasing from 69.5% in 1996 to 57.7% in 2007
(56.4% in 2008), against rising unemployment rates of prime age (25-54) and older (5564) workers in the given period (Table 15). Indeed, the share of unemployed youth in
total unemployment decreased from 37.5% to 21.3% during 1996-2007. Unfortunately,
issues remain open regarding the quality of this progress. Hence, Angel-Urdinola and
Macias (2008) point out that the improvement in the labour market since 2004 onwards
has been driven above all by low-skilled workers, especially youth, engaging in lowproductivity activities. Thus, unemployment decreased most among the least educated
youth (primary school or less), in parallel with rising employment rates for this group
caused by expansion in low-quality jobs in subsistence/unpaid agriculture.

Table 13 - Unemployment by categories in the former Yugoslav Republic of Macedonia

and selected countries, 2007
Country
Bulgaria
Czech Republic
Hungary
Poland
Slovakia
Slovenia

Youth
(15-24)
% rate
15.1
10.7
18.0
21.7
20.3
10.1

Elderly
(55-64)
% rate
6.8
4.6
4.2
6.8
8.2
3.3

Unskilled1
% rate
18.0
20.4
17.5
16.5
45.1
7.4

National
average
% rate
6.9
5.4
7.4
9.7
11.2
5.0

Share of long-term
unemployed2
(1 year+) (4 years+)
58.8
29.6
52.2
18.7
46.8
8.4
51.3
9.1
74.2
39.6
45.7
11.8
81

Romania
Croatia
The former
Yugoslav
Republic of
Macedonia
EU-27 average
NMS-10 average
(year 2006)

20.1
24.0
57.7

2.3
6.4
28.0

8.6
12.1
43.6

6.8
9.8
35.2

50.0
61.5
84.9

4.4
29.9
65.0

15.4
24.3

5.5
6.7

10.9
21.5

7.2
11.0

42.7
55.8

11.9
13.4

1) ISCED (International Standard Classification of Education) 0-2.

2) Share of individuals unemployed for 1 year / 4 years and more in total unemployment.
Source: Authors calculations; http://epp.eurostat.cec.eu.int; LFS data for the former Yugoslav Republic of
Macedonia.

Activity rate for young individuals aged 15-24 has been decreasing from 43.3% in 1996
to 35.9% in 2008 (section 2.1.1). The very low level of activity for youth aged 15-19
(17.9%) could be considered as a positive and desirable trend15, if it were reflecting
higher participation in education. However, according to the 2002 Census data, 34% of
youth aged 15-19 were part of the so called NEET (Not in education, Employment or
Training) in 2002 (Novkovska, ILO, 2006). Comparatively, this is much higher than in the
EU member states, where this figure is around 10%. Consequently, youth
discouragement (i.e. young people not even looking for a job) pushing individuals
towards informal economy, emigration (brain drain for the more educated ones), illegal
or even criminal activities has been pointed as a particular concern (ILO and Council of
Europe, 2006).
As regards the quality of employment, young individuals appear to face much worse
conditions relative to other age groups. According to the WB study (Angel-Urdinola and
Macias, 2008) using 2006 LFS estimates, young are more likely to be first-time job
seekers (92% of all unemployed at age 15-24 did not have previous work experience),
they work disproportionately more in the informal sector and the primary sector
comprising agriculture and mining, and are mainly employed as unpaid family workers.
Though, accepting low-quality/low-pay jobs might be lucrative strategy for young workers
in terms of their chances of finding regular, better paid job. Nevertheless, adulthood
young workers seem to transition rapidly into wage employment, especially after age 30.
Estimates indicate that 80% of workers at the age of 43 have permanent jobs, against
less than 50% of workers at age of 24.
Despite certain improvement over the past decade, employment and participation of
older workers (age 55-64) in the labour market in the former Yugoslav Republic of
Macedonia continues to be extremely low in comparison to national and EU average
levels. However, there has been a considerable improvement in the participation rate of
this age group, from 27% in 1996 to 44.3% in 2008 (Table 14). Similarly, their
employment rate increased from 24.4% in 1996 to 31.7% in 2008. However, activity and
employment of older women aged 55-64 is much lower than that of men, at about 25%
and 20%, respectively.
Parallel to activity and employment increases, the unemployment of older workers also
increased significantly from 9.6% in 1996 to 28.5% in 2008. The latter may point to
15

In line with the European Employment Strategy which sets as target that 85% of the 22 year old youth
should have completed upper secondary education by 2010.

82

gradual losing of the advantage of holding secured formal job, as well as decreasing
returns to experience during transition, as firms begin to favour younger workers with
higher education and skills matching new production and information technologies (ETF,
2008). One part of the rising unemployment of elderly can also be explained by their
increased participation in the labour market over the given period.
Many older workers and in particular those with low education and skills have faced
major difficulties adjusting during the transition process, resulting in a large pool of
inactive workers among the elderly as well as highly unfavourable structure of the
unemployed aged 55-64. Hence, vast majority (around 92%) of inactive in this age group
have at most upper secondary education, while around 33% of all males and 54% of all
females in this group declared various reasons for inactivity other than retirement16
indicating a hidden pool of discouraged workers. This early withdrawal can be
explained by the inability or the unwillingness of these workers to adapt to the new
labour market conditions, in conjunction with the effects of social policies of the
Government providing income support for older workers through early retirement
schemes and disability pensions (Lehman, 2009).
Furthermore, among the unemployed aged 55-64 considerable majority has rather low
education attainment and skills (only 12% is the share of tertiary educated) and has
been in unemployment over very long period (94% have been unemployed longer than 1
year, while 75% longer than 4 years). Insufficient adult learning opportunities and lack of
policy implementation and coordinated effort in this area as assessed by the ETF (2007a), suggesting that in the foreseeable future many older workers in the country will
continue to be at risk when trying to find or keep a job.
One of the striking features of the labour market is the very high incidence of LTU (see
section 2.1.3). This share has continuously increased since 1996, and reached 84.9% in
2008, which is well above the EU-27 and NMS averages. Due to the depreciation of
knowledge, skills and working experience, there is negative duration dependence in that
the longer people are unemployed, the lower are their chances of finding a job and
hence the disadvantage of LTU in the labour market. More importantly, data indicate a
deepening of the problem with very long duration over four years which represents about
60% of total unemployment in 2008 and is especially relevant for the age group 30-44,
suggesting that individuals at their most productive age who become unemployed tend
to stay locked in this status.

Table 14 - Labour market indicators by age groups, 1996, 2007 and 2008

16

Mainly housewife for women and other reasons for men.

83

Source: Authors' calculations based on LFS data.

Age
Group
Young
15-19
20-24
15-24
Prime age
25-34
35-44
45-54
25-54
Elderly
55-59
60-64
55-64

Activity rate
2007
1996
2008

Unemployment rate
2007
1996
2008

Employment rate
1996
2007
2008

23.8
64.9
43.3

17.9
53.6
35.9

16.2
54.9
35.9

76.7
66.6
69.5

62.6
56.1
57.7

56.8
56.2
56.4

5.5
21.7
13.2

6.7
23.5
15.2

7.0
24.0
15.7

77.7
80.4
67.5
75.8

78.3
80.0
75.5
77.9

78.5
80.8
75.0
78.1

41.1
18.9
13.1
25.6

39.3
29.7
27.2
32.3

37.7
28.1
26.5
31.0

45.8
65.1
58.7
56.4

47.5
56.2
55.0
52.8

48.9
58.1
55.2
53.9

37.5
16.3
27.0

51.2
24.7
40.0

55.0
29.8
44.3

9.3
10.1
9.6

28.2
27.7
28.0

28.2
29.1
28.5

34.0
14.7
24.4

36.8
17.9
28.8

39.5
21.1
31.7

Labour market indicators reveal major differences in outcomes for certain ethnic groups
that have changed little over the past years despite anti-discrimination laws and policies.
According to the 2002 census data17, participation rate of Macedonians was highest at
58%, followed by Vlach (54.7%), Roma (54.2%), Serbs (47.3%) and Turks (44.3%).
Participation of ethnic Albanians was lowest (37.9%). Inactivity is particularly relevant for
females from minority groups such as Albanians and Roma, as already examined in
section 2.1.1.
Table 15 - Unemployment, employment and population by ethnicity, in the former
Yugoslav Republic of Macedonia in 2002

Macedonians
Albanians
Vlach
Roma
Turks
Serbs
Other
Total

Unemploy
ment
LFS 2000
180,164
52,062
734
9,776
7,834
4,277
6,865
261,712

EmployEmpl.
Empl.
ment
rate
structure
LFS 2000
28.2
68.8
459,200
41.9
83.5
49.3
19.9
53,566
18.5
9.7
32.1
0.3
1,555
42.1
0.3
73.1
3.7
3,589
13.0
0.7
38.6
3.0
12,474
28.8
2.3
36.6
1.6
7,416
31.7
1.3
36.2
2.6
12,046
24.4
2.2
32.2
100.0
549,846
35.8
100.0
Source: LFS 2000 and Census 2002 data.

Unemp
rate

Unemp
structure

Census
2002

Census
structure

1,297,981
509,083
9,695
53,879
77,959
35,939
38,011
2,022,547

64.2
25.2
0.5
2.7
3.8
1.8
1.9
100.0

Regarding unemployment, Roma community is the most seriously affected with

unemployment rate of 71.3% almost twice the national average (38.1%) from the 2002
census data (Table 15). Some other sources, mainly NGOs run by Roma population

17

From 2001 onwards labour market data by ethnicity are not available in the LFS publications because
the sample is not representative by this characteristic. Information can be obtained from LFS 2000 and
the 2002 Census of population which used the same LFS definitions for the economic activity of the
population as the LFS.

84

indicate that the true unemployment figure is even higher at around 95%. Unemployment
rate of ethnic Albanians was also very high, 49.3% in 2002.
Roma are grossly under-represented in both, private and public sector employment, the
latter in spite of the Ohrid Framework Agreement provisions on proportional
representation of ethnicities in state institutions at all levels. Besides being affected to a
certain degree by discrimination along ethnic lines, the insufficient integration of the
Roma in the labour market has also been induced by specific Roma cultural traditions
and practices (EC DG Employment, 2007). In particular, very low participation in the
educational system and lack of motivation for prolonged learning leave many Roma
people with extremely low educational attainment. Though the former Yugoslav Republic
of Macedonia does not have very large Roma community, yet evident social exclusion
and widespread joblessness among its members require special consideration.
Table 16 - Participation in education by ethnic group and gender, 1998/99-2001/02
Ethnic
group

Primary 1998/1999
Total

Female
students

Tertiary1 2001/2002

Upper secondary 2000/2001

Total

Female
students

Total

Female
students

142,116

57.7

69,096

69,991

77.0

35,539

39,765

88.9

22,149

Albanian

76,225

30.9

36,827

15,718

17.3

6,619

2,192

4.9

1,094

Turkish

10,453

4.2

4,925

1,665

1.8

633

546

1.2

269

Roma

7,970

3.2

3,836

499

0.5

216

126

0.3

68

Vlach

435

0.3

181

238

0.3

127

417

0.9

257

Serbian

2,757

1.1

1,338

1,217

1.3

548

822

1.9

425

Other

6,534

2.6

3,072

1,652

1.8

592

707

1.7

364

44,575

100

24,626

Macedonian

246,490 100 119,275

90,980
100 44,274
1) The data do not include the students in the SEEU (Tetovo University)
Source: Taken from OECD Review report, OECD, 2004.
Total

Inspite of strong emphasis in legislation and government policies on equal opportunities

for education, school attainment varies significantly across different ethnic groups. While
in primary education18 the participation is proportional to the ethnic composition of the
population, there are important differences at the higher education levels (Table 16).
Macedonians, who are 67% of the population, are overrepresented in the secondary
education (77% of all students) and in the tertiary education (with 89% of all students).
The Albanian community, 23% of the population, accounts for only 17% of secondary
and 5% of tertiary students, in the public institutions. Roma population constitute 2.2% of
total country population and have a good level of attendance in primary education 3.2%,
but comprise only 0.5% of secondary and 0.3% of higher education students (OECD
Review Report, 2004). Ethnic based disparities in education are particularly evident as
18

Primary school level was the conventional compulsory education in the past. From 2008 onwards
legislative changes demand secondary education as compulsory.

85

regards gender. Thus, ethnic Albanian, Turkish or Roma girls while equally included in
primary education have significantly lower participation at the secondary level than boys
from their ethnic communities. This underlines the importance of education for
employability of ethnic minorities, especially women, and calls for special attention to
promotion and improving access of ethnic minorities to higher level education.
There are no precise estimates on the number of disabled people in the country.
According to Pension and Disability Insurance Fund records for individuals with
disabilities receiving social assistance their number by end-2007 was 13,063, of which
6,676 were children and 6,387 adults. In addition, according to the ESA, in January 2007
there were 2,223 people with disabilities registered as unemployed, out of which 760 are
women. Concerning the educational status, 1,116 of unemployed disabled individuals
were without any qualification. Concerning the type of disability, the majority (749) of
those registered as unemployed disabled persons were with a mental disability, followed
by those disabled as a result of work injury (558).
The special conditions and benefits for employment and work of the disabled persons
have been regulated by the Law on Employment of disabled persons, while the
conditions for allocation of financial means from a special fund have been regulated by
separate rulebook on the criteria and the procedures for assistance in employment of
and working with disabled persons. Subsidizing of employment of disabled persons has
been implemented by the ESA as active policy foreseen with the official operational
plans and measures for employment for 2007 and 2008. For example in 2007, with the
allocated financial means from the special fund employment of 267 disabled persons
was subsidized, and 156 in 2008 (though the plan was 2000).
In legislative terms, the country does not lack legal acts that regulate the status of
people with disabilities. Indeed there are 26 laws and many other additional by-laws
which are regulating this matter19. Also there is a National Strategy for Equalisation of
the Rights of Disabled People (2001), as well as a Declaration for Protection and
Promotion of the Rights of Disabled People, adopted by the Parliament in 2003.
Currently, there is a citizen initiative for adoption of a Law on protection of the rights and
dignity of persons with disabilities, a legal instrument that will cover horizontally all of the
legislation and will serve as a reference point for disability issues. Moreover, the country
has not signed the UN Convention on the rights of people with disabilities.
Yet, the situation of people with disabilities has not improved and these persons
continue to suffer discrimination. An additional problematic aspect is the limited access
of children with disabilities to mainstream education which contributes to school
segregation, discrimination and denial of their right to basic education (EC DG
Employment, 2007).
Concrete government initiatives and measures to help disadvantaged groups in
obtaining employment are outlined in the National Action Plan for Employment (NAPE),
the most recent one being for 2009-2010, elaborated on the basis of the 10 Guidelines
of the European Employment Strategy. According to the document, ethnic minority
groups, especially the Roma population, persons with disabilities and young people were
identified as the groups facing particular difficulties on the labour market and highest risk
of social exclusion. Also, in the beginning of 2005 the Government adopted a National
19

These laws range from only fragmented mention of the disabled (Custom Law) up to the existence of a
separate Law for employment of disabled people, as lex specialis of the labour Law.

86

Strategy for Roma as part of the EU agenda 2000 and signed the Decade of Roma
Inclusion 2005-2015, committing itself to support the full participation and involvement of
the Roma community in achieving the Decades objectives. These are spelled out in 4
distinct Action Plans for healthcare, education, housing and employment. In brief, the
Employment Action Plan was designed with the participation of Roma experts and
recommends action in several areas, mainly improvement of the job search process,
establishing of local training and education centres, transforming of the grey economy
and national regulations to integrate Roma people and promote their employment.
Recently, an improvement in the field of minority rights has been noted (see also PCA,
2008), especially relevant for the ethnic Albanians and their access to education and
proportional representation in the public employment. Improvements regarding
employment of ethnic groups have been associated with the Ohrid Framework
Agreement (2001) which incorporates the principle of equitable employment mainly in
the public sector (i.e. central government, local government, judicial institutions and
public enterprises). Notwithstanding the achievements so far, there is a need for further
efforts in this direction and better integration of other communities, such as ethnic Turks
and the Roma.
If progress is to be achieved, the administrative capacity in the country in this field has to
be developed, as well as the problems of coordination between relevant institutions and
lack of capacity at municipal level addressed. This necessary implies competent public
employment service able to integrate excluded individuals through carefully geared
active labour market programmes for particular groups, taking into account specific
disadvantages, cultural and traditional factors relevant for particular groups of workers.
Given the state of the Macedonian labour market and the limited resources targeting is a
critical issue. Other areas where improvement is required are: slow implementation of
strategies for the Roma, inadequate legal framework and support for anti-discrimination
and insufficient policy measures for improved access to the labour market for vulnerable
groups, including people with disabilities.

2.3.2. Regional disparities

The former Yugoslav Republic of Macedonia is administratively divided in 84
municipalities and the city of Skopje as a separate unit of local self-government,
covering 10 municipalities. The municipalities are rather unequal in terms of size and
resource endowments. The biggest municipality in terms of population size is Kumanovo
with 105,484 citizens (according to the 2002 Census), while the smallest one is
Vranestica (with 1,322 citizens). In terms of area, the municipality of Prilep is the biggest
one covering 1,194 km2 while Cair municipality is the smallest one covering only 3.5
km2. Around 507,000 citizens, or one quarter of the total population of the country, live in
the City if Skopje. Anecdotal evidence suggests that daily commuters add a substantial
number to the population of Skopje.
Given the relatively small size of municipalities, for planning and development purposes,
the territory of the country is divided in 8 NUTS-3 regions which also differ considerably
in terms of their size, population and socio-economic outcomes. Basic characteristics of
the 8 regions according to the 2002 Census are the following:

Vardar region (4,042 km2 or 16% of territory and population of 154,000);

87

Eastern region (3,537 km2 or 14% of territory and population of 181,000);

Southwest region (3,340 km2 or 13% of territory and population of 222,000);

Southeast region (2,739 km2 or 11% of territory and population of 172,000);

Pelagonija region (4,717 km2 or 19% of territory and population of 236,000);

Polog region (2,416 km2 or 10% of territory and population of 310,000);

Northeast region (2,310 km2 or 9% of territory and population of 174,000) and

Skopje region (1,812 km2 or 7% of territory and population of 590,000).

The most densely populated region of Skopje with around 319 inhabitants per km2 is
more than 2.5 times more densely populated compared to the second most densely
populated region, Polog with 126 inhabitants per km2. On the other hand, the Vardar
region has only 38 inhabitants per km2. Similar discrepancies show up in terms of the
urban/rural characteristics of regions. As expected, Skopje is largely urban (72% of
population), while Polog is the least urban region with only 29% of the population being
urban.
Only one region, the Pelagonija region, registered a negative population growth rate
between 1994 and 2002. On the other hand, the biggest positive growth rates were
registered in the Polog region, followed by the Skopje region and the Northeast region.
Regardless of this, the fertility rates in all regions have declined considerably over the
last two decades. Internal migration, including ruralurban, has been declining mostly as
a result of relatively few opportunities and information asymmetries, inefficient housing
market as well as increased migration abroad. This is also confirmed by recent research
(Angel-Urdinola and Macias, 2008) on labour market outcomes in the country.
The availability of regional data has only recently improved which now allows
comparisons across regions but not the developments in a region over time.
Rgional disparities in economic development are large. With a GDP per capita of MKD
289,622 in 2008 (67% above the national average), the Skopje region is by far the most
developed region in the country generating 48.5% of the national value added. The
Vardar region, with a GDP per capita of MKD 179,645, is the only other region with a
GDP per capita higher than the national average of MKD 173,385. On the other hand,
the Polog and Northeast regions, with GDP per capita of MKD 80,366 and MKD 86,436,
respectively, are the least developed regions in the country.
There are also significant differences in education attainment across regions, though
people with low education dominate in all regions. Close to of the population above 15
years in the Polog region had elementary education or lower. This ratio is the smallest in
the Skopje region, but at around 40% it is still high. Similarly, Skopje has the highest
education attainment levels. Around 45% of the inhabitants of the Skopje region had
secondary education, and 15% had tertiary.
Available data show that labour market outcomes are extremely heterogeneous across
regions. According to data from the 2002 Census of population the highest activity rate
of 65% was registered in the Southeast region, while the lowest rate was registered in
the Polog region (37%). Region wise, there also appeared to be a relatively

88

straightforward link between education attainment and labour market participation with
higher levels of education generally associated with higher labour market activity rates.
Similar discrepancies exist in other labour market performance indicators, such as the
employment rate and the unemployment rate.
Recently published data on regional labour market outcomes (LFS data) largely confirm
finding of the 2002 Census. However, they also indicate that the Northeast region has
the worst labour market results, followed by the Vardar and Southwest region, while the
Polog region displays lower than average unemployment rate (probably the LFS data do
account for the grey economy and hidden inactivity in this region20). According to the
regional statistics, in 2007: i) unemployment rate varied between 11.7% in the Southeast
region and 58.0% in the Northeast region; ii) employment rate varied from 25.0% in the
Northeast region to 62.3% in the Southeast region; and iii) participation rate varied from
43.9% in the Polog region to 70.5% in the Southeast region (see Table 17).
Table 17 - Labour market indicators and GDP per capita by the 8 (NUTS-3) regions

Nationwide
Vardar region
Eastern region
Southwest region
Southeast region
Pelagonia region
Polog region
Northeast region
Skopje region

Labor Market in 2007

Activity rate
Employment Unemployment
(15+)
rate (15+)
rate
56.3
37.3
33.8
57.9
32.7
43.6
59.2
47.4
20.0
55.5
33.7
39.3
70.5
62.3
11.7
63.6
41.6
34.5
43.9
32.3
26.4
59.5
25.0
58.0
53.1
33.3
37.3
Source: SSO database by regions, 2009.

GDP in 2007
GDP per capita
(in MKD)
173,385
179,645
127,027
110,771
159,347
168,560
80,366
86,436
289,622

The biggest gender participation gap is registered in the Polog region (37 p.p.) due to
the traditional non-participation of ethnic Albanian women on the labour market.

3. EMPLOYMENT POLICIES: SITUATION, DEVELOPMENTS AND

PRIORITIES

3.1.

Human resources development

According to the UNESCO's Education For All Development Index, which reflects the
progress in four areas (universal primary education, adult literacy, quality of education
and gender parity), the former Yugoslav Republic of Macedonia was ranked on the 31st
20

Angel-Urdinola and Macias (2008) find that informality (as proxied by percentage of workers registered
with the pension fund) differs considerably between the 8 major regions, from national average of 13%, to as
low as 5% in the Eastern region and highest 31% in the Polog region.

89

place in the world in 2006, within the group of high-score countries.21 Since even
composite indices cannot capture all aspects of the multifaceted human resources
development, the disaggregated analysis in the following sections aims to examine
whether the Macedonian education system is indeed aligned with the European Union
standards.
During the 2000-2006, the budget allocations to education (in percent of GDP) have
been among the lowest within the group of transition economies (Figure 16). The
situation has changed dramatically since 2006, given that the level of public expenditure
on education was raised to 5.4% of GDP in 2008. Collaboration between higher
education institutions and the various professional organizations has not been intensive,
implying that public education institutions have not managed to tap non-tuition private
funds.
Figure 16 - Public expenditure on education in transition economies,
Average for the period 2000-06 (in percent of GDP)
7.00
6.00

6.00

5.68 5.60 5.59

5.33

5.00

4.95

4.48 4.32 4.17

4.10

4.00

3.50 3.31

3.00

3.04 3.02

2.00

Macedonia

Albania

Romania

Serbia

Slovakia

Bulgaria

Czech Republic

Croatia

Poland

Hungary

Lithuania

Latvia

Slovenia

0.00

Estonia

1.00

Source: TransMONEE 2008 database, UNICEF Innocenti Research Centre, Florence.

3.1.1.

Pre-school and basic education

Net rates of pre-primary enrolments (as a percent of population aged 3-6) in the country
have been relatively low by international standards. It is estimated that around 33% of
children are included in preschool facilities, which is much lower compared to the
average for the advanced transition economies from the Central and Eastern Europe
and the average for the transition economies (Figure 17).22 However, as a consequence
of rapidly falling natality rates and more pronounced social stratification, the pre-primary
enrolments of children up to 6 years have been steadily declining during the past years
from 35,852 in 1999/00 to 20,256 in 2006/07, implying a striking reduction of 43.5%.
21

Even the designers of the index caution that it should be treated as informative only, because problems in
certain areas may not be captured by the proxy indicators (e.g. the survival rate to grade 5 as a measure of
quality of education).
22
The advanced transition countries are the 10 new EU member states (CEE-10): the Czech Republic, the
Slovak Republic, Poland, Latvia, Lithuania, Estonia, Slovenia, Hungary, Bulgaria and Romania. The
transition countries included in the data sample of the Innocenti Research Centre, in addition to the noted 10
countries, are: Albania, Bosnia and Herzegovina, Croatia, Serbia, Montenegro, Belarus, Moldova, Russia,
Ukraine, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

90

Children enrolled at the pre-primary level are more likely to come from more affluent
households.
The amendments of the Law on Primary Education in May 2007 introduced a threestage primary education organized in nine years. By the age of six, children are enrolled
in compulsory basic education encompassing a preparatory year, four years of primary
education and four years of lower secondary education (ISCED 1 and 2). In the 2007/08
school year, there were 997 primary schools and the pupils/ teacher ratio was 14.50
(SSO, 2009). This ratio was slightly above the unweighted average ratio of 13.7 for the
developed economies in 2007 (UNESCO, 2008). The standard deviation of pupils per
teacher ratios across the 8 statistical regions in the country is relatively low (1.43),
implying no significant regional differences. Despite the recent large-scale governmentsponsored computerization of the elementary schools, the material conditions are far
from satisfactory. Inter alia, the insufficient investment in basic education infrastructure
and unreformed curricula has encouraged the establishment of private elementary
schools. It is estimated that the proportion of students attending private schools of
primary (ISCED 1) education is 0.4%, which is considerably lower than the EU-27 and
CEE-10 average of 21% and 2.4%, respectively, in the 2006/07 school year (Source:
European Commission, 2008).
Figure 17 - Net rates of pre-primary enrolments (ISCED 0) in the transition economies
(1989/90 -2007/08, as a percent of population aged 3-6)
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2007

2006

2005

2004

2003

2002

2001

2000

1999

CEE-10 average

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

Macedonia

Average for 28 transition countries

Source: TransMONEE 2008 database, UNICEF Innocenti Research Centre, Florence.

The gross enrolment ratio23 in the basic education (ISCED 1 and 2) in 2006/07 was
95.7%, somewhat lower than the average for the new 10 EU member states from
Central and Eastern Europe (100.9%) and the overall average for the transition
economies (98.0%).

23

Gross enrollment ratio is calculated as the number of students enrolled in basic education, regardless of
age, as a percentage of the population of official school age for basic education, and hence can exceed
100%.

91

One of the most serious problems in the Macedonian primary and lower secondary
education is the grading policy, which inter alia, must encourage children to take
responsibility for their work and to provide incentives for improvement. The assessment
of pupil's performance in primary schools is biased, as 52.4% of the pupils have finished
their grade with "excellent" marks and 20.8% with "very good" final results. Such loose
grading policy reveals that the current examination system can no longer be considered
a benchmark for knowledge, skills and learning. For instance, the former Yugoslav
Republic of Macedonia participated in the Programme for International Student
Assessment (PISA) under the auspices of OECD in 2000 and 2002. It provides crossnationally comparable evidence on student performance which is measured in terms of
five levels of reading literacy. The proportion of students from the former Yugoslav
Republic of Macedonia who reached (the highest) Level 5 in 2002 was less than 0.1%,
whereas more than half of the students (63%) have not even reached Level 2. Not only
the present assessment distorts the incentives to improve and compete for knowledge in
the primary education, but also sets the initial perception on the erroneous "rules of the
game" in the society.

3.1.2.

Upper secondary education

Due to the unfavourable skill structure of the labour force and the poor employability
prospects of low-skill workers, the Macedonian authorities in May 2007 introduced legal
amendments that made the upper secondary education compulsory. In the 2007/08
school year, there were 107 upper secondary schools (high schools, technical and other
vocational schools, and art secondary schools), 4 special upper secondary schools and
2 faith-based secondary schools in the former Yugoslav Republic of Macedonia with an
average pupils per teacher ratio of 14.41. Upper secondary education (ISCED 3) is
provided by general secondary schools (gymnasia), vocational schools and specialised
secondary schools. Vocational schools offer courses lasting 3 or 4 years, including a
period of practical instruction. As a legacy from the communist system, vocational
education still covers 25 occupational clusters corresponding to as much as 238
educational profiles, out of which 42 for a 4-year education (downsized from 80 in 2005).
At the end of upper secondary education students sit a maturita, a final secondary
school exit examination which is a necessary precondition for university admission.
Students with an average grade in the secondary education higher than 4.5 (on a scale
from 1 to 5) are exempted from this final examination.24 The curriculum-based external
exit examinations (CBEEEs) have been introduced recently as a means for reinforcing
competition by comparison and improving the overall school quality.
Table 18 - Proportion of females (in percent of the relevant population),
2000/01 and 2006/07

Pre-primary education (ISCED 0)

The former
Yugoslav Republic
of Macedonia
2000/01 2006/07
48.4
48.7

CEE - 10
2000/01 2006/07
48.0
48.4

24

The maturita comprises of three exams with an additional practical examination for students in vocational
schools. The final secondary school examination in Macedonian is not standardised in that the MES
prescribes only the subjects in which examination should be carried out and schools and teachers have
/discretion over the exams content and assessment.

92

Basic education (ISCED 1 and 2)

General upper-secondary education (ISCED 3A)
Upper-secondary education (ISCED 3, all
programmes)
Post-secondary non-tertiary education (ISCED 4)
Tertiary education (ISCED 5)

48.3
56.5

48.3
54.7

48.3
59.2

48.2
57.9

47.9
7.3
44.2

47.3
12.5
54.5

50.1
58.0
56.1

49.1
55.9
57.7

Source: TransMONEE 2008 database, UNICEF Innocenti Research Centre, Florence.

The gender-sensitive analysis reveals that the proportion of girls in general uppersecondary education (ISCED 3A), in the former Yugoslav Republic of Macedonia in
2006/07 was 54.7%, somewhat lower than the average for the 10 new EU member
states, 57.9% (Table 18). Even so, male and female teachers still receive insufficient
training in gender issues, which impedes their potential as effective role models.

3.1.3.

Tertiary education

Changes in the enrolments and field of study in the higher education are indicators of the
extent to which the country is developing the skills needed for a modern knowledgebased economy. According to official figures, 64,254 tertiary students were enrolled in
the 2007/08 academic year, which represents a sharp increase of 59.7% compared to
the student enrolments in the 2000/01 academic year (Source: SSO, 2009). While
20,625 students finished the upper secondary education in the 2007/08 student year,
nearly 85% of them were enrolled in the first year of study in the 2008/09 academic year.
The rapidly growing demand for tertiary education in a country with official
unemployment rate exceeding 30% not only reflects the expected higher returns to
education, but also enables the unemployed to prolong their job search. The demand
has been encouraged by expanded supply of educational opportunities through
blossoming of private providers of tertiary education and rapid creation of state-funded
university degree programmes. For instance, the increased access to state-funded
tertiary education encompassed regional dispersion of undergraduate programmes and
establishment of new universities (University "Goce Delchev" in Shtip and University for
Information Technology in Ohrid). Since the deconcentration and decentralization of the
higher education have not been based on coherent cost-benefit analysis, there has been
growing public criticism that government education plans are, in essence, populist. At
the end of 2008, 81.7% of the students were enrolled in the state universities, 17.9% in
the private providers of tertiary education and 0.4% in the faith-based higher education
institutions.
There are a number of arguments that so far the more intense competition has brought
lower academic standards, rather than improvements in the quality of education per se:
-

Weak regulation of market entry has led to flourishing of for profit providers of
tertiary education, promising easy access to diploma;

Although envisaged by the Higher Education Law, the Evaluation Agency that is
supposed to conduct external assessment of the quality of education has never
become operational;

Due to the permanent underfunding and poor management of budgetary resources,

on one hand, and more intense competition from private universities, many state

93

faculties abolished the entrance examinations in order to attract more students;

-

The anecdotal evidence from many private universities suggests loose examination
policy. For instance, the share of students enrolled in the private universities in the
2005/06 academic year was 4.6%, whereas the share of students graduating on
time in private universities (i.e., three years later) increased to 10.6% at the end of
2008.25 No systematic research has been conducted so far to assess the
determinants of internal efficiency in the Macedonian higher education.

The simultaneous establishment of new private and state university degree programmes
does not seem to be on a competitive basis: private universities mostly target students
from affluent households, whereas the state universities aim to increase the access to
tertiary education by providing relatively inexpensive and geographically dispersed
university degree programmes. More important, the degree of marketisation of the
higher education is left to the market, rather than to a coherent national strategy.
The gender balance of enrolments is different at the tertiary levels than lower down the
education system. Participation rates of female students in the tertiary education (ISCED
5) have been steadily increasing from 44.2% in 2000/01 to 54.5% in 2006/07, which
seems to be a general trend in the European transition economies (Figure 18).
Furthermore, women are more likely to choose and graduate from social sciences,
humanities and arts, but are still under-represented among graduates in natural sciences
and engineering.
Figure 18 - Participation rates of female students in the tertiary education (ISCED 5) in
the European transition countries, 1989/90 - 2006/07 (in percent)
60.0
58.0
56.0
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0

Females (CEE-10)

2006/07

Females (MK)

Males (CEE-10)

2005/06

2004/05

2003/04

2002/03

2001/02

2000/01

1999/00

1998/99

1997/98

1996/97

1995/96

1994/95

1993/94

1992/93

1991/92

1990/91

1989/90

Males (MK)

Source: TransMONEE 2008 database, UNICEF Innocenti Research Centre, Florence.

The time-series analysis of the field of study in tertiary education in the former Yugoslav
Republic of Macedonia reveals that the share of students opting for social sciences,
business and law has increased from 24.2% in 2000/01 to 32.8% in 2006/2007, whereas
the interest for studying humanities and arts, natural sciences, agriculture, and services
25

Many undergraduate programmes in the private universities last three years.

94

has steadily declined (Figure 19). The inference based on the international comparison
must take into account the different levels of economic development and the countryspecific features. For instance, the number of students studying humanities and arts is in
line with the European experience, but the labour demand for their services is very
limited (Figure 20). Despite the substantial increase of the number of students studying
social sciences, business and law, their share is still low compared to the European
standards. It should not be surprising that due to the underfunding of research and
development activities by both the state and enterprise sector, the share of students in
natural sciences is also low by international standards. Lastly, the relatively high number
of students studying agricultural sciences reflects the traditional importance of this
export-oriented sector, particularly for the former Yugoslav markets.

Figure 19 - Percentage distribution by field of study

in tertiary education in the former Yugoslav
Republic of Macedonia (school years ending 2000
and 2006)
Services

4.5

Not known or unspecified

9.0
8.4

Health and welfare

Agriculture

7.7

Figure 20 - Percentage distribution by field of study

in tertiary education in the former Yugoslav
Republic of Macedonia and Europe (school year
ending 2006)

Services

Health and welfare

4.0
6.9

Agriculture

Engineering,
manufacturing
and construction

18.1
19.2

Engineering, manufacturing
and construction

7.4
10.3

Science

Science

Social sciences,
business and law

24.2

Social sciences, business and law

32.8

Humanities and arts

10.9
12.9

Humanities and arts

13.3
10.4

Education

2000

2006 0

Education

10

15

20

25

30

35

40

5 10 15 20 25 30 35 40 45 50

North America and Western Europe

Central and Eastern Europe
Macedonia

Source: Education for All (EFA) Global Monitoring Report, UNESCO, Annual Reports, 2004; 2009.

Since science and technology are vital to the knowledge-based economy, the European
Council set as a goal in 2003 that the total number of tertiary graduates (ISCED level 5a,
5b and 6) in mathematics, science and technology in the European Union should
increase by at least 15% by 2010. EU-27 had already achieved the benchmark before
2005 and the MST students accounted in 2006 for nearly a fourth of the total EU-27
student population. Unfortunately, the average 2000-06 growth of the tertiary MST

95

students in the former Yugoslav Republic of Macedonia was 0.5%, which is five times
lower than the EU-27 average (Source: European Commission, 2008).

Figure 21 - Net enrolment rates across different ISCED levels in selected countries in
2007
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Macedonia Central and
Eastern
Europe and
the Baltic
States

South
Eastern
Europe

Primary education (ISCED 1)

OECD

France

USA

Finland

Secondary education (ISCED 2, 3 and 4)

Tertiary education (ISCED 5)

Source: Berglof, E. (2008), Long-Run Growth and Competitiveness in Transition Economies: An

Unpublished Agenda, Paper presented at EBRD Conference, October.

3.1.4.

Adult education and training

Adult learning refers to all learning undertaken by adults after having left initial education
and training, however far that process went. Its scope spans all forms of formal, nonformal and informal learning in which adults participate in order to improve knowledge,
skills and competences for the purposes of work, employment, personal interest and
social activity. Notwithstanding the intrinsic value of all learning, the main focus in this
report however, is on learning related to employment, as underpinned by the European
employment objectives. This assumes not only the need for adults to regularly update
their skills in line with labour market needs, but also for government and social partners
to provide an environment that supports skills acquisition and updating.

96

Adult participation in lifelong education in the former Yugoslav Republic of Macedonia

made slow progress in the recent decade. The country has developed an Adult
Education Plan which is aiming to promote inclusiveness for individuals from ethnic
groups with low education levels. The education ministry has enacted law to create a
strategy for adult lifelong education (ALE) and secure financial resources for its
implementation.
The new Adult Education Law (adopted on January 15th 2008 by the Macedonian
Parliament) foresees establishment of a Council for adult education by the Government
in charge for strategic creation and planning of measures. According to this Law, the
adult education will be financed by the national state budget, the local self-government
as well as by the participants in the educational process. The main goal of the Law is to
provide educational opportunities for everyone and for all adult groups in line with labour
market demand. Every person who is at least 15 years old can participate in certain
certified adult education programmes if he or she fulfils the conditions set with the
respective programme implemented by accredited institution for adult education. The
person enrolled signs a contract to participate in the adult education programme.
The introduction of new content such as working with a personal computer, word
processing, graphics and internet use has decisively changed the direction of adult
education. State and private organizations have hired young teachers and specialists to
introduce new material on information technology. However, since the computer skills
teachers use the internet and necessarily have good English skills, they tend to be wellinformed not just about their own field, but also about general political and economic
developments, and can easily find other jobs. The young teachers' know-how is an
important profit-making factor for institutions of adult education. They have introduced a
fundamentally new way of thinking in numerous institutions, often under considerable
pressure and through discussions and debates. Many were even promoted in the
hierarchy from their former status of freelance teachers to employees and to more senior
positions. The workers' universities are a case in point.

3.2.

Wages, taxes and benefits

This section analyses few labour market institutions, such as wage formation, labour
taxes and unemployment benefits, all of which affect behaviour on both sides of the
labour market and hence labour market outcomes. The analysis shows main issues in
the areas, as well as possible reforms/measures which might improve performance.

3.2.1. Wage formation

Wages are fundamentally important for workers and their families at all development
levels because they determine the living standards. In addition, wages are important
from societal viewpoint, for the economic progress and welfare. On the other hand,
wages are part of the firms costs. Hence the importance of managing this conflicting
interests and designing effective wage negotiation system. According to the ILO and
Council of Europe (2006), wage formation in the former Yugoslav Republic of Macedonia
is highly decentralised. In particular, whereas wages in the public sector and in large
private firms are mainly determined through collective bargaining, wages in micro and
small firms are predominantly determined at enterprise level.

97

In line with the international experience, wage setting and negotiations are defined in the
Labour Law, Law on Civil Servants, Law on Payment of Wages (for the public sector)
and general, branch and employer-level collective agreements. In addition, wages and
wage grids for certain sectors can be determined in specific laws, for example Law on
Army. Wages of civil servants are based on a points-based system, where number of
points depends on the job position, education, experience etc. and are defined in the
Civil Servants Law. For each civil servant, number of points is multiplied by the value of
the point. Government and council of local self-governments determine the value of the
point for the central government civil servants and municipal civil servants, respectively.
On the other hand, wages in the rest of the public administration (non-civil servants)
depend on complexity factors (or coefficients) for each job position which are set more
generally in the General Collective Agreement (GCA) for the public sector and in details
in the branch area collective agreements, such as for education, culture, child protection,
health, etc. These factors are then multiplied by the lowest wage for the least complex
job, which is quarterly or annually agreed and published by the signatory parties of
collective agreements. In the private sector that is covered with collective agreements
the wage system is similar to that in the public administration (non-civil servants), based
on complexity factors and lowest wage for the least complex job.
Besides basic wage, there are several wage supplements (or additions) both in the
public and private sector, such as wage supplement for overtime work, night work, work
in shifts, work during public holidays, etc. Workers are also entitled to compensations for
sick leave, for business trips, annual leave compensation, wage compensation while
obtaining higher education or qualifications, etc. In addition, until January 2009,
employers were paying to their workers a food and travel allowance, if
meals/transportation to and from working place were not provided by the employer, but
were abolished with the introduction of the gross wage system.
The 2009 reform in the area of payroll taxes showed that there is diversity across the
public institutions in the area of wage setting and that fiscal control over wage bill is
rather loose. In this respect, the MLSP has made few attempts in the past to prepare a
law that would define the basis of the system of wages in the public sector (one such
proposal was presented to the Government in May, 2009), but there is opposition from
several government institutions who claim to be too specific to be regulated by a general
law. Nevertheless, the amendments to the Civil Servants Law from mid 2009 extended
the scope of the Law to several government institutions.
According to the Labour Law, collective agreements are signed on a national and branch
level, as well as enterprise level. Two collective agreements should be signed on a
national level, GCA for the private sector (or economy) and GCA for the public sector.
The former is signed between the representative trade union and employers'
organisation, whereas the latter between the founder of the public institution(s) and the
trade union.
General/branch collective agreements apply and are obligatory for employers that are
members of employers association, signatories of the collective agreement or those that
joined the association additionally. Collective agreements define rights and obligations of
the signatories, where the legal standards should be applied directly, and cannot reduce
the rights defined in the Labour Law itself. Parties of the collective agreement should
negotiate bona fide for concluding a collective agreement when changes are made in the
Labour Law that concern issues covered in the collective agreement.
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Collective agreements are binding for all signatory parties, parties that additionally
became members of signatory associations or joined the collective agreements.
Collective agreements on an individual (employer) level are valid for all employees,
including those that are not members of a trade union or the trade union that signed the
agreement.
Following the adoption of the 2005 Labour Law, all collective agreements had to be renegotiated in order to be in line with the Law. GCA for the private sector was signed in
mid-2006 while the one for the public sector was agreed upon only in early 2008.
Additional change in the GCA for the private sector was undertaken t the beginning of
2009 in order to implement the gross wage reform. Ten collective agreements at a
branch level were harmonised with the Labour Law while there are about 20 additional
branch-specific collective agreements which have not been adjusted to the changes in
the Labour Law. There are several enterprise level collective agreements in force but
there is no precise information on their total number, since the MLSP is not obliged to
keep record of such collective agreements.
Whereas there is no limitation on the wage growth in the private sector (it should follow
productivity growth), there is no automatic adjustment (or indexation) of wages in the
public sector. Recently, in 2008, the Law on Payment of Wages was amended, providing
a gradual, 3-year increase of public employees wages by 10% per annum, in October
2007, 2008 and 2009. Though, after a period of actually frozen wages, this increase(s)
should preserve and even increase real wages (annual inflation in 2008 was 8.3%), the
authorities should consider some regular indexation formula. After the increase of
wages in October 2008, due to the ongoing national and global economic crises, the
Government made a decision to postpone (for indefinite time) increase of wages in
public administration that was planned for October 2009.
There is no statutory minimum wage for the private sector in the former Yugoslav
Republic of Macedonia, but the minimum wage can be negotiated as part of a separate
settlement between employers and union representatives, i.e. in a branch collective
agreement. Due to the fear of further increase of the number of unemployed, there has
been a little progress in the establishment of the minimum wage for the private sector.
This issue has been several times on the agenda of the Economic and Social Council,
but without clear progress. In the course of adjustment of the General Collective
Agreement for the private sector with the 2005 Labour Law, there was disagreement
between trade unions and employer organisation: while trade unions pushed for setting
a nationwide minimum wage in the collective agreement, employers organisation
agreed only to set minimum wages by branches arguing that a relatively high nationwide
minimum wage might reduce competitiveness of the low-pay sectors, whereas low
minimum wage would be meaningless for high-pay sectors. Finally, they agreed that
minimum wages should be set at a branch levels. Indeed, some branch level collective
agreements (for textiles and leader industry, construction etc.) have established
minimum wages, which are approximately at a level of about 50% of the average net
wage in the branch and they usually require annual adjustment with the inflation rate.
Still, setting a national minimum wage is one of the objectives set in the NAPE 20092010.
However, given that provisions of collective agreements are applicable only to parties of
the agreement, even if stipulated, minimum wages and wage grids are not necessarily
binding to the entire economy which limits the effectiveness of collective bargaining in

99

the private sector. In addition, minimum wage would not improve the position of majority
of workers engaged in the informal economy.
In the absence of statutory minimum wage, the minimum floor for payment of the social
contributions (so-called minimum reference wage) set by the Labour Law acts its
substitute.26 However, the minimum floor is not an effective tool for protecting workers
living standard since workers could still receive lower wage and pay contributions on the
prescribed minimum; it only protects government revenues the rational of their existence
being guaranteed minimum pension.
The minimum net wage for the public sector was set in 2006 at MKD 5,040 (or around
EUR 85) per month which was increased by 10% in 2007 and 2008, along with the
across the board increases of wages of public administration. At the time of introduction,
the minimum wage in the public sector was set at 37% of the average net wage in the
economy, while currently is at a level of about 30 of the average net wage.27 There are
no provisions for automatic adjustment of the minimum wage in response to price or
market developments.
The ratio of minimum to average wage in the former Yugoslav Republic of Macedonia is
lower than the average of the South Eastern Europe region and Central and Eastern
European Region28 and unlikely to discourage much employment (Boeri and Garibaldi,
2009).
There are several studies exploring the issue of possible introduction and level of
minimum wage in the country. For instance, Rutkowski (2008) argues that a country
facing high unemployment and informal employment, as is Macedonia, should not rush
into setting a statutory minimum wage. Given the high youth unemployment and high
informal employment in Macedonia, high minimum wage, for instance, might create
barriers to creation of entry level firms (UNDP, 2006).
On contrary, conventional arguments for introduction of a minimum wage are that
minimum wage protects workers against wage deflation and support the economy by
avoiding excessive declines in aggregate demand, acting as an automatic stabilizer
(ILO, 2009). Angel-Urdinola (2008) argues that given the imperfect competition in
Macedonia (due to high discrimination and low mobility) and monopsonistic labour
market, firms can allow to pay (female) workers below their marginal product of labour,
which reduces their supply of labour. In such situation, if minimum wage is introduced at
or below competitive market wage, overall employment might increase and the gender
pay gap decrease because a minimum wage is likely to be more binding for low-skilled
women than for low-skilled men. However, additional evidence is needed to define
regional labour markets in Macedonia as monopsonistic ones. In addition, in a country
with high unemployment, increasing labour supply might not be a primary concern.

With the gross wage reform, the prescribed minimum reference wage was reduced from 65% of
the average net wage to 50% of the average gross wage.

26

27
From January 2009, wages in Macedonia increased substantially (the average wage increased by 13%
compared to December 2008) since the food and travel allowance are now incorporated in the wage and
reported as such. In certain sectors, these non-taxed allowances were as high as the workers wage.
28
The analysis in the report of the ILO and Council of Europe (2006) shows that the minimum wage in FYR
Macedonia is higher that the average of South East Europe and and Central and Eastern European Region.
However, at that time the definition and reporting of wages in Macedonia did not include food and travel
allowances and hence the wages in Macedonia were not comparable with those in (most of) the other
countries.

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3.2.2. Taxes and social security contributions

High labour taxes and social contributions adversely affect labour demand by increasing
labour costs. Moreover, they might reduce labour supply by lowering after tax wage.
In this regard, a deep reform of the Macedonian payroll system was implemented in
January 2009, with a view of reducing the tax wedge, the administrative burden on firms
and reducing informal employment and evasion. This section begins with exploration of
the previous labour tax system with its main deficiencies, then introduces in detail the
reformed system and end with an initial assessment of the reform.

The old wage system

Labour income (wage) in the former Yugoslav Republic of Macedonia was taxed by
personal income tax (PIT) and social security contributions which were both paid by the
employer, on behalf of employees. With the introduction of a flat PIT and reduction of
previous levels (15, 18 and 24%) to only 10%, the former Yugoslav Republic of
Macedonia belongs to the group of countries with the lowest personal income tax in the
world. However, the overall tax burden remained relatively high, in particular for lowskilled labour, which is most vulnerable to unemployment and informal economy. The
high labour tax burden (tax wedge) on low-wage workers was caused by the minimum
base for payment of social insurance contributions which was prescribed at 65% of the
national average wage rather than on the individual wage. For instance, in the former
Yugoslav Republic of Macedonia, a worker who earned the average wage and who
received tax free fringe benefits (food and travel allowances), faced a labour tax wedge
of around 33%.
By contrast, for a worker who earned only half of the average wage, the labour tax
wedge (including tax free fringe benefits) was higher with around 39%; that is, the
system was regressive. Hence there was a need to reduce or abolish minimum social
contributions, though the latter policy option should be considered with caution given the
statutory guaranteed minimum pension.
Firms in the former Yugoslav Republic of Macedonia would have usually given their
workers tax free allowances (hot meal allowance, travelling allowance for transport
between home and workplace, annual leave allowance, New Year allowance) in cash or
in kind. If paid up to a maximum prescribed amount, these allowances were not taxed by
social contributions, but only with PIT. Given that these allowances were irrespective of
the worker's wage, they reduced somewhat the regressivity of the system caused by the
minimum social contributions. In addition, there was a general personal income tax
exemption which also preserved some progression in the personal income tax system as
it led to an increase of the average income tax rate with the income.
In addition to the high labour costs, the old payroll system created relatively high
administrative burden because the procedure to calculate labour taxes was highly
complex for firms as well as for the tax administration (grossing up of net wages). This
complexity was due to various peculiarities in the former Yugoslav Republic of
Macedonia, such as the consideration of minimum or proportional social contributions
depending on wage levels, different income bases for the different social contributions
and the fact that net wages had to be used as a starting base for calculating labour

101

taxes, although the rates of labour taxes were based on gross wages, thus requiring a
grossing-up procedure (Leibfritz, 2008).
The tax and social contribution systems were therefore reformed in 2009 in order to
reduce their adverse effects on the labour market by reduction of the labour tax wedge,
in particular for low-skilled labour, and by simplification of labour tax calculations and
payment.
The newly designed wage system
In order to reduce (the regressivity of) the tax wedge, reduce administrative burden on
firms and stimulate domestic and foreign investment, the Government carefully designed
a comprehensive reform package and an Action Plan for its implementation. The reform
that was implemented from 1 January, 2009, consisted of:
- full harmonization of the basis for payment of the three (mandatory) social
contributions;
- gradual reduction of social contributions' rates from 32% in 2008 to 27.9% in 2009 and
further to 22% in 2011;
- introduction of a gross wage system: wages would be negotiated on a gross level, tax
free allowances would be integrated into wage, liable person for the payment of PIT and
social contributions would become the worker, instead of employer (as currently), etc;
- integrated collection of the PIT and social insurance contributions in the Public
Revenue Office.
The implementation of the reform required legislative changes, some of them being only
terminological, whereas some were much more complex. In this regard, a new Law on
Mandatory Social Insurance Contributions was prepared defining the liabilities for
payment of all social contributions and the personal income tax, their calculation and
payment, as well as control over the payment, issues which were previously defined in
the separate insurance laws and somewhat inconsistent. The statutory rights arising
from the insurance status are still regulated in the separate laws for each area. In
addition, changes were made in the Labour Law (Official Gazette, No. 161/2008). In
addition, there was a need to re-define some of the statutory rights that were tied to the
(net) average wage, for example pension indexation, etc.
The expected outcomes of the reform were:
- transparent and simple system of payroll taxes and labour costs;
- reduced administrative burden on firms calculation of social contributions and the PIT
would be simplified and firms would now pay all contributions and the PIT on a single
account;
- improved control over payment and hence reduction of the grey economy and
improved tax collection;
- greater job creation as a result of the reduction of the tax wedge for low-wage earners
and lower informal employment;

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- greater social insurance (especially pension) for workers.

In addition, in the phase of design of the reform, the Ministry of Finance, in cooperation
with the World Bank, has made simulations on the influence of the reform on formal
employment. Three different scenarios were prepared, which, ceteris paribus, ranged
from 2,400-7,750 new jobs created.
Initial assessment of the effects of the reform
The success/failure of this reform can be measured in terms of wage and employment
effect. Data from the LFS 2009-q1 show continuing labour market improvement, which
might indicate that the reform helped employers to overcome this difficult economic
period through reduced labour costs. Though at the same period several other countries
reduced labour taxation (including social contributions) in order to lower business costs
and/or stimulate aggregate demand in view of the economic crises, the gross wage
reform in the former Yugoslav Republic of Macedonia was designed well before the
cries, from April 2008 and hence cannot be regarded as a policy response to the crises.
According to data from the SSO, the average monthly net-wage in January 2009
increased by 13% compared to December 2008, which can be viewed as (the effect of)
incorporation of food and travel allowance into the wage. Contrary to the expectations
(mainly of trade unions) that the reform would hurt low-paid workers since employers
would not incorporate these allowances into the wage, published data show that average
wages in the lowest-paid sectors increased in line with the national average. For
example, the average net wage in the textile industry increased by 17.6% in January
2009 compared to December 2008, by 20% in the leather industry (manufacture of
leather and leather products) and by 16% in the civil engineering sector.
At the same time, the increase of the average gross-wages in January 2009 compared
to December 2008 amounts only 4.5%. The same increase holds for the low-paid
production sectors, whereas the average gross wage in high-productivity (high-paid)
sectors decreased. For instance, the average gross wage in the financial sector declined
by 4.5%. These developments suggest that the intended effects of the reform were
fulfilled: incorporation of food and travel allowance into wage (at least, part of previously
granted allowances), greater social security for workers (social contributions are now
paid on whole wage, including the part that was previously paid as a non-taxable
allowances), and lower tax wedge and labour costs since the increase in the net wage
was accompanied by a much smaller increase or decline in gross wage (or labour costs)
depending on the production sector.
In the course of the year, wage growth continued. In particular, the annual rates of
increase of gross and net wages in January 2009 were 17.2 and 24.1%, respectively,
whereas the rates of growth rose to 17.5 and 27.4% in June 2009, respectively. In
addition, there are indicators that the reform reduced informal economy and increased
tax compliance. In particular, whereas in December 2008, 7.5% of workers did not
receive wage on time-wage arrears (this number was constantly declining but very
modestly) in January 2009 only 2.6% of the workers had wage arrears. This share
however increased to 4.6% in June 2009.
Regarding the planned and actual revenues of social security funds, the total amount of
revenues from social insurance contributions collected by the Public Revenue Office is
by 5.6% higher than the planned revenues from social insurance contributions for the

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2009-q1, and by 4.0% higher than the revenues collected in the same period last year,
despite the decline in the other tax revenues due to the lower economic activity.
Revenues from contributions in the Pension and Disability Fund increased by 3.5%
compared to the revenues collected in the same period 2008 and those of the Health
Insurance Fund, are 10.7% higher than the planned revenues, and by 4.9% higher than
the revenues collected in the same period last year.

3.2.3. Income support for the unemployed

The rationale for the existence of income support for the unemployed (i.e.
unemployment benefits) is to provide unemployed with a search budget until they find a
job. Though, conditional on the design of the system (the level, duration of benefit, etc.)
it might lead to unemployment trap or low-intensity job search. In this regard, for
instance, the duration of unemployment benefits in the former Yugoslav Republic of
Macedonia have been downsized few times during transition, as presented below. The
level of benefits (i.e. the replacement rate) seems to be comparable to that in the peer
countries (countries in the region and some NMS-10), though from policy perspective the
authorities might consider introduction of a flat instead of current means-tested benefit.
The legal basis for the unemployment benefits in the former Yugoslav Republic of
Macedonia is the Law on Employment and Insurance in Case of Unemployment (Official
Gazette No. 37/1997, with the most recent change in Official Gazette No. 29/2007).
Unemployment insurance is financed by an unemployment insurance contribution of
1.4% of the gross wage29 and operated through the ESA. In December 2008, 23,565
persons received income support which is about 7% of total number of registered
unemployed persons, the major category within the unemployed that receive income
support being redundant workers (see Table 19). This percent is quite low if compared to
EU economies. It reflects labour market situation in the country in which majority of
unemployed do not have any prior work experience (first time job-seekers) or are LTU
who had an unsuccessful job search and exhausted their eligibility, as well as the
incentive to register as unemployed while being inactive or informally employed (see
below).
Table 19 - Health and income support beneficiaries, 2003-2008
health
insurance
year
2003
2004
2005
2006
2007
2008

29

income
support

registered
% of
% of
unemployed beneficiaries unemployed beneficiaries unemployed
390,361
238,123
61
47,324
12
391,072
252,612
65
45,867
12
359,989
242,679
67
40,124
11
366,551
248,564
68
30,572
8
357,166
244,717
69
24,686
7
343,363
231,508
67
23,565
7
Source: Employment Service Agency (http://www.zvrm.gov.mk).

redundant
workers, % of
income
support
55
55
63
65
65
65

The contribution rate was 1.6% till 2008, and will be further reduced to 1% in 2011.

104

Eligibility conditions in the former Yugoslav Republic of Macedonia, as in most CEECs,

restrict unemployment benefits to workers that are unemployed roughly in the sense of
the ILO definition of unemployment, that is actively searching for a job and meeting
some administrative requirements. The latter are re-registering on a monthly basis,
attending interviews with employers arranged by the ESA, accepting a suitable job offer
in terms of educational attainment and knowledge, accepting participation in ALMPs, etc.
Registered unemployed that do not fulfil these criteria are deleted from the registry for 1
year and loose the right to the unemployment benefit. In practice, re-registration is
usually the main and sole activity in the job search requirement.
However, despite the legislative requirements, the unemployment registry is inflated by a
high number of people who are not actively looking for work since the definition of active
search includes individuals with different job search intensities. Some individuals search
jobs only by registering in the ESA. Other semi-passive seekers place an ad and/or
check for jobs with family/friends, while more active seekers undertake several
activities to seek employment. The incentive for this over-registration is free health
insurance provided by the ESA (see section 3.3.1). Indeed, the LFS 2007 data show that
84% of the unemployed register themselves at the ESA but one third of the unemployed
relied on being registered in the employment office as the only job seeking mechanism,
Only 53% of LFS unemployed used more active job search method, such as
placing/answering an ad, contacted employers, and/or participated in job interviews.
The relatively low proportion of registered unemployed that receive unemployment
benefit (only 7%) is also due to the strict entitlement conditions that restrict benefits to
people who have a sufficient record (minimum 9 months continuous work or 12 months
with breaks in the last 18 months) of contributions from work. Benefit duration ranges
between 3 and 12 months, though maximum benefit duration has been adjusted
downwards few times, from 18 months, to 14 months and 12 months from 2006. It
depends on work experience prior to becoming unemployed, with a possibility for
indefinite duration (until retirement) when some requirements are fulfilled (see Table 20).
Table 20 - Unemployment benefit schedule
Duration
1 month

Work History
at least 9 months continuous or 12
months in the last 18 months
2 months
18 months - 2.5 years
3 months
2.5 - 5 years
4 months
5 - 7.5 years
5 months
7.5 - 10 years
6 months
10 - 12.5 years
7 months
12.5 - 15 years
8 months
15 - 17.5 years
9 months
17.5 - 20 years
10 months
20 - 22.5 years
11 months
22.5 - 25 years
12 months
25 + years
Until retirement / at least 15 years of experience and 5
new employment
years remaining to retirement
Source: Authors own presentation on the Law on Employment and Insurance in Case of
Unemployment.

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Only small proportion (10-15%) of the entitled unemployed receive the regular
unemployment benefit, while for the majority of unemployed workers the scheme
provides early retirement allowance until they reached retirement age and become
entitled to old-age pension.
The replacement rate, that is the ratio of unemployment benefit to the average net
monthly pay of the worker in the last 12 months, equals 50%. Afterwards, the
replacement ratio is 40%, i.e. ESA implements a declining benefit schedule. The
replacement rate in the former Yugoslav Republic of Macedonia is within the range of
NMS rates (for the first month of unemployment), which in 2003 ranged from 25% in
Lithuania to slightly over 60% in Slovenia and Hungary, and lower than the EU-15
average of 63%. Although Macedonian regulation requires that the level of
unemployment benefit be reduced for any income earned while unemployed, it is a
means-tested benefit, it is rarely applied due to a difficulty in detecting such income, low
capacity and workload of the ESA staff. In this regard, the introduction of a flat-rate
unemployment benefit may simplify benefit administration and produce savings in
resources (including staff). Among CEECs, for example, Hungary, Estonia and Poland
use a flat-rate unemployment benefit subject to quarterly or annual indexation
(Mojsoska, 2005).
There is no prescribed minimum level for the unemployment benefit, whereas the upper
limit is the average wage. The average benefit is about 35% of the average net wage in
the country. The lower replacement rate of the benefit might be explained by the fact that
prior to becoming unemployed beneficiaries wages were below the average wage.
Overall, the average level of benefits in NMS and Western Balkan countries (including
the former Yugoslav Republic of Macedonia) is low compared to developed economies.
However, labour market and other relevant circumstances between developed and these
economies differ substantially. The economic environment in the latter countries is
characterised by a low administrative capacity, weak enforcement and a large grey
economy providing ample possibilities for informal work hence justifying relatively low
unemployment benefits that would not create employment disincentives and are fiscally
sustainable (Van Ours and Vodopivec, 2004).
Lehmann (2009) assesses the possible negative impact of unemployment benefits on
search intensity of unemployed in the former Yugoslav Republic of Macedonia and the
locking-in effect based on the LFS data and finds that this effect is insignificant. The
result was expected given that the income support is almost evenly distributed along the
unemployment duration (see Table 21).
Table 21 - Distribution of LFS unemployment by duration and incidence of income
support, 2007
By duration
<3months
3-6 months
6-12 months
12-18 months
18-24 months
24-36 months

Males
1.97
4.54
5.87
4.29
3.90
9.12

Incidence of
income support
70.91
67.72
60.98
60.00
62.39
65.88

Females
1.86
3.97
8.26
5.25
6.47
10.24

Incidence of
income support
41.38
48.39
50.39
46.34
43.56
54.37

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36-48 months
48months and over

10.34
59.98

65.05
69.23

11.20
52.75

44.57
46.36

Source: Lehmann, 2009.

To sum up, the comparative analysis of the level, duration and eligibility criteria of the
system of income support to the unemployed in the former Yugoslav Republic of
Macedonia suggest that the system is appropriately designed to the current labour
market context and relatively high informal economy. Whereas there might be a case for
scaling down eligibility criteria in order to protect the living standard of unemployed and
their families, this should be addressed through the welfare system.
The authorities might, however, consider possible introduction of a flat-rate benefits
indexed to inflation, for instance on quarterly level because the maximum duration of
benefits is 12 months. This would ease some ESA resources, would match the nature of
the benefits as income support while searching for a job, and would increase
redistribution function of the system.

3.2.4. Child benefits

Child protection in Macedonia is regulated with the Child Protection Law (recent changes
are published in the Official Gazette, No. 98, 107/2008 and 83/2009), in order to support
families with upbringing children. It can be viewed as income support programme for
working poor households, but with the 2009 legal changes and the introduction of the
conditional cash transfers the system would also prevent under-investment into
education of poor/socially excluded households.
The child protection system consists of following rights: child allowance, special
allowance, assistance for equipment for a newborn and co-financing of public child care
institutions. As a word of caution, we should note that some of the changes in the Law
from 2009 would apply from 1 December 2010, and some from the date of accession of
the former Yugoslav Republic of Macedonia into the EU.
Child allowance is provided to poor households where at least one of the
parents/caretaker is working. Eligibility conditions include both categorical criteria related
to the parent and the child and an income based criteria related to the total household
income. Child allowance is granted on the basis of the age of the child, i.e. up to 18
years of age and if the child attends school on full-time basis and on the household
income. The parent/caretaker should be in one of the following statuses: employed,
pension/disability insurance beneficiary, in army service, unemployment benefit
recipient, a permanent financial support user, disabled veterans or a user of a family
disability allowance, registered farmer and/or craftsmen. Conditional upon certain
requirements, child allowance can also be granted to custodians of children.
Household income is calculated as a cumulated income of all family members during the
previous year, including wages, income from agriculture, pension, financial social
assistance, scholarships, dividends, etc.
The eligibility income threshold is defined as 16% of the average net wage, for couples,
and 32%, for single parents. The amount of the benefit is:

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- 4.6% of the national average (net) wage for children up to the age of 15 or as long as
they are full-time primary school pupils;
- 7.3% for children between the age of 15 and 18, as long as they are in secondary fulltime education.
The total monthly amount of child allowance for one family cannot exceed 1,800 MKD
(slightly above 10% of average wage in December, 2008).
The amended Law from 2009 however prescribes some changes in this area, which will
come into force with the accession of Macedonia into the EU. For instance, the eligibility
income threshold would be up to 15% of the average net wage in the previous year, for
couples, whereas for lone parents the threshold set for couples should be increased by
75%. In addition, the maximum cap would be 15% of the average net wage.
Table 22 Number of beneficiaries of child protection rights

2006
2007
2008
1

Child allowance
amount
Househ
(in ths.
children
MKD
olds
den)
17,204
32,540
21,121
17,189
32,392
22,091
16,510
31,016
21,867

Special allowance

Support for newborn

househol
ds

childre
n

amount (in
ths. MKD
den)

househol
ds

children

amount (in
ths. MKD
den)

4,374
4,664
4,979

4,545
4,843
5,175

15,280
17,430
19,955

514
497
500

522
505
508

1,738
1,864
1,911

Source: Ministry of Labour and Social Policy.

Note: Annual data are averages, whereas for 2008, data are for March, the latest available
information.

In December 2008, 31,016 children from 16,510 fhouseholds received child allowance.
The average (monthly) allowance per household was 1300 MKD (slightly above 20 EUR)
and per child 710 MKD about 12 EUR). The total cost for the child allowance was 22
millions MKD that is 0.01% of GDP, and along with the special allowance for children
and the support for a newborn, the spending was about 0.02% of GDP.
In 2008, the Government increased the rights granted under the Child Protection Law,
as part of its demographic strategy and policy. In particular, the previously guaranteed
assistance for equipment for a newborn was replaced with a one-off financial support for
a newborn (for the first three children) in the amount of 30% of the average wage. In
addition a new right was introduced, that is parent allowance for a second, third and forth
child, in municipalities with replacement rates of less than 2.1. The schedule for this
entitlement is:
- for second live born child - 30% of the average net wage, for a period of 9 months;
- for third live born child 50% of the average net wage for 10 years;
- for forth live born child 70% of average net wage, with a duration of 15 years.
If a mother gives a birth to a forth live born child when using the benefit for the third
child, she would get 100% of the average net wage.
In 2009, the latter amendments to the Child Protection Law were ruled out by the
Constitutional Court, i.e. the court made a decision that the Law is discriminatory and
should apply to whole territory of the country. However, given the budgetary constraints,

108

the Government approved amendments to the Law that foresees keeping only the third
child benefit, and a transitory period of 9 months for phasing out the second and fourthchild benefits. In addition to these changes, the one-off financial support for a newborn is
granted only for the first newborn baby in the family instead of for the first three children.
Additional issue, more important for the labour market performance is that such high
child benefits might have a negative (substitution) effect on female participation in the
labour market, especially for females from ethnic minorities who already have very low
participation, as well as those with lower educational level. On the other hand,
international experience does not show strong evidence for the effectiveness of (direct)
population policies. Some other policies, for instance better access to child care public
services, flexible working arrangements, policy of taxation of a family instead of
individual, etc., might be more effective tools in promoting higher fertility rates, while not
having an adverse effect on female participation.

3.3.

Employment services and active labour market programmes

Public employment services (PESs) have a potential to reduce failures in the search
market that diminish the efficiency and effectiveness of the job-matching. Fulfilling this
potential depends on the organisational and institutional structure of the employment
services itself and other labour market institutions, on the capacity of the staff, workload,
overall labour market context in the country, etc.
In this section, the public employment services in the former Yugoslav Republic of
Macedonia, its efforts for capacity improvement, passive and active policies
implemented by the service, etc, are explored in details. Recommendations for better
and more efficient operation are also developed.

3.3.1. Public employment service

The Employment Service Agency (ESA) is a public institution and legal entity with a
controlling Administrative Board (see Figure 22). It is a tripartite body consisting of 9
members, 5 nominated by the Government, and by 2 representatives of leading trade
union and employers organisations. Members of the Board nominate the Chairman who
keeps the position for 4 years. The ESA is managed by a Director nominated by the
Minister of Labour and Social Policy and appointed by the Government. Both the
Director and the Administrative Board have 4-year mandates and can be re-appointed.
Figure 22 - Institutional organisation of the Employment Service Agency (ESA)

Administrative Board
Minister of Labour and
Social Policy

Managing Director of ESA

Head Office

30 Local employment
centres

109

Source: Authors' representation of the ESA structure (see www.zvrm.gov.mk).

According to the current regulation, the Ministry of Labour and Social Policy (MLSP)
supervises the performance of the ESA only from legislative perspective. However, there
is no legislation on the mutual responsibilities of the MLSP and the ESA, their formal
communication etc., which creates practical problems for an effective design and
implementation of the employment policy.
Despite that the minister for labour and social policy is responsible and accountable for
ESA by the law, s/he does not have real executive power. This lack of institutional
accountability of the agent, the ESA, to its principal, the MLSP appears to give rise to a
principal-agent problem (Mojsoska, 2005). The agency problem might be further
exacerbated by the presence of multiple stakeholders in the tripartite structure of the
ESAs Administrative Board. Besides positive effects of the tripartite Board, such as
involvement of social partners in the design/implementation of policies, there are also
negative effects, for example sometimes different objectives and views of different
stakeholders. In addition, not all major employees and employers organisations are
represented in the Board which creates tensions among the organisations and with the
Government (see section 3.5.2).
Hence, there is a room for an improvement in the institutional and organisational
structure of ESA to address the principal-agent problem, which can be drawn on the
experiences of other countries, for instance the Minister of Labour might be either a
permanent chairman of the board or s/he would appoint the chairman and director
(World Bank, 2003-b).
The ESA structure comprises of a head office and 30 local employment centres (Figure
22). Under the CARDS project 2004-2005, the head office in Skopje was reorganised to
include 6 departments. Local employment centres have a status of organisational units
which usually comprise of four departments: placement service, employment
programmes, vocational guidance and unemployment benefits. The Skopje
organisational unit is by far the largest both in respect to the staff and activities. It covers
about 20% of the total ESA staff and about 1/3 of all activities within the ESA. Selected
local offices act as ESA regional level.
As Versa (2009) reports, the management system of the ESA is quite centralised, at
least in regards to active policies, which prevents flow of data that are processed on
central level to the local offices. The latter do not receive aggregated statistical data for
the whole territory, have no role in monitoring the active policies and hence cannot
contribute/give recommendations for improving the effectiveness of the programmes,
say by better targeting, or changing the scope of different active policies based on field
findings. Some improvement in the area of information flow from central to local level
has been achieved recently through establishment of Intranet where more detailed
information is provided, but the remaining concern is the lack of interest of the local ESA
staff for the data. Hence, their awareness, knowledge and role have to be improved.
Figure 23 - Organisational chart of the ESA

110

ESA Managing Director

ESA Executives and Advisors
Head Office

Director' Support Office

Active Employment
Policies

Research and Analysis

Unemployment Insurance

IT

Financing and Accounting

HRD

Local employment centres

Placement

Employment programmes

Vocational Guidance

Unemployment Benefits

Source: Authors representation of the ESA structure (see www.zvrm.gov.mk).

Local distribution of ESA shows that with coverage of 70 thousands citizens per local
office, the former Yugoslav Republic of Macedonia is close to the average of the PESs in
the NMS and neighbouring countries. A local office in the former Yugoslav Republic of
Macedonia on average covers an area of 833 km2 which is low compared to either
CEECs average (943 km2) or the average for developed economies. However, one
must be cautious in interpreting these two indicators since they should be related to the
overall labour market state in the country, i.e. high unemployment in the country. On the
other hand, ESA is an integrated PES which provides all services: unemployment
benefits, placement services and active programmes, which is not the case in all EU
countries, but was the case in most communist countries.
As a quantitative indicator of how clients are served or what is the burden on the ESA
staff we can use the number of staff per local office. With an unemployed to staff ratio of
about 654 (as of 31 December, 2008), the former Yugoslav Republic of Macedonia is an
outlier even among countries in the region (the EU average is between 110 and 150)
suggesting relatively high staff workload in the former which, presumably, affects service
quality. The ratio of ESA workers responsible for active measures to the total number of
unemployed persons is 1:1244, leaving small room for individualised approach.

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Moreover, only 52% of total staff is front-line counsellors/advisers, and one job
counsellor/advisor has to deal with over 1.300 registered unemployed. It is evident that
the ESA still lacks the required human (and technical) capacity of a modern PES. If
improvement of labour market policies is one of the government priorities, then
increasing the capacity of ESA both in terms of additional staff and training of all
employees should be envisaged even on short-term. For instance, as ILO (2009)
recognises, some EU countries (such as Germany and Spain) has hired additional staff
in their PESs in order to improve matching and assistance to the unemployed given the
widespread job losses in the current global economic crises which are likely to be of
much shorter time span compared to the persistently high unemployment in the former
Yugoslav Republic of Macedonia.
The ESA staff was burdened with additional functions that might not be typical for a
PES, that are registration of newly opened and termination of existing contracts, as well
as provision of free health insurance for uninsured registered unemployed persons. The
former function was based on so-called employment booklet that each employee held so
that employers had to personally go to the local employment centres and register the
new contract or terminate the existing one. This created administrative burden to
employers and to the ESA staff. With the amendments to the Labour Law in 2008,
employers are given possibility to electronically register new employments and
employment booklet was abandoned. In addition, the provision of health insurance
inflates registered unemployment and supports informal employment and inactivity since
these persons can get health insurance. It also increases workload of the ESA staff. In
2009 the administration of health insurance for the registered unemployed was
transferred to the Health Insurance Fund.
The ESA activities are funded by the unemployment insurance contribution and budget
transfers for covering the deficit of the ESA. The unemployment contribution that was
1.6% of the worker's net wage (reduced to 1.4% in 2009 and further to 1% by 2011),
provides insufficient revenues to cover ESA costs due to a low number of formally
employed and, respectively, taxed individuals (see Table 22). Hence, the main source of
revenues for ESA is budgetary transfers providing about 60% of the total funding in
2008. Increased revenues from contributions and their share in total revenues reflects
increased employment in the country in the period 2006-2008, as well as possible
improvements in the collection capacity. Recently introduced integrated collection of the
contributions in the Public Revenue Office improved collection of the unemployment
insurance despite the declining contribution rate.
Table 22 - Revenues of the Employment Service Agency in 2006-2008
2006

2007

2008

Denars,
million

Denars,
million

Denars,
million

Unemployment insurance
contributions

1,371

24.1

1,524

30.2

1,829

37.8

Budgetary transfers

4,305

75.7

3,512

69.6

2,992

61.8

11

0.2

12

0.2

19

0.4

5,687

100.0

5,048

100.0

4,840

100.0

Other sources
Total

Source: Ministry of Finance, 2009.

112

In the past several years, the EU CARDS projects have provided strong support to ESA
in developing its capacity for design and implementation of both passive and active
employment policies.
The first EU CARDS project, Technical Assistance to Support Employment Policy,
funded by the European Union and managed by the European Agency for
Reconstruction (EAR) in the former Yugoslav Republic of Macedonia was implemented
from May 2004-June 2005, with a total cost of EUR 2.5 million. It had four components:
1) assistance for the preparation of the National Action Plan for Employment (NAPE); 2)
capacity building and organisational improvement of labour market institutions; 3)
improvement of employment regulation; and 4) implementation of pilot ALMPs projects
to identify and learn from best practices. Under this project, the Macedonian government
prepared their first NAPE for 2004-2006. Although more descriptive than focused on
quantified outcomes and targets, the Macedonian NAPE promoted some dialogue with,
and coordination of, stakeholders in the employment policy. Changes in the
organisational structure of ESA under the second component were explained above.
Training of the ESA staff was provided and local employment centres were equipped
with PCs. Unfortunately, the promised evaluation of the pilot active employment
programs has not been completed under the project.
The Employment Policy Project phase II included numerous activities related to
designing, monitoring and evaluation of employment policies, developing service
provision for job seekers and employers, developing ALMPs, as well as strengthening
communication strategies and publicity measures. Its total amount was EUR 1.0 million.
The 3rd phase of the CARDS projects started in November, 2007 and ended in May,
2009. The overall aim of the project was to assist the Government for accession to the
EU with an objective to help the country to prepare for embracing the employment policy
orientations resulting from the European Employment Strategy (EES) and the Integrated
Guidelines for Growth and Jobs. Specific objectives were to further strengthen the
capacity of all relevant labour market institutions and actors to effectively implement,
monitor and evaluate the objectives and targets laid down in the National Employment
Strategy 2010 and the National Action Plan for Employment 20062008.
The following activities have been already implemented:

The creation of a new service model with customer oriented approach, based on
best EU practices as well as the experience acquired by ESA through the capacity
building. This new service model consists of: uniform services provided by all local
offices; standardised work methods; an open office for increased use of self-service
tools (CV bank, vacancy bank, etc), reliable labour market information; ALMPs for
different target groups and annually updated local development plans (see below).
However, full implementation of this new model requires further training of the ESA
staff and additional technical equipment.

Activities with the pilot municipalities for designing of Local Employment Action Plans
have been implemented. In particular, NAPE is a basis for starting the process for
creation and implementation of policies on a local level by drafting the Local
Employment Action Plans, which were prepared with 11 pilot municipalities (out of 83
municipalities).

A manual for the Skills demand analysis has been completed with full survey

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methodology. Details on the skill needs analysis were presented in section 2.2.4.

The system for classification of occupations was adjusted to the International

Standard Classification of Occupations (ISCO). Until 2008, the ESA was not using
ISCO in the records of unemployed persons which hindered mediation since
employers do search for workers with specific occupation. Hence, a team for ISCO
classification of occupations has been established. ESA started the application of
ISCO classification of occupations in the records of unemployed persons in the
Employment Centre in Skopje. In addition, the ESA implemented the occupations in
the survey research for Skills demand survey for 2008. However, additional activities
should be undertaken in this area for the full implementation of ISCO.

A process for establishment of a new system of monitoring and reporting regarding

the conditions on the labour market and ALMPs. For that purpose, trainings were
organized for familiarisation of representatives from ESA, MLSP, and SSO with the
way of monitoring and reporting in EU Member states. The situation in terms of the
monitoring indicators of the EU Employment Committee has been determined.
Finally, the MLSP and the ESA developed and agreed on a set of indicators that
should be regularly and timely provided by the ESA to MLSP, which would improve
informational flow and help in the employment policies design. The implementation of
this new system is still pending.

Activities started for design of new active measures, coordinated with the findings
from the Skill needs analysis.

Training has been delivered to the ESA personnel in several areas (see section
3.5.1).

Other donors
USAID Within the USAID e-government project, the ESA introduced an electronic
system for registration/termination of employment contracts and support services were
developed in the ESA for employers that do not have the necessary IT equipment for
electronic registration. In addition, the Employment Booklet as a public document has
been abolished with the amendments to the Labour Law from 2008, and an obligation
posed to the ESA, the Pension and Disability Insurance Fund and Health Insurance
Fund to keep and permanently store the records of the registrations and de-registrations
in mandatory social insurance. A person, upon request, can easily access data
regarding his/her status and changes in regards to the social insurance of the employer.
In particular, the system enables employers to announce job vacancies,
register/terminate employment contracts and submit a request for mediation for
employment, in general or for specific profiles of workers from the list of profiles posted
by the job seekers. Through this web system, employees have an insight in their
registration/de-registrations of employment, insight in the announcements of job
vacancies and job seekers can post their working profile (CV).
Additional procedure has been initiated for procurement of software for upgrading of the
web portal with possibilities for career guidance.

114

Other international donors include: World Bank, IMF, UNDP, PHARE, Stability pact,
Social Council within the Council of Europe, ILO, ETF, etc.

Unemployment Insurance
According to the Law on Employment and Insurance in Case of Unemployment, benefit
recipients are entitled to free pension and disability insurance whereas all unemployed
who are not insured by other means (e.g. through their spouses) receive free health
insurance. The latter entitlement creates a relatively large incentive for certain groups to
register with the ESA. The unemployed that are engaged in the grey economy and
inactive population with other source of income (e.g. remittances which are relatively
large in the former Yugoslav Republic of Macedonia) register for the health insurance.
However, it is very difficult to identify such cases since the enforcement of a legislation
regarding active job search is very weak. In December 2008, 231,508 unemployed
persons (or 67% of the total number) used free health insurance through ESA.
In 2007, the ESA started to collect and publish data on registered unemployed persons
who sign a written statement that they register only for getting free health insurance, but
are rather inactive or grey economy workers. In December 2008, these category of
unemployed constituted 20% of total registered unemployed. This deal with the
unemployed is very helpful for distinguishing between jobseekers and non-jobseekers in
order not to waste limited staff and financial resources on the latter category, for
example involvement of inactive person into some active programme. However, it also
means that the ESA does not properly implement the regulation concerning activity and
availability for a job of the unemployed and respective sanctions.
The administration of health insurance absorbs much of the ESAs time and staff.
Moreover, provision of health insurance is not regular activity of a public employment
service. However, changing the system that was put in place long time ago requires
political will. In 2008, the authorities received some support from the World Bank in a
form of policy proposals for changing the system of provision of health insurance for the
registered unemployed, ranging from simplest case of exclusion of registered
unemployed that do not receive unemployment benefit from eligibility conditions for ESA
provided health insurance to a deeper reform of switch from the insurance-based to a
general tax financed health insurance, defining different health packages for different
categories of contributors.
The Government made a decision to transfer the responsibility for administration of
health insurance from ESA to Health Insurance Fund, which is implemented through the
amendments to the Law on Health Insurance from 15 January 2009. Details about the
newly established system were defined in the rulebook of the Minister of health
published in the Official Gazette No. 73/2009 (from June 2009) with applicability from
July 2009. However, the rulebook only considers the necessary documentation that
registered unemployed have to submit to local offices of the Health Insurance Fund and
does not define eligibility criteria in more detail, except that the re-registration period is 9
months. Hence, eligibility for health insurance still depends on the status of registered
unemployed meaning that the jobseekers, inactive persons and those employed in the
grey economy would all continue to register in the ESA.

115

This implies that the benefit to ESA from the above change would be in terms of freeing
its staff which can now be focused on the regular services of public employment
services, whereas there would not be any benefit in terms of cleaning the register and
reducing registered unemployment (the former Yugoslav Republic of Macedonia is
currently one of few countries with higher number of registered unemployed than LFS
unemployed). Hence, the authorities need to consider a more comprehensive reform in
the area of health insurance.

Services to unemployed
The ESA provides regular services as all PES. These include: the role of a labour
exchange, provision of active programmes and job-search assistance.
The role of labour exchange is performed through announced job vacancies (posted on
the web site of the ESA, in Job Clubs in local offices) and register of unemployed
persons from which ESA performs pre-selection for the available job posts or working
profiles available on the web site. Jobseekers can apply for all vacancies (directly to the
employer) even in cases when ESA performs a pre-selection for the employer.
Professional orientation (counselling) is offered to students entering higher educational
institutions or the labour market, the unemployed and employed. This service comprises
provision of vocational information, orientation (psychometric testing) and professional
selection (selection of candidates for training and pre-qualification).
Professional orientation is conducted in ESA, in the employment centre of the city of
Skopje and in the centres with inter-municipal teams (8), which also provide these
functions for the other employment centres. In 2007 a total number of 23.473 persons
(only 7% of total unemployed) were covered by these activities, of which majority
undertook examination and counselling and about 11% were covered by professional
selection upon the request of the employers for preparation for employment (training, requalification or additional qualification) or employment.
Training delivered by ESA is solely demand-driven, that is employer-specific.30 It may
last up to 3 months in case of training and pre-qualification and up to 2 months for
training in the same qualification (occupation). During the training beneficiaries receive
MKD 4,000 (about 25% of the average net wage in 2008) and are entitled to health and
disability insurance whereas employers receive a fixed amount of MKD 2,000 per worker
as a contribution of ESA to training costs and bear the costs of transport and food for
trainees. Employers are obliged to employ a minimum of 70% of all trainees that
successfully complete the training for an indefinite time (open-ended work contracts).
Only small proportion, less than 1% of unemployed, receives training. For example, in
2007, 2,751 persons completed the training, and 91.8% of them were employed.
Training is mainly delivered by the employer as on-the-job training or by training
contractors. There is no competitive bidding that allows the most cost-effective training
provision, instead the employer decides on the provider and informs the ESA. The
outcome (effectiveness) of the pilot training in specific occupations will be evaluated
30

As already indicated, starting from 2008, the ESA started to conduct a pilot vocational training in
occupations/profiles that lack in the labour market, though on a small scale. This programme should be
evaluated and if it increases employment prospects of trained workers, the scale should be extended.

116

after the completion of the training.

Job clubs carry out activities with unemployed persons, such as open office, workshops,
lectures, interviews with unemployed persons, free training for the unemployed persons
in foreign languages and computers. The aim of the activities in the job clubs is to
improve skills and knowledge of the unemployed, and improve their presentation
(interview) skills. In 2007, 26,002 persons (about 7% of unemployed) were covered by
the activities in the job clubs whereas some of them were included in several different
activities.
The large stock of registered unemployed in the former Yugoslav Republic of Macedonia
may suggest that attracting jobseekers to register with the ESA should not be of great
concern. Instead the ESA should seek to increase the search activity of unemployed,
improve the accuracy of the unemployment registry, pursue a more individualised
approach to targeted groups of the unemployed and boost self-help services for others
with better prospects of regaining employment. Given the high registered unemployment
and staff and time limitations the ESA should make basic vacancy information as freely
available as possible, reducing the frictional unemployment, maximising the interactive
job broking and the self-help philosophy, an area where the ESA has made considerable
progress recently.

Services for employers

Employees of the ESA, in particular its placement department, visit companies that
require its service for a first time where they explain the services available in detail,
complete any required documentation for cooperation and assess the working conditions
offered by the client. Employers that have already used ESA services usually visit the
placement unit by themselves.
ESA provides cost-free direct support to employers in their recruitment process. In
particular, LESs make selection and send 1 to 5 candidates for a vacant post of an
employer (reported in an application form). Employers should inform LESs whether the
selected unemployed are suitable for the vacancy/ies, and the selection process can be
repeated if needed. However, the relatively low use of the selection service of ESA (and
mainly in a case when an employer would like to use initial training funded by the ESA)
suggests its low effectiveness in terms of the quality of applicants submitted and the
capacity of ESA to quickly respond to employers needs.
The ability of ESA to improve matching in general, as well as to place more
disadvantaged workers into jobs, depends on the vacancy notification. Hence the
Government extended the previous legal requirement for vacancy notification for the
public sector, to the private sector. In practice, this legal obligation is not respected fully
by the private sector employers, since their incentive for notifying vacancies with the
ESA would depend on (their perception) of the ability of the ESA to service their needs,
as well as on the relative profitability of this service to other recruitment channels
(Mojsoska, 2005).
Employers also use the services of the Job Clubs where they can acquire information for
active employment measures, legislation in the area of employment, can explain their
needs for workers, etc.

117

3.3.2. Active labour market programmes

While sound macroeconomic policy, business environment and labour market
institutions are main factors influencing labour supply and demand, active labour market
programmes (ALMPs) can affect overall unemployment rate only at a margin (Lehmann,
2009; World Bank, 2008-b). But, the latter still has a role in tackling unemployment.
Box 3 systemizes main types of programmes implemented in OECD countries along with
their purpose and potential effect and estimated effectiveness. Although further
explanation of the table is not needed, the importance of core employment services
should be explained, such as the job search assistance or placement services, including
job clubs, employer contact services, etc. The latter is not considered as an active labour
market policy in the former Yugoslav Republic of Macedonia. In particular, by improving
the informational flows the ESA might increase the efficiency of the matching of
unemployed workers and unfilled jobs, reducing the average duration of unemployment
spells and the unemployment (World Bank, 2008-b). In addition, this service is relatively
inexpensive.
Box 3 - Types of ALMPs in OECD countries, generic purpose and effectiveness
Type of program
a. Public employment
services (job brokerage)
and administration
b. Labour market training
c. Employment / Start-up
incentives
d. Direct job creation / Public
sector employment
e. Youth measures (training
and/or subsidised jobs)
f. Measures for the disabled

Generic purpose
Improve matching efficiency
Attenuate
skill
mismatch;
human capital accumulation
Improve job matching process;
increase labour demand
Increase
labour
demand;
prevent
human
capital
deterioration
See b, c and d.

Costs and effectiveness

- relatively cheap
- highly effective*
(unanimous)**
- relatively very expensive
- effective (mixed)***
- relatively expensive
- effective (mixed)
- relatively expensive
- ineffective (unanimous)
-

Integrate
discriminated
persons into the labour market
Source: Lehmann and Kluve (2009).
Note: *effective means that the programme, on average, increased the chances of the
participants for employment or re-employment.
** unanimous means that virtually all studies show the indicated effect.
*** mixed means that some studies show the indicated effect but other studies do not.

Though in the past there were some modest experiences with implementation of ALMPs
in the former Yugoslav Republic of Macedonia, mainly ad-hoc and/or donor-driven
programmes, starting from 2007 the Government (MLSP) prepares an annual
Operational plan for active policies and measures (OP) which can be considered as a
move towards programming approach to ALMPs. In 2008 and 2009 the allocated funds
for ALMPs increased considerably, as well as the scope of the programmes. While
spending on active programmes in 2007 was about 0.1% of GDP, it increased to 0.2% of
GDP (along with the start-up incentives) in 2008 and further increase is planned for 2009

118

(see Table 24).31 The sources of the funds for the active measures are: state budget,
ESA budget, and funds from UNDP and USAID.
Table 24 - Allocated funds and participants in ALMPs, in 2008 and 2009
OP, 2008

Start-up incentives, 2008 OP, 2009 Start-up incentives, 2009

Plan

Real.

Plan

Real.

Plan

Plan

Funds

294.2

275.6

387.5

385.7

795

360

% of GDP

0.074

0,069

0.097

0.097

0.194

0.088

Persons

7,165

6,822

2,000

1,964

13,929

2,000

2.0

1.91

0.56

0.55

4.08

0.58

% of
unemployed

Source: Ministry of Labour and Social Policy.

Note: See table A, in Annex, for detailed presentation on each type of measure and separate
target groups.

Within the NMS, Estonia has lowest spending on active measures, less than 0.1% of
GDP, whereas Hungary is the highest spender with about 0.45% of GDP. The average
spending on ALMPs is about 0.2% of GDP. Despite the higher average unemployment
rates in the NMS, their spending is lower than the average EU-15 spending (the lowest
spenders among the latter countries are Luxembourg and Greece, at about 0.3-0.4% of
GDP), partly due to the fiscal constraints. However, there are large variations in
spending on ALMPs even among the EU-15 countries, so that the Scandinavian
countries have more active approach toward labour market policies.
ALMPs that were implemented in 2008 were: wage subsidies, self-employment, training
and pre-qualification of unemployed (also called programme for preparation for
employment), formalisation of existing businesses, work-experience programmes for
young, and special programmes for Roma population. Details about each measure,
target groups, funding and the immediate effects are given in Table A in Annex. Starting
from 2008, the Government introduced additional active programme, start-up incentives
(nationally called self-employment through low-interest loans) funded through the state
budget. In addition, in view of the current economic crises, the Government, in May 2009
amended the OP and introduced public works programme (mutually funded by the
central and local government level) though past experience in the country showed that
this programme is relatively expensive. The argument for such programme is that it
ensures that unemployed are linked to the labour market, but the programme usually
does not improve employability of the participants and might even pose a stigma against
them (i.e. their skills).
In order to make national data on ALMPs comparable to data from EU countries, the
authorities should align the national classification of active programmes to that of the
Eurostat which is based on the types of interventions. An informative comparison shows
that all ALMPs provided in the former Yugoslav Republic of Macedonia fall only in 3 (out
of 12) subcategories of the Eurostat-defined active policies. There might be a possibility
for further diversification of ALMPs that are implemented in the country, for instance
31
As part of a second anti-crises measure, the Government allocated additional MKD 150 millions for public
work program, which is defined as dont in the Carone et al. (2009) recommendations for labour market
policies in a financial crisis.

119

through decentralisation of the authority for design and implementation of the

programmes in the local ESA offices.
As Lehmann (2009) points out, targeting is the main issue with the implementation of
ALMPs in transitional labour markets/economies. In particular, he explains that countries
with transition labour markets should not necessarily learn from the experiences of
OECD countries where major target are less-educated, older workers, long-term
unemployed, etc. Given the large pool of unemployed and sluggish labour demand,
vulnerable groups in transition economies cannot compete successfully for regular jobs
even after programme participation so that the programmes would be ineffective. In this
regard, wage subsidies, start-up incentives and similar ALMPs should be targeted
towards youth.
The World Bank (2008-b) argues that although direct job creation measures (for
example, wage and job subsidies, public works, etc.) are costly and their long-term
effects are uncertain, the slack labour market in the former Yugoslav Republic of
Macedonia gives a case for implementation of such measures, at least until the macroeconomic policies and the investment climate bring about greater job creation.
Unfortunately, there is not yet a proper evaluation of the ALMPs, in order to enhance
their contribution to the labour market performance. There are few non-comprehensive
studies, for example, Betcherman et al. (2004) who found a positive impact of training
in the former Yugoslav Republic of Macedonia both in terms of employment and
earnings but we should be careful in interpreting the results since this training
programme was a small scale programme (less than 0.005% of unemployed
underwent training) and because it was demand driven training. Another evaluation
study (PLS Ramboll Management, 2002) found that training and counselling were
relatively inexpensive programmes for placing unemployed into jobs ($256 and $299,
respectively), whereas public works was the most expensive programme. However this
evaluation ignored substitution and dead-weight effects and hence costs and effects
should be treated with caution.
The OP for 2009 sets the following programs and measures:
- programme for self-employment;
- support programme for formalisation of existing businesses,
- different training programmes, prequalification or additional training, counselling for
unemployed persons on the demanded knowledge and skills, as well as training in the
profiles/occupations that are lacking on the labour market, based on the findings from
the 2008 skills demand analysis,
- wage subsidies and other programmes for economic empowerment of women-victims
of domestic violence;
- employment-support programme for Roma population;
- work-experience programmes with a duration of 3 months for the young unemployed
persons to prevent unemployment and ease the school-to-work transition,
- public works that were introduced with the amendments to the OP from May 2009.

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In addition, the Government would proceed with the to start-up incentives with lowinterest loans for the long-term registered unemployed.
Under the Component 2 of the CARDS III project, a report with a set of
recommendations for improving the monitoring (and design) of ALMPs was prepared
and accepted in April 2009 by the Steering Committee (see Versa, 2009). Among others,
the report recommends:
i) Preparation of Guidelines for monitoring and reporting on ALMPs between ESA and
other institutions (MLSP, Government, UNDP as one of the main donors, etc). These
guidelines would define a timetable, content and other features of the reporting process
among institutions;
ii) A set of indicators should be defined for each active measure which should be then
reported (published) by the ESA. This would improve understanding of the policies and
detect possible improvements, for example in terms of targeting specific groups, whether
intended goals are achieved, possible savings, etc.
iii) Change some of the definitions of target groups and the coding lists in the ESA data
collection methodology and harmonise it with the EU standards. This mainly applies to
the definition of young persons (Eurostat definition is below 24 years of age,
Macedonian is below 27), of long-term unemployed (over 1 year according to Eurostat,
nationally - 2 years), level of education (the ESA is in process of implementation of
ISCED classification, the previous one being combination of educational and
occupational classification), classification of ALMPs, where the MLSP and ESA are not
using the Eurostat classification of labour market policies by type of action.
iv) Prepare Guidelines for implementation of each ALMP which is important for the local
ESA staff and for the transparency. Such guidelines are already available for some of
the programmes but should be extended and harmonised (in terms of the content) for all
ALMPs.
v) Further development of the monitoring system including training for the ESA staff,
selecting ALMPs participants through counsellors instead of current selection by public
tendering, introduction of performance indicators (management by objectives) for local
and regional ESA offices.

3.3.3. Private employment services and temporary employment agencies

The argument for having private employment agencies is that given that a PES does not
depend on the market for its existence, its services may not match demand so that
private employment agencies may fill this gap. Assuming that private agencies operate
more effectively and efficiently, increased competition may induce a PES to improve
quality and efficiency. However, ESA should ensure that it fulfils its social role, i.e.
provide intensive and quality services for disadvantaged unemployed free of charge.
The ILO-convention 181 from 1997 (supplemented by the ILO Private Employment
Agencies Recommendation, No. 188 from 1997) requires deregulation of the market for
private agencies and temporary work agencies as long as worker rights are respected.
Developed countries have different experiences with the private employment agencies.

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According to the Law on Employment and Insurance in Case of Unemployment, the

MLSP keeps registry of and gives licences to the private employment agencies. Though
there are 45 such agencies in the register, only 16 of them renewed their licences, and
the licences of the others have expired.
Experience shows that they are mainly engaged in head-hunting services, and focused
on easy-to-place jobseekers, so-called clientele creaming.
In 2006, a specific Law on Agencies for Temporary Employment was adopted in the
former Yugoslav Republic of Macedonia, with an overall objective to reduce the informal
labour market (I.e. the widespread use of civil law 'freelance' contracts) and increase
flexibility for employers in quick adjustment to the demand.32 The law defines the
procedures and terms for establishment of temporary work agencies, defines temporary
work, and cases in which workers can be temporary employed. Temporary work can be
used for replacement of temporary absent worker, temporary increased workload,
seasonal work, project work, specific non-continuous work that is not part of the main
firm activity, unexpected short-term activities in the main area of activity. Agency
contracts can last a maximum of 1 year, with or without breaks.
Temporary work agencies should get license and be registered with the MLSP.
Currently, there are 25 registered temporary work, which in 2008 employed about
11,000 workers (less than 2% of total LFS employment).
Temporary workers have same rights as full-time employees, i.e. in addition to the wage,
they enjoy pension, health and employment insurance while assigned with a firm, and all
statutory health and safety measures apply to agency worker. Their wage cannot be
lower than the wage of a full-time worker in the firm, with similar job tasks. Hence, these
workers are not in a discriminatory position relative to the regular workers, though, they
are unlikely to receive any training other than the specific one for the firm.
The main users of this service are public sector institutions who use such hiring in order
to sidestep restrictions for employment in the public sector. There are several constraints
to a higher general use of agency work. First, firms-users of this service have to pay
some fee to temporary work agencies, which, they argue, is rather high. Second, since
this is treated as a service, employers have to pay value added tax (18%) to the amount
they are giving to the agency, increasing their costs for workers. Third, civil law
'freelance' contracts are still in much use, because they are relatively cheap and rather
easy to use.
In general, there is no readily available data on private and temporary work agencies,
and the former are rather neglected even in the CARDS employment projects, and not
mentioned in the strategic employment documents such as NAPE.

32

Law on Agencies for Temporary Employment (Official Gazette, No. 49/06).

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3.4.

Legal provisions, employment protection legislation, and labour

inspection

3.4.1. Labour Law

In recent years, Labour Law in the former Yugoslav Republic of Macedonia has been
amended several times mainly reflecting government intention for increasing labour
market flexibility and reducing hiring and firing costs, while trying to enhance workers
security and penalties for non-compliance. In addition, amendments were partly
reflecting the required transposition of acquis, as well as suggestions from the
International Labour Organisation. Currently, new amendments to the Law are in
parliamentary procedure. However, the Law is still not effectively aligned with all EU
requirements.
The Law regulates following areas: working relationship and work contract; obligations
and rights of the both parties of the agreement; remuneration; discrimination; night work,
overtime work and holidays; special protection of women (for instance while on maternity
leave), young workers below 18 years of age and disabled workers; resolution of
disputes; collective bargaining; strikes; and penalties for non-compliance. Over time, the
number of areas or issues within an area covered with the Law has been increased and
there might be a scope for preparing separate laws for certain areas, for instance
collective bargaining.
However, administrative capacity for proper implementation and enforcement of the Law
remains low and preparations in this area are moderately advanced. Moreover, there is
insufficient cooperation between the relevant labour market institutions. Some progress
in the alignment of national legislation and in the institutional capacity has been achieved
with the twinning project that started in 2008, between the MLSP and the Slovakian
Ministry of labour, social affairs and family (see section 3.5.1).
Next sections of the report explore several issues of the labour legislation, such as antidiscrimination, equal opportunities, health and safety at work, strictness of the legislation
(measured through the employment protection legislation). Then, the capacity of labour
institutions is analysed.

3.4.2. Anti-discrimination
The two European Union anti-discrimination directives passed in 2000 extended the
narrow focus on gender to cover discrimination in employment on a variety of grounds,
and even more widely prohibiting discrimination on the grounds of ethnic (and racial)
origin in almost all areas of socio-economic relations. Although with serious delays, a
framework law on anti-discrimination has been prepared and comments from relevant
institutions received, though it have not yet passed the Parliamentary procedure. The
responsible institution is the Equal Opportunities Department within MLSP, which is
putting mechanisms in place to identify, pursue and criminalize all forms of
discrimination.

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Minorities and persons with disabilities continue to suffer from discrimination. Lesbian,
gay, bisexual and transgender people are also subject to open discrimination.
A law on languages was adopted and there has been some progress on equitable
representation. For instance, the study of Albanian language is offered as elective
course in the primary schools. Yet, even more efforts are needed to address the
concerns of the smaller ethnic minorities. The government has made some progress in
addressing the difficult living conditions and discrimination of Roma people, given their
poor access to education, social protection, healthcare, housing and employment.
Nonetheless, overall the country is moderately advanced in this area.

3.4.3. Equal opportunities

Equal treatment and opportunities for women is particularly important in order to ensure
that women have same opportunities in the labour market as men do which is important
precondition for greater participation of women in the labour market. This can be
achieved through regulations that take into account equal representation, working
abilities and family obligations. Though in recent years there has been some progress in
the area of gender equality mainly in terms of legislation, there are additional issues that
should be addressed, for instance improvement in the legislation according to the
international standards and conventions as well as better implementation capacity.
In 2006, the Parliament passed the Law on Equal Opportunities that defines
discrimination, prescribes policies and measures for ensuring gender equality, as well as
responsible institutions and structures. As stipulated, the Parliament sets a Committee
on Equal Opportunities and the MLSP sets a separate department for equal
opportunities, while on municipal level equal opportunity committees should be
established along with designated equal-opportunity coordinators. Equal opportunity
coordinators are also appointed on central government level, one in each line ministry.
The Department for equal opportunities in the MLSP has a role of the gender equality
body, with a responsibility to coordinate gender equality issues on the national and local
levels. However, low capacity of this Department and not clearly defined mandate
remain as issues. The number of municipalities with equal opportunities committees
increased from 30 in 2007 to 79 in 2008. Though, the efficiency of the set system is quite
low so that women remain vulnerable to discriminatory practices, particularly women
living in rural areas and women from ethnic minorities, and stereotypes remain very
present.
Besides the Law on Equal Opportunities, the Labour Law also gives special treatment
for female workers, for example in case of overtime and night work, as well as in a case
of pregnancy and parenthood. In addition, the law states that employers are obliged to
support employees in balancing work and family life, but this concept of support is
rather vague and too general.
During pregnancy and until a child is less than 1 year old, the Labour Law states that
women cannot perform activities which might hurt their health or health of their child, and
cannot work overtime or in night shifts. Women are entitled to 270 days maternity leave
or 1 year in case of twins, and the job is guaranteed while the worker is on maternity

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leave. The replacement rate while on maternity leave is 100% of the previous wage. The
Labour Law also prescribes that a mother can take a one and hour (paid) break per
working day for breastfeeding the child, up until 1 year of age of child, which is rarely
implemented in practice.
These legislative protective and supportive measures for female workers are insufficient
for women to be able to more easily balance work and family. Other preconditions are
also important such as more equal division of family responsibilities, almost non-existent
flexible work arrangements offered by firms, inadequate network of child and elderly care
institutions, etc.
In the area of pay discrimination, ILO notices that the country has not properly
implemented the convention C100, Equality of Opportunity and Treatment, in particular
the requirement for equal remuneration for work of equal value still living a room for a
gender pay gap (see section 2.2.5). In particular, this requirement is not entirely
implemented in the national labour law which provides for the principle of equal
remuneration for equal or same work, but not for workers performing work of a different
nature which is, nevertheless, of equal value. In addition, it is not clear to what extent is
the principle of equal remuneration for men and women for work of equal value
implemented in the practice.
In 2007, the Government adopted the National Action Plan for Gender Equality 20072012. The key priorities, policies and performance indicators for promotion of gender
equality are spelled out in the Action Plan and divided in ten strategic areas of action: 1)
women and human rights, 2) women and decision-making process, 3) women and
health, 4) women and social security, 5) women and education, 6) women and work, 7)
women and violence, 8) women and media, 9) women and peace activities, 10) women
and ecology. The aim of the policy instrument women and work is achieving the four
strategic objectives: 1) increase of the rate of employment among all women; 2)
improvement, advancement and strengthening of the economic status of the women; 3)
support of the process of transition from informal to formal economy in the service sector
(care for children, care for elderly people, cleaning services, etc.); 4) increase the rate of
employment of women in rural areas. The implementation of the Action Plan is
responsibility of the section for equal opportunities of the MLSP, respective line
ministries (de facto all ministries are involved except Ministry for Transport and
Communications and recently established Ministry for Information Technology) and local
government designated entities, based on the agenda of concrete measures and actions
specified by the annual Operational Plans prepared each year for better monitoring and
execution of the national gender strategy.
The Annual Operational Plan represents formal agenda which elaborates concrete
gender equality projects and programs in each of the ten strategic areas of action
specified by the National Plan. In effect, the plan outlines more detailed information by
individual projects such as the main activities, stakeholders, deadlines, measurement
indicators, fiscal implications and sources of funding. The documents content is
intended to be prepared and compiled through inter-ministerial cooperation and
proactive contribution by all relevant stakeholders via designated equal opportunity
coordinators, with MTSP being in charge of overseeing, facilitating and managing the
efforts and acting as central hub. Nevertheless, in practice this process has been
criticised for several weaknesses, such as: insufficient input and low participation of line
ministries; inadequate knowledge and awareness of appointed gender coordinators, i.e.
they often remain only vaguely familiar with the gender policy in general and the
125

operational plans content in particular; lack of synchronization between policies

implemented and promoted by individual ministries and the broad gender strategy, in a
sense that certain ministry level projects/programmes do not take into consideration or at
times even counteract gender strategy objectives; and last but not least an overall
context of poor coordination on behalf of the largely understaffed MTSP gender section.

3.4.4. Health and Safety at Work

The legal basis for the health and safety at work in the former Yugoslav Republic of
Macedonia encompasses the Labour and Work Protection Law, harmonized with the EU
Framework Directive 89/391/EEC, the Health Protection Law, the Environment
Protection Law, the Health Insurance Law, as well as the international documents, such
as ILO Conventions No. 155 and 161 and Recommendation No. 171 and the WHO
Global Strategy on Occupational Health for All.
Occupational health activities are performed through the Institute of Occupational Health
and by occupational health services mainly within primary health care facilities (health
care units). The occupational health services seem to be more oriented towards curative
occupational medicine than towards modern preventive occupational health and safety
activities. Except for certain categories of employees that are exposed to a high risk at
work, employers do not pay sufficient attention to occupational safety and health
measures. Many occupational medicine activities at enterprise level have been
discontinued, and the so-called occupational medicine dispensaries closed.
The Macedonian Society of Occupational Medicine and the Institute of Occupational
Medicine made efforts in recent years to establish a basis for a new model of
occupational health services through a nationwide OHS model, taking the inter-sector
approach into account. National strategy for health, healthy environment and safety at
work has been adopted in order to strengthen the basic occupational medicine services,
to expand their coverage, and to improve their coverage and activities. In this respect
the Institute of Occupational Health and Macedonian Society of Occupational Health
have taken the leading role in implementation of the OHS reforms, with due support by
the Ministry of Health, MLSP and WHO/EURO. Ongoing activities in this domain include
change in the methodology33 for monitoring of occupational diseases, as well as
coordination with the EU in implementation of the EODS - European Occupational
Diseases Statistics methodology and a new design of the Registry for Occupational
Diseases. Incentive for improvement of reporting system and capacity building in this
area has come within the ESAW (European Statistics for Accidents at Work) project
aimed at implementation of the respective Eurostat methodology and recommendations.
The current situation of registering and reporting of accidents at work in the country was
evaluated in 2004 and 2005 by the State Statistical Office and other relevant
stakeholders (the National Institute for Health Protection, the Health Insurance Fund and
the Institute of Occupational Health) and report was prepared with valuable conclusions
on implementation of the Eurostat methodology in the former Yugoslav Republic of
Macedonia.

33

Mainly refers to verification (new national criteria), enlisting, evidence and registration of occupational
diseases.

126

3.4.5. Employment protection legislation (EPL)

The strictness of the employment protection legislation (EPL) affects both employers
and employees decisions, generating along the way a number of effects on labour
34
costs, employment and productivity, both favourable and unfavourable. For example,
while protecting workers against unjustified termination of employment and giving them
some income security through severance payments, EPL makes redundancies more
lengthy and costly for employers, with inherent negative effects on total employment.
Stricter EPL is also expected to increase labour market segmentation, i.e. the gap
between the insiders - those workers in regular jobs enjoying high employment security
- and the outsiders - those in irregular jobs, such as fixed-term, seasonal or any type of
informal employment, as well as unemployed jobseekers, non-covered by EPL.
Similar to other transition economies reforms were undertaken in the former Yugoslav
Republic of Macedonia in the market economy direction which aimed at modifying the
national legislation to reflect the new labour market realities. The objective of these
modifications was to enable enterprises to terminate employment for economic reasons
at lower costs, in response to the view that strict labour legislation inherited from former
35
Yugoslav regime was in the root of the labour market problems, such as high and
persistent unemployment levels.
Table 25 - Employment Protection Legislation strictness, late 1990s and early 2000s
Regular
Temporary
Collective
Country
Employment
Employment
Dismissals
Overall Index
Bulgaria
2.3
2.8
4.4
2.8
Croatia*
2.6
2.6
3.5
2.7
Czech Rep.
3.0
0.5
4.3
2.2
Estonia
2.9
1.3
4.1
2.4
Hungary
2.1
0.8
3.4
1.8
FYR Macedonia (1)
3.9
5.0
4.2
4.4
FYR Macedonia (2)
2.1
4.4
4.0
3.2
Poland
2.3
1.0
3.9
2.0
Slovakia
2.6
1.2
4.4
2.3
Slovenia
3.4
2.5
4.8
3.3
CEEC average
2.7
1.2
4.1
2.4
EU average
2.4
2.1
3.2
2.4
OECD average
2.0
1.7
2.9
2.0
* Updated for the new Labour Law in 2003
(1) Before the 2003 law amendments; (2) After 2003 amendments
Notes: Index ranges between 0-6, with 6 indicating most restrictive legislation.
CEEC is an averaged index for the following countries: Czech Republic, Estonia, Hungary,
Poland, Slovak Republic and Slovenia.
34

EPL is understood here to refer to regulatory provisions that relate to hiring and firing, particularly those
governing unfair dismissals, termination of employment for economic reasons, severance payments,
minimum notice periods, administrative authorization for dismissals, and prior consultations with trade union
and/or labour administration representatives.
35
One of the key tasks at the beginning of the transition was to dismantle the job monopoly, a fundamental
feature of the previous system of self-management.

127

Sources: Cazes and Nesporova, (2003); Rutkowski (2003); World Bank estimates for the former
Yugoslav Republic of Macedonia in Mojsoska (2003); updated estimate for Croatia in Sosic
(2004).

According to the ILO and the Council of Europe (2006) the overall EPL in the former
Yugoslav Republic of Macedonia at the end of 2003 was still considerably strict by
international standards, despite deregulation reforms during the nineties and again in
2003 with the Labour Law amendments. The table 25 illustrates this by presenting
summary of EPL indexes for the former Yugoslav Republic of Macedonia and selected
countries. This assessment follows the OECD methodology and entails evaluation of the
whole set of labour market regulations, taking into account various aspects of regular
employment contracts, fixed-term employment contracts, and collective dismissal
procedures.36 The comparison with the Central and East European (CEE) countries, on
one hand, and with the EU and OECD countries, on the other, shows that the countrys
EPL scores are quite high and above the average levels. However, the high value of the
overall index for the former Yugoslav Republic of Macedonia was mostly due to the
stringency of the legislation on temporary employment and collective dismissals, with
temporary employment sub-index for the country reaching the maximum value in the
peer group.
During the transition, there has been a substantial reduction in the strictness of regular
employment legislation which regulates hiring and firing rules for permanent workers,
notification procedures and severance payments. Thus after the 2003 law amendments,
the former Yugoslav Republic of Macedonia had a less rigid legislation on regular
employment than most of its peers and the CEEC average. On the contrary, legal
changes in 2003 regarding temporary employment which allowed for greater use of
fixed-term contracts (up to three years) without limits to their number or duration did not
produce a significant decline in the temporary index, with its score remaining high mainly
as a result of the non-existing legal framework on temporary work agencies (TWA) in
2003. Paradoxically, the use of fixed-term employment contracts continued to be
widespread practice in the country despite the rigid legislation. Collective dismissals
index covers the definition of collective dismissals, additional notification requirement
and possible delays. Macedonian index ranged comparatively low among CEE
countries, but still much higher than EU and OECD averages. The former Yugoslav
Republic of Macedonia thus seems untypical of its region, as temporary employment
remains rather low in almost all transition countries" (Cazes and Nesporova, 2006).
The new Law on Labour Regulations adopted in July 2005 aimed at making the labour
market more flexible through several new provisions: reduction of maximum severance
payments (from eight to six months), clarification and liberalization of overtime rules,
removal of some restrictions on fixed-term, temporary and part-time contracts, a
reduction of employers obligation on sick pay (from 60 to 21 days). The scope of formal
procedures of collective dismissals was also reduced: collective agreements are
considered binding only for signatories and members of signatory associations and trade
unions and valid for a fixed two-year term. This provision should exempt many smaller
firms from having to enter into collective wage agreements reached at industry level.
Box 4. Labour Law, 2005
Notice period (Labour Law, article 88)
One month for an individual dismissal, two months in case of termination of employment contracts
to more than 150 employees or 5 per cent of the total number of employees with the employer
36
This index
is a weighted
of 22 items of the strictness of employment protection.
prior
termination
of theaverage
labour relation.
Severance payments (Labour Law, article 97) for Macedonia
Severance payment
< 5 years of services
1 month salary
5-10 years
2 months salary
10-15 years
3 months salary

128

Source: Taken from the ILO and Council of Europe report (2006). Abstract from the Decree on
Promulgation of the Labour Relations Law, Skopje, 2005

On the whole, the 2005 Labour Law changes have contributed to reduced separation
costs, simplified redundancies procedures and increased speed of the labour
adjustment. Further loosening of legislation rigidity has come with the adoption of the
Law on TWAs in 2006 providing more adequate regulation on temporary work. It should
be noted that the above presented EPL indexes for the former Yugoslav Republic of
Macedonia, which unfortunately have not been updated since to take into account these
new regulations, would be expected to show further lower index values in view of the
increased flexibility coming with the changes.
Despite different conclusions in the empirical literature regarding the importance and
impact of employment protection on general labour market outcomes, the research in
this area that relates to the former Yugoslav Republic of Macedonia delivers some
findings and valuable information for the policymakers for the need and direction of
further labour law amendments. Micevska (2004)37 finds that the strictness of EPL has
no effect on overall unemployment, but the stricter protection of temporary employment
increases unemployment rate for women and young workers and reduces labour force
participation. Similarly, Mojsoska (2003) finds that legislative rigidity seems to impair
labour market prospects of those who are in greatest need of flexible labour markets in
the country.
Another contemporary study of the Vienna Institute (WIIW) and European Commission
(2008) on Western Balkan countries that includes also the former Yugoslav Republic of
Macedonia finds that EPL in the region has impact only on certain market outcomes, in
particular male unemployment and female employment in a way that the regulations on
temporary contracts and on collective dismissals are significant in opposite ways, and
further inverse relationship exists between the effects on gender38. In general, loosening
of temporary EPL simultaneously increases male unemployment and female
employment, with no effect on female unemployment, indirectly suggesting higher
female participation. Conversely, more flexible regulations on collective dismissals
37

Micevska (2004) has explored the effect of EPL, as measured with indices developed by the author, on
employment, unemployment and labour force participation in general and for particular vulnerable groups,
using a sample of 37 OECD, CEE and SEE countries and a regression framework.
38

The effect of EPL on labour market outcomes is estimated by using a simple OLS regression model with a
dataset for 2003 including 14 countries of the EU-15 group, 7 countries of the NMS group, 9 OECD non-EU
countries and 6 Southeast European candidate countries and potential candidate countries of the EU
(Albania, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro, Turkey).

129

reduce both, male unemployment and female employment. Additionally, the institutional
measures summarized in the rule of law have been found to have strong positive
correlation with female employment in the Western Balkan countries. Specifically for the
Macedonian labour market, the study finds that greater flexibility of collective dismissal
procedures would bring only gender restructuring effects without any improvement in the
overall employment, while relaxing the protection of temporary contracts would result in
only negligible positive employment effect. On the contrary, very significant improvement
of the female and the overall employment level results from the increase in the rule of
law measure.

3.4.6. Informal sector and labour inspection

The unfavourable business climate during the early transition has not only discouraged
new business start-ups, but also promoted the blossoming of the informal economy. To
discourage the sizeable shadow economy and spur the development of private, and
particularly, small and medium-sized enterprise sector, the authorities substantially
reduced the personal-income and corporate tax rates at the beginning of 2007. The
adoption of the so called flat tax is expected to generate growth-enhancing effects in the
medium term, mostly through discouragement of the grey economy, but the policy itself
involves an important trade-off in terms of income redistribution and widening wage
differentials in favour of the upper class. Furthermore, the National Action Plan for
decreasing of the grey economy in 2008 was adopted, while amendments made to the
Labour Law introduced stricter penalties for unregistered employment. Within the
National Action Plan for Employment (NAPE) 2006-2008 activities in this domain
included an extensive campaign against the undeclared work undertaken by the MLSP
and the Federation of Trade Unions of RM in cooperation with the other social partners,
local authorities and State Labour Inspectorate (SLI) with the purpose of legalizing the
employment of informal workers. The SLI adopted a Strategy for Modernization and
Capacity Building in March 2008 that aims at: (i) developing performance indicators and
benchmarks for each labour inspector, and (ii) intensifying capacity building through
training on legal issues (particularly, labour regulations), managerial and soft skills, and
occupational safety and health. The action plan for implementation of the Strategy,
additionally, formulates a range of activities that will increase the visibility of the
Inspectorate and reduce the incentives to stay in the informal economy.
So far, there has been no comprehensive analysis of the success of the implementation
plan to reduce the underground economic activities. The significant reduction of the tax
and social security burdens was expected to reduce the incentives for businesses to
continue their "shadow operations". These positive effects are likely to be reinforced
because tax changes are accompanied by improving government services and
strengthening legal system (the simplification of the administrative and regulatory
burden, the improvement of the quality of cadastral services and the visible success in
combating corruption practices). Furthermore, the intensified enforcement activities of
the SLI and the Public Revenue Office are substantially increasing the costs of having
employees work without official labor contract and of underreporting.
Other activities outlined by NAPE 2009-2011 in the near future for decreasing of the
undeclared work mainly relate to further reduction of labour costs through reforms of the
social insurance system and strengthened inspection supervision. The main emphasis is
placed on strengthening of the capacity of the Public Revenue Office, the SLI and the
financial police.

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There is an abundant evidence of sizeable informal economy activities in the country.

The SLI is responsible for monitoring of the implementation of the laws and other
regulations relating to labour relations, employment, collective agreements and
employment contracts. At the end of 2008 the SLI had 67 inspectors in charge of
supervision of labour relations located in 30 regions countrywide. Relevant facts about
the existing administrative capacity of the SLI are presented in the Table below.
Table 26 - Facts about the State Labour Inspectorate
Total number of staff in labour inspection services
Number of inspectors
HQ versus total staff (%)
OSH versus employment inspections (e.g. 100:0,
50:50, 45:55...)
Percentage of economically active population
covered by labour inspection services
Inspectors/1,000 enterprises
Inspectors per 1,000 employees
Inspections/1,000 workers/year
Visits by one inspector per annum
Inspectors per computer
Internet access?
Inspectors per office car
Own car used?
Own car use remunerated?
Inspector salary versus minimum wage (number of
time more than minimum wage)
Inspector salary versus private sector salary (worse,
same, better?)
Average age of inspectors
Annual report produced for public (yes/no)

109
101
8%
34 OSH: 67 LI
65%
0,7
0,19
57,36
297
2
Only in HQ
2
No
No
1:1.7
Same
45
Yes

Source: Macedonian National Occupational Safety and Health profile report (Petkovski, 2007).

During the 2008 the labour inspection supervisions were evidently strengthened and the
number of inspections in the labour relations domain was considerably higher. The State
Labour Inspectorate conducted 40,576 on-site inspections in 2008 related to labour law
compliance (an increase of 44.0% compared to the previous year), of which 4,827
resulted in temporary ban on business operations and 5,771 ended with files for
administrative prosecution. The inspectors discovered 15,839 unregistered employees,
out of which 11,628 were then formally registered with the ESA following the onsite
inspection. Most violations of labour regulations have been related to unpaid overtime
work and/or work during national holidays. The analysis of the human resource
management in the SLI indicates serious understaffing, which in turn, inhibits more
effective monitoring of the labour law compliance (Source: Annual Report, 2008).
Recent monthly data confirm the trend of increased labour inspection efficiency. Thus in
the six month period from October 2008 to March 2009 a total of 21,173 inspections in
the area of labour relations were made, representing 35% increase from the same
period a year ago. The number of detected cases of workers without employment

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contract in the period October 2008 - March 2009 was 6,779 or 14% less than in the
same period of the previous year, which might indicate reduced incidence of undeclared
work against the backdrop of significant increase of labour inspection supervisions. The
Labour inspectorate has been focused in particular on detection of labour regulation
violations in the manufacturing industry, trade sector and catering services (hotels and
restaurants), as these activities have been identified as relying excessively on
unregistered employment (Annual Report of the State Labour Inspectorate 2008).
Table 27 - State Labour Inspectorate - Inspection supervisions for labour relations in
2008
Number of
Number of
Number of
persons
persons
Number of
issued
registered in
Conducted
engaged
filed court
decisions on
the ESA, after
inspections
without
issuing work
cases
ban of
employment
activities
prohibition
contract
decision
1.993
943
531
214
283
Jan.
2.414
1.210
979
259
364
Fev.
2.797
1.049
872
343
433
Mar.
4.114
1.451
960
550
600
Apr.
3.489
1.166
780
326
432
May.
2.995
881
547
316
372
Jun.
3.080
945
678
356
395
Jul.
2.181
776
633
212
271
Aug.
3.745
1.607
992
415
483
Sep.
4.960
1.803
1.281
731
812
Oct.
4.331
1.869
1.749
563
683
Nov.
4.477
2.139
1.626
542
643
Dec
40.576
15.839
11.628
4.827
5.771
Total
Source: State Labour Inspectorate.

During the discharge of its regular oversight activities the SLI closely cooperates, either
through exchange of information or participation in joint inspections, with other
institutions (ESA, local centres for unemployment and social care, Public Revenue
Office, and other state inspections: financial, sanitary, market, etc). Moreover, the SLI
has open dialog with the trade unions through consideration of important labour rights
issues emphasized in discussions with the employees representatives.
Although the 2005 Labour Law has been improved on several occasions and brought
more in line with the acquis, there still remain some vaguely defined concepts and rights
that create problems in the subsequent implementation. In particular the law leaves
broad discretion rights to employers with regard to the use of overtime, annual holiday
and public holiday work. Another problem relates to the inefficiency of courts, mainly
frequent dismissal of outdated cases after long delays and trivial financial penalties39
have been identified as particular obstacle in the law enforcement by the SLI and the
main reason for small number of effective court resolutions (Annual Report of the State
39
Often courts specify much lower penalties as prescribed by the Law on Penalties instead of taking into
account the Labour Law which specifies much higher penalties corresponding to the type and degree of
violation.

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Labour Inspectorate 2008). Certain institutional drawbacks related to the functional and
organizational setup of the SLI, above all the insufficient capacity in terms of staffing and
available resources, as well as the inadequate separation of its core oversight activities
from policy development responsibilities, must be overcome first before any significant
progress in the law enforcement is seen. The main objectives and capacity building
measures in this respect have been outlined in the Strategy for modernization and
qualification of the State Labour Inspectorate adopted in March 2008.
Integrating social concerns in the business strategy and operations of Macedonian
companies would, inter alia, enhance social inclusion, demonstrate greater respect for
environmental protection, and improve the observance of core labour standards. The
latter challenge must be tackled by expanding the scope and effectiveness of the
government's labour inspection services in order to (1) discourage businesses from
entering the shadow economy; (2) promote a level playing field for doing business in the
former Yugoslav Republic of Macedonia, and (3) alleviate the deep mistrust between
employers and employees.

3.5.

Good governance

The governance is related to the (quality of) the decision-making process and the
process by which decisions are preferably implemented. Hence, the need that
government and other actors in the labour market-stakeholders practice good
governance, that is the decision and implementation processes should be free of abuse
and corruption and entirely based on the principle of the rule of law.
Good governance consists of the following elements: openness, participation,
accountability, effectiveness and coherence. Ensuring that these elements are
implemented in the employment policy, there is a need for a relatively high capacity of
policy-makers, public administration and stakeholders, good cooperation between labour
market institutions, functioning, all-inclusive social dialogue, as well as a strategic
approach to the policy. All these integral issues and analysed and assessed in the
following sections of the study.

3.5.1. Capacity-building
Capacity of the main labour market institutions, the MLSP, ESA and the SLI is in general
low and insufficient to match the ambitious employment strategies and plans. In addition,
the ESA and its local offices have not made the necessary preparations for participation
in the European Employment Services Network (EURES).
Meanwhile, there are certain improvements in this area, consisting of training of the
administration (and social partners), increased staffing and improvement in technical
capacity, as planned in the National Action Plan for Adoption of the Acquis (NPAA). In
addition, the NPAA defines future capacity-building measures needed for improvement
of the design and implementation of an effective employment policy.

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The main institution responsible for labour legislation and employment policy is the
Ministry of Labour and Social Policy (MLSP). The MLSP organisation consists of 10
departments, including the Labour Department which is significantly understaffed with
about 10 employees instead of 20, as determined in the organizational act of the MLSP.
These employees cover a wide range of issues and segments and their work is
organized in four divisions:
- Labour Market Unit, which is responsible both for preparation of strategic and
operational employment documents, such as National Employment Strategy, National
Action Plan for Employment and Operational Plan for active policies and measures, as
well as monitoring of their implementation, with until recently had only 2 employees40;
- Labour Unit responsible for drafting employment legislation, with 2 employees;
- Unit for Social Partnership which acts as a Secretariat of the Economic and Social
Council, promotes the social dialogue and collective bargaining, with about 3 employees;
- Unit for Wages, in charge of wage legislation, with only 2 employees.
Recently the Department has been engaged in two major projects, that are the CARDS
III project and the twinning project for harmonization of the labour legislation with the
acquis. These projects contributed towards capacity building of the staff mainly through
workshops, specific trainings, as well as knowledge transfer from the (mainly) foreign
experts and institutions that were implementing the projects, such as the Swedish Public
Employment Service, consultancy company GVG (German Association for Social
Security Policy and Research), Slovakian Ministry of Labour, Family and Social Affairs,
etc.
Moreover, one of the activities within the CARDS project was to review the structure,
organisation and capacity building needs of the MLSP, to propose changes and provide
training to ensure an effective monitoring and implementation of the NES and the NAPE.
The review showed that the number of employed staff in the area of employment policy
does not correspond to the Government commitments and proposed establishment of an
additional unit for employment policy with responsibilities in designing the employment
policy, implementation of the NES and NAPE, monitoring and evaluation of ALMPs,
alignment of policies with those of the EU, etc. However, this unit have not been yet
established. The project team also prepared training needs assessment and
implemented several training modules (labour market data, monitoring and evaluation of
ALMPs, the European Social Fund-ESF, EURES and management of grant schemes)
for the staff from the MLSP, as well as from the other institutions involved in the project.
In 2008, a new twinning project started in the MLSP for harmonization of the labour
legislation. It provides support for improvement of capacity of the country in reinforcing
labour market and preparation for accession to the EU, with one of the mandatory
results being that the capacity of the MLSP' staff is improved on issues linked to the EU
labour legislation and that all relevant EU directives have been transposed. The project
consists of three working groups, on working conditions, information and consultation of
workers, equal treatment and anti-discrimination and health and safety at work.

40

While preparing this report, there was some increase in the staff.

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Members of these working groups are staff from the MLSP, SLI, Secretariat for
European Affairs, and from other relevant institutions. The project has been directed
towards an assessment of the compatibility of five domestic laws, the Labour Law, the
Law on Employment and Insurance in Case of Unemployment, Law on Temporary Work
Agencies, Law on Employment of Disabled Persons and the Law on Equal
Opportunities, with the EU legislation. Currently, involved foreign experts prepare final
reports based on the assessment. Within the project, working groups were trained on
preparation of correspondence tables, detailed presentation on the labour acquis and
review of the EU directives for each of the three areas/working groups in the project.
In view of the effective use of the pre-accession assistance within the IPA Component
IV, Human Resource Development, the MLSP established an IPA Unit. In 2008 and
2009, the staff from this unit received training in several areas, that are programming,
EU procurement procedures, monitoring and evaluation, development of a
communication plan, etc., based on the annual training plan, and organised by the
CARDS international team from both local and international experts.
Some progress was also achieved in raising the institutional capacity and preparation for
participation in the Open Method of Coordination. A National study on disabled persona
and National study on old-age persons have been prepared, within a consultative
process. In addition, a multi-sectoral working group has been established for preparation
of a National Strategy for Fight against Poverty and Social Exclusion. A national
coordinative mechanism should be established for preparation and implementation of
the Strategy.
The ESA is the main implementing body of the passive and active employment
policies/programmes. Its low capacity was and has been addressed by intensive
capacity building activities, mainly within the CARDS projects. The organizational
structure of ESA was changed within the CARDS II project, to better reflect the
responsibilities of a modern PES (see section 3.3.1). Following training modules were
implemented under the most recent CARDS project:
- training in the new service model established by the ESA. This training was targeted at
managerial staff at the central office and local offices staff, in total 330 employees (more
than 60% of total staff) of the ESA;
- training on monitoring and evaluation of ALMPs;
- training on available labour market indicators, their compatibility with the Eurostat
standards, methodology of data collection, data analysis;
-144 persons, or about 30% of total staff were trained for preparation of individual
employment plans, in line with the ESA goal to develop a more individualized approach
to the unemployed, drawing from the experience of modern PESs. Through the training,
individual employment plans were prepared for 4,243 unemployed persons which is still
a negligible proportion of all unemployed (about 13%).
- training on implementation and use of the ISCO classification;
- training related to IPA funds and the ESF;
- workshop on EURES, etc.

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The project proposes that a division for training of staff is established within the HRD
department responsible for the overall plan, coordination and support of staff training, as
well as initial/introductory on-the-job training for the new staff on the main aspects of the
ESA operation and services. Indeed, the ESA, as well as other labour market institutions
has to reduce their dependence on international assistance for capacity building
activities and has to prepare and execute an annual training plan. This is difficult to
achieve given the relatively low spending on ESA administration.
With the CARDS III project, ESA upgraded the ICT system (both software and
hardware) in the main and local offices. In addition, new software would be developed
for the overall work of the ESA including the system of monitoring of implementation of
ALMPs.
The SLI is still understaffed and lacks proper facilities for normal working, and hence
cannot ensure proper implementation and enforcement of the legal provisions. In the
course of 2008 and 2009, capacity of the SLI was improved mainly through the
participation of the SLI staff in the training and work under the CARDS III project and the
twinning project for harmonization of national legislation with the EU acquis. The SLI
staff participated in several seminars and workshops where they got acquainted with the
new legislation on health and safety ay work and its proper implementation, and
rulebooks on minimum health and safety requirements in some specific areas.
Moreover, the inspectors from the SLI held few workshops and seminars for employees
and employers on their rights and obligations arising from the health and safety
regulations.
The SLI was one of the major actors in the public campaign for reduction of the grey
economy, through opening a telephone lines for reporting undeclared work and
participation in several discussion forums.
The NAPE 2009-2010 sets following objectives in the area of SLI:

Establishment of two units within the Department for normative activity for health and
safety at work: a Unit for normative activity for health and safety at work and section
for cooperation with national and international organisations in the area of health and
safety at work, with a total number of 12 officers;

With the new adopted organizational scheme of the SLI, the number of inspectors
should be increased by 50 new officers;

Improved communication and cooperation between the SLI and social partners;

Training of labour inspectors for changes and needs on the labour market
(methodological, social and management skills etc.), promotion of working
procedures, analysis of accidents at work, working conditions and labour relations,
drafting of annual working plans and annual reports and introduction of an expert
system for providing of post specialized knowledge of the labour inspectors in the
area of health and safety at work.

A progress is achieved also in the area of technical capacity of the SLI, new ICT
equipment has been procured as well as few vehicles.
In the area of anti-discrimination, a draft Law on Anti-discrimination has been prepared
and several public forums were organized in order to promote the Law and to get
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feedbacks from the stakeholders. In addition, the Law was send to the ODIHR and
Venetian Commission and the EC Delegation in the country. Part of the comments
received were incorporated and the Law should be soon adopted by the Government.
The Department for equal opportunities within the MLSP, prepare the annual
Operational Programme for 2009, based on the National plan for action for gender
equality 2007-2012. Training has been provided for capacity building for mechanisms for
gender equality for the coordinators for equal opportunities of females and males in the
ministries and focal points for gender equality in the Ministry of Education, State
Statistical Office, General Secretariat and Secretariat for European Affairs. Needs
assessment has been prepared for the national mechanisms for gender equality.
In December 2008 and January 2009, 6 workshops were organized for 80 professionals
on gender sensibility and incorporation of gender equality concept into social and health
work and police. Moreover, in December 2008, the MLSP started the implementation of
the annual programme for capacity building of the mechanisms for gender equality on
local level. The programme should help the equal opportunity commissions to exercise
and coordinate their functions.
In summary, there is certain improvement of the capacity of the main labour market
institutions, in terms of additional staffing, provided training and technical improvement.
However, labour market institutions are in general understaffed and rely too much on
international assistance in the capacity building efforts. It is necessary to ensure that the
projects ensure transfer of knowledge from foreign partners and experts to the staff of
the participating national institutions. This is currently only partly done, for instance, it
often happens that national programmes, strategies, documents, etc. are in essence
written by the foreign party/experts instead of training and consulting national staff to
gain hands-on experience. This comment includes CARDS projects.
In addition to the previous analysis of the capacity of the main labour market institutions,
Annex 2 provides the results of the implemented survey on the representatives of the
main stakeholders in the labour market, which can also be treated as an assessment of
their capacity and knowledge. The annex presents main findings of the survey in detail
whereas here we briefly summarise those. In particular, the knowledge of respondents
on the main labour market characteristics and developments can be assessed as rather
low, with few exceptions. The same holds for the recent and planned employment policy
measures, and broader economic policy which were familiar to only few respondents.
Hence, recommendations provided by the interviewed persons at the end of each
section of the questionnaire were quite similar, general and did not draw on the
respondents assessment on the current state of the labour market and identified
challenges.

3.5.2. Cooperation between the labour market institutions

The main labour market institutions in the former Yugoslav Republic of Macedonia are
the MLSP, ESA and SLI. The MLSP carries out the following activities: legislation of
labour market and employment, design of employment policy, follow-up of ALMPs,
legislation and follow-up of equal treatment, supervision of the operation of ESA, etc. As
explained in section 3.3.1, the absence of division of responsibilities and accountability
of the MLSP and ESA hinders the effectiveness of employment policy. The ESA should

137

be implementing body of the labour legislation, in particular the Labour Law, the Law on
Employment and Insurance in Case of Unemployment, as well as the NES, NAPE, and
OP. Hence, it should be accountable to the MLSP. However, current regulation states
that the MLSP supervises the performance of the ESA only from legislative perspective.
This issue was raised also by the CARDS III project where proposals were made on the
flow of information between the Government, MLSP and ESA. The latter two institutions
signed an agreement on the detailed reporting system from ESA to the Ministry,
whereas the communication between government and ESA should be through the
MLSP. In addition, we propose that the experience from other countries is used so that
either the minister or state secretary for labour and social policy should be permanent
head of the ESA Administrative Board. The structure of the ESA Administrative Board
might be changed to ensure the equal representation of the three participating groups:
government, employers and workers.
Additional area that deserves attention and improvement is rather centralized
management of ESA and insufficient information flow. Hence there is a need for
decentralization of ESA management, bottom-up approach in which local offices could
propose and implement active policies based on the local labour market needs, and
greater involvement of stakeholders in the employment policy on local level.
The MLSP, ESA and SLI intensified their cooperation under the already mentioned two
most recent EU projects, where they worked in same working groups, participated
together in several trainings and workshops and had an opportunity to share their views
on different issues.
In addition, there is cooperation between the Ministry of Education and MLSP, especially
in the area of equal opportunities.
The former Yugoslav Republic of Macedonia is in a process of accreditation of the
Operating Structure for decentralised implementation system for IPA Component IV, the
Human Resource Development. National Accreditation has been granted and the
Decision on Conferral of Management powers by the European Commission is expected
during this year.
The MLSP already started preparation of the first projects to be financed under this
Operational Programme. In addition, a draft twinning project fiche has been finalised
and submitted to EC Delegation in the former Yugoslav Republic of Macedonia for
support of the Operating Structure for decentralised implementation of IPA Component
IV funds, in the first year of implementation.

3.5.3. Strategic approach to employment policy

In recent years, there is some improvement in the area of planning and implementation
of employment policy, as well as its complementarity with other policies, mainly
educational policy. In December 2006, the Government approved the Employment
Strategy 2010. The first NAPE was prepared for the period 20062008 as operational
document for implementation of the Employment Strategy, with a considerable expert
support. The progress in the area of employment policy is considerable but objectives
set in the Employment Strategy are too ambitious.

138

The new NAPE 2009-2010 was prepared by the working group from several ministries
and institutions, with large national ownership of the document and through a
consultative process. NAPE 2009-2010 is based on the new EU Integrated guidelines for
growth and jobs that cover economic, social and employment policies, organised in 24
guidelines, that are:
z

Guidelines 1-6

Macroeconomic guidelines

Guidelines 7-16

Microeconomic guidelines

Guidelines 17-24

Employment guidelines

Specifically, NAPE covers the employment guidelines (17 24), but since small and
medium sized enterprises and the entrepreneurship in the former Yugoslav Republic of
Macedonia have large impact on the labour market in light of the high unemployment, it
NAPE also covers guidelines 14 and 15 from the microeconomic guidelines.
NAPE draws on the main labour market challenges in the country and defines programs,
projects, measures and activities to address those challenges. The document was also
based on the lessons learned from the assessment of the implementation of the NES
and NAPE 2006-2008, prepared under the CARDS III project. The NAPE should
contribute to the overall preparations of the former Yugoslav Republic of Macedonia for
the future membership into the EU by creating and implementing employment policies in
line with the policies defined in the European Employment Strategy.
Starting from 2007, the Government (MLSP) prepares annual operational plans for
active programmes and measures for employment, as one of the instruments for
implementation of the NES and NAPE. The preparation and implementation of these
documents can be viewed as a move towards programming approach to ALMPs.
Operational plans define specific employment programs and measures that should be
implemented, the target groups, allocated funds, etc.
IPA Multiannual operational programme for Human Resources Development 2007
2013, prepared by the Government has been adopted by the European Commission in
2007. The Operational Programme was prepared in line with the Strategic Coherence
Framework 2007-2013 which aims at strategic programming of investments in the areas
of regional and human resources development, clustered around IPA III and IV
components. Regarding the IPA IV component, the Strategic Coherence Framework
defines the overall objective as to foster the development of human resources, in
particular by improving the quantity and quality of human capital, leading to more and
better jobs, higher growth and development and increased national competitiveness at
international level. It also states that the Human Resources Development Component for
period 2007-2013 will be implemented through a single Multi-annual OP, covering the
three separate pillars of intervention of this component: Employment, Education and
training and Social inclusion.

General economic, social, employment and education strategies

Work Programme of the Government of the former Yugoslav Republic of

Macedonia for the period 2008-2012
National Employment Strategy 2010

139

Strategic Coherence Framework 2007-2013

National Development Plan
Operational Programme for Human Resources Development 2007-2013
National Programme for Adoption of the Acquis
National Action Plan for Gender Equality
Strategy for Demographic Development 2008-2015
Strategy for the Roma
National Strategy for development of the small and middle size enterprises (2002
2013)
Program for development of entrepreneurship, competitiveness and
innovativeness of the small and middle size enterprises (2007 2010)
Program for development of entrepreneurship, competitiveness and
innovativeness of the small and middle size enterprises in 2008
Program for reform of the Business Environment and institutional strengthening
BERIS
Program for improvement of competitiveness of Macedonian products and
services in 2008
Multiannual operational programme for Human Resources Development 2007
2013
National programme for development of the education 2005 2015 with
accompanying programme documents

3.5.4. Social dialogue

Social dialogue in the former Yugoslav Republic of Macedonia is established on tripartite
and bipartite level. The system of social dialogue is based on the International Labour
Organisation (ILO) Convention on Freedom of Association and Protection of the Right to
Organise No. 87, the ILO Convention on the Right to Organise and Collective Bargaining
No. 98, the ILO Convention on International Labour Standards No. 144, and the ILO
Recommendation No. 152 on International Labour Standards, the Constitution, Labour
Law, other related laws and collective agreements (ILO and Council of Europe, 2006).
The country has so far ratified 69 ILO conventions and ratification of the convention 94
was already discussed among the social partners.
The Labour Law guarantees the freedom of association, i.e. the right of employees and
employers to establish an association, as well as the independence of these
organisations.
Whereas in the previous communist system there was only one trade union and none
employers organisation, the transition brought about pluralism in this area. This nonexistence of employers organisation was hindering the bipartite social dialogue and led
to a large role of the state in the social dialogue.
The three major trade unions acting on national level are the: Association of Trade
Unions of Macedonia (established in 1946) and re-registered in 1991, Union of
Independent and Autonomous Trade Unions of Macedonia existing from 1991 and
Confederation of Free Trade Unions established in 2005.
The Chamber of Commerce was established at the beginning of transition and was
representative employers body in the tripartite dialogue and in the collective bargaining
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until 2005. However, this organisation could not be treated as an independent according
to the ILO principles of freedom of association and hence in 2004 a new Organisation of
Employers of Macedonia was established mainly out of the members of the Chamber of
Commerce. Another active organisation is the Confederation of Employers of Macedonia
established in 2001.
One organizational difference between the trade unions and employers' organisations is
that the former have usually developed a three-level structure, that is employer, branch
and national level, whereas the latter have only central level structure.
The legal framework for bipartite and tripartite social dialogue, including the
establishment of an Economic and Social Council as a forum for tripartite consultation on
economic and social issues between the Government and social partners, is defined in
the Labour Law.
The Economic and Social Council was formed in 1996 as a permanent tripartite body,
with an Agreement signed between the government, trade union and employers'
organisation.
According to the Agreement on Establishment of Economic and Social Council, tripartite
consultations are made on economic policy issues, labour, wage and social protection
issues, working conditions and safety at work, health protection and pension insurance,
education, culture and vocational training, child care, etc. In addition, the Council should
encourage peaceful resolution of collective labour disputes, participate in coordination of
social partners for their cooperation with the International Labour Organisation and other
international European institutions dealing with the tripartite dialogue and the
implementation of the international labour conventions, etc.
The Council has 9 members, 3 representatives from each social partner. The minister of
labour and social policy is by default the president of the Council. Decisions are made by
consensus, though at a request from the members, decisions can be voted. The public
and government are informed about the decisions, opinions and recommendations of the
Council and adopted documents are sent to the government, respective institution and
the Parliament. The strength and activity of the Economic and Social Council varied
substantially in the period 1998-2006, depending on the strength and leadership of the
president, economic and social situation in the country, etc. Indeed, the EC wrote the
following in the 2007 Progress Report, Chapter 4.19.:
There has been no progress in the field of social dialogue which remains very formal
owing to the weaknesses of the social partners The composition of the members of
the ESC was not completely in accordance with the labour law provisions, since the
representation criteria of the trade union representatives have still to be clarifiedThis
has also a very negative impact on bipartite social dialogue The definition of
representation criteria therefore currently hinders the development of social dialogue
structures
This citation highlights two important issues. First one is the low capacity of social
partners, which is also found in (Stojkovski and Huelsmann, 2009). The latter report
prepared under the CARDS III project, conducted an analysis of the training needs of the
social partners, as well as their self-assessment, and defined several areas where
training should be delivered to social partners. These include financial planning and
management, public relations segment, project preparation, strategic planning, bipartite

141

social dialogue, etc. Most of the planned training modules (6 in total) are already
implemented. Additional capacity issue is a lack of language skills, though most of the
organisation are members of international organisations and would like to even increase
their international cooperation. On the other hand, they report that their knowledge in
ICT is rather satisfactory. Despite the achieved progress in this area, much more needs
to be done.
Second issue is about representation criteria about participation in the social dialogue,
i.e. The Economic and Social Council. For instance, only one national level trade union
is a member of the Council, the Association of Trade Unions of Macedonia as well as
only one employers' organisation, the Organisation of Employers of Macedonia.
According to the EC (2008), the lack of representation of social partners in the Council
hinders the development of an all inclusive social dialogue.
In particular, representation criteria for trade unions is defined in terms of membership,
i.e. that at least 33% of all workers on national, branch, and employer level are their
members. Similarly, the criteria for employers organisations are that they gather at least
33% of all employers and employees in the respective sector (nationally, in the branch,
or employer level). These are rather high requirements for representativeness by
international standards. Moreover, this criterion is not implemented properly, and some
important trade unions or employers' organisations are left out of the Council. Hence,
after some period of regular meetings of the Council, the last session was held in May
2008, when the introduction of the gross wage reform was discussed.
After some ILO support which involved all major social partners, the MLSP prepared
amendments to the Labour Law which should improve representation and hence
contribute to better social dialogue.
With the proposed amendments (currently in the Parliamentary procedure),
representation criteria for the trade unions would be reduced from current 33% to 20%
membership of employees in the public or private sector, branch or employer who pay
membership fee, whereas for employers' organisations the requirements is that they
employ at least 10% of all workers in the public or private sector, branch or employer
(from previous 33%). There are additional requirements for a representative trade
union/employers' organisation on a national level. In addition, the amendments to the
Labour Law perceive establishment of a body (commission) responsible for determining
the representation. This commission would be comprised of 9 members, by three
members from three different ministries, the MLSP, Ministry of Justice and Ministry of
Economy. Registered trade unions and employers' organisation might nominate a
representative who shall attend meetings/activities of the commission. If these
amendments are passed and implemented properly, the representation issue should be
at least mitigated and social dialogue improved.
Notwithstanding, one might argue that there are limitations to the strength of the social
dialogue in the former Yugoslav Republic of Macedonia given that about 40% of total
employment is in micro firms, and majority of other workers is concentrated in small
companies with up to 50 employees.
Besides consultations in the framework of the Economic and Social Council, active
participation of social partners in the policy design is ensured through their participation
in different bodies, steering committees, managing boards (for example in the ESA,
Pension and Disability Fund, Health Fund, the VET Council), coordinative bodies such

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as the Corporate Public Responsibility body, Common Consultative Committee of the

former Yugoslav Republic of Macedonia and the European Economic and Social
Committee, etc. Important remark is that different organisations (including those that are
not members of the Economic and Social Council) participate in different
institutions/bodies.
In addition, the NAPE has(ve) been prepared and is implemented with participation of
social partnership. Social partners were also active participants in the CARDS project,
phase 3. Moreover, the Government and the Association of Trade Unions have signed a
social agreement which determines the economic and social issues in the country,
priorities and obligations, as well as the course and dynamics of realization.
Though the law sets a framework for the decentralized collective bargaining (the
tripartite dialogue on a local level), there is not much progress in this area. Such
dialogue should stimulate local development through coordination and cooperation of the
social partners on local level.
The bipartite dialogue functions on an employer (firm) level, branch level and on a
national level between employees and employers organization, for the private sector,
and between the government and the trade union of public sector employees, for the
public sector. The two general collective agreements that were re-signed in 2009
relatively fast after the Labour Law amendments could be viewed as some improvement
in this area. However, vague and non-implemented representation criteria are major
limitation for more effective bipartite dialogue.
The MCMS surveys on the confidence in the civil society shows that about 20% of the
population aged 18-64 has a confidence in trade unions, whereas the confidence in
employers' organisations is slightly higher, at 23% in 2008.
Regarding the cooperation between the social partners' organisations, there is some
rivalry and tensions, which, among others, come from the representation issues and
participation vs. non-participation of some organisations in the Economic and Social
Council. Some organisations have signed memorandums of understanding which
facilitate their cooperation. Tensions were created also because one of the trade unions
publicly supported a political party in 2002 parliamentary elections.

4. EMPLOYMENT CHALLENGES AND PRIORITIES FOR ACTION

Previous chapters in this report explored the general economic developments and
policies in the former Yugoslav Republic of Macedonia, labour market performance and
employment policies. Given the poor performance and outcomes in the labour market,
there is a need for implementation of a comprehensive policy package consisting of
micro-level reforms, appropriate mix and coordination of macro policies, and
employment policies. Microeconomic reforms should further improve business
environment in order to ease and make less costly establishment and growth of firms.
These measures, along with the measures for reducing labour costs, are likely to
increase job creation given the current insufficient demand for workers. The
macroeconomic policies mix should preserve current stable environment, though
simultaneously allow for greater dynamics in the economy. Policy-makers should be
aware that major challenge for the macroeconomic policies on the medium run would
arise from the nominal (and real convergence) towards the EU. In addition, product and
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labour market policies should be consistent and coordinated as to improve country's

competitiveness.
On the supply side of the labour market, employment and broad economic policies
should i) provide incentives for greater labour market participation, and ii) ensure that
skills and knowledge of supplied labour are a good match to the demanded ones.
The former Yugoslav Republic of Macedonia needs to advance fast and make
considerable progress in order to be able to improve its record in achieving full
employment, higher quality and productivity at work and social and territorial cohesion,
that are the overarching objectives of the European Employment Strategy for the period
2008-2010. Given the analysis provided in the previous chapters on the current state of
the Macedonian labour market, as well as taking into account the candidate status of the
former Yugoslav Republic of Macedonia and its priority of joining the EU, the country's
priorities for action should be identical to those identified in the revised Lisbon agenda
for growth and jobs, in particular:
- attract and retain more people in employment, increase labour supply and modernise
social protection systems;
- improve adaptability of workers and enterprises;
- increase investment in human capital through better education and skills;
In light of the global economic and financial crises, in January 2009 the Commission
defined two priorities that deserve immediate actions that are flexicurity, as a pathway to
increase employability, and skill upgrading and their better match with the labour market
needs, which is important not only in the current economic slowdown but also as a
response to demographic and technological change.
We begin this chapter with a summary of the main challenges of the Macedonian labour
market based on the analysis provided in the previous chapters. Afterwards, we
establish priorities for action building on the challenges identified and the Lisbon
priorities.

4.1. The main challenges of the current labour market in the former Yugoslav
Republic of Macedonia
As the exploration and comparative analysis in this report showed, Macedonian labour
market can be characterised as an outlier relative to both the European' and
neighbouring countries' labour markets. It suffers from low activity, low employment
rates, high unemployment and mismatch between supplied labour and demanded skills.
Labour force participation rate is low by international standards, reflecting the low
employment coupled with high unemployment rate. Low participation is supported by the
sizeable net inflows of remittances and free health insurance provided for the registered
unemployed (which might not be jobseekers). Main determinants of activity are gender,
education, ethnicity and age. In particular, females in the former Yugoslav Republic of
Macedonia exhibit very low participation (that is more than 25 p.p. lower than that of
males) due to the traditional role of women in the society, which is exacerbated for
females from ethnic minorities such as Albanians and Roma. Moreover, young, rural and
unskilled females are less likely to be active in the labour market. An important finding
from a policy perspective is that gender participation gap declines with the education
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level, where females with tertiary education are more active on the labour market than
respective males. In this regard, policies to improve educational attainment of women,
especially of those from ethnic minorities, as well as provision of accessible and
affordable childcare and other dependants care might increase their participation (and
employment).
Young workers also have low participation rate which can be regarded positive if young
workers were inactive because of being full-time students and investing in their
education in light of relatively high returns to education. But, to the extent that young
people stay in education in order to be able to acquire visa for travelling abroad, or
because of difficulty in finding a (decent) job, or that they are inactive for other reasons
than educating themselves, the Government should consider policies to address low
activity of youth.
Early retirement schemes offered in the 1990's and beginning of this decade had only a
temporary effect on the labour supply so that participation rates of older workers (55-64
age group) increase continuously which can be regarded as a positive development
given the ageing population and its likely future pressure on the pension system.
Employment rate in the former Yugoslav Republic of Macedonia is only two-thirds of
the EU-27 average employment rate though in recent years it follows an increasing
trend. It implies an insufficient utilisation of labour in the former Yugoslav Republic of
Macedonia, hence raising employment level in the country would generate higher
economic growth and promote more inclusive labour market. The authorities have set a
national employment target of achieving employment rate of 48% by 2010 (in NAPE
2009-2010). However, this lower target seems unrealistic given that the economy has to
generate more than 86 thousands jobs in two years period, that is about 14% of the
employment level in 2008.
Low employment affects literally all groups in the labour market, especially those with
lower education. Gender gap in employment is relatively high and persistent. As for
activity, the difference in employment rates between genders decreases with education
so that higher-educated females have greater employment rates than males. As much
as 16.5% of employed women have a status of unpaid family worker.
Though self-employment can be viewed as an effective tool for reducing unemployment
in a low job-creation environment, it also reveals low social security since starting an
own business in the former Yugoslav Republic of Macedonia is often subsistence, lowproductivity strategy, and predominantly takes place in the informal economy. In this
regard, Government policies (in particular active labour market programmes, taxation
policy, and business environment) should further promote entrepreneurship and support
business start-ups, but higher consideration should be paid to target groups and
sustainability of the businesses.
The use of part-time employment in the former Yugoslav Republic of Macedonia is much
lower than in the EU-27, which might reflect low living standard, though it can also result
from low demand for part-timers. To the extent that part-time employment might increase
flexibility and virtually create new jobs, and might increase alternatives for women, the
Government should reduce barriers to its greater use which was recently done with the
gross wage reform and changes in the system of social contributions.
Though addressing low participation and employment rates should deserve great

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concern of Macedonian government, reduction of unemployment is a major challenge.

Both genders are almost equally affected by the unemployment, though true
unemployment of women is disguised with their high employment as unpaid family
workers.
Youth unemployment is another challenge for the employment policy. Considerable
efforts are needed in several areas to help young people enter the labour market without
an unemployment spell. Firstly, microeconomic policies should boost job creation, while
more intensive economic growth along with a more flexible labour legislation should
ensure greater dynamics in the labour market. Secondly, given that lack of previous
work experience is one of the main disadvantage of young persons compared to the
other job applicants, active labour market programmes should help young persons to
acquire experience. Thirdly, there is a need for a greater adaptation of education and
training systems to the changing and increasingly demanding skill requirements.
Fourthly, relatively high (private) returns to education in the former Yugoslav Republic of
Macedonia probably provide sufficient incentives for individuals to acquire more
education, but government institutions must improve their ability to provide accurate
information on the demanded skills.
The information on demanded skills should be improved and should be a main input into
designing the educational and training policy at all levels and segments. Such informed
policymaking, along with transmission of correct signals to students and their parents
would reduce the existing skill mismatch in the labour market.
Very high long-term unemployment in the country implies that virtually all unemployed
have difficulty in finding a job. However, records of unemployed include non-jobseekers
and grey economy workers. Apart from these categories which can be tackled if there is
a political will, persons with insufficient and/or inappropriate skills are main groups at risk
of (long-term) unemployment. A strong focus should therefore be placed on skills
acquisition and upgrading, trough formal and non-formal education system, including
training, retraining and work practice provided to unemployed. The Government is doing
a right step in that direction with introduction of a compulsory secondary education,
social cash-transfers conditional on secondary school attendance, increased spending
(including investments) on education. However, the remaining challenges in this area
are getting all ethnic groups, in particular Roma population and females from Albanian
and Turkish ethnic minority into education system, reforming the education, especially
VET system, and promotion of lifelong learning.
Raising the educational attainment of groups at disadvantage might render more
inclusive labour market, though the latter is also a result of the insufficient job creation,
as well as tiered structure of the labour market in which formal job opportunities are rare.
Moreover, raising the average educational attainment might also reduce regional
labour market disparities, given that there is a link between the region's unemployment
rate and educational attainment of its citizens.

4.2. Priorities for action

Attract and retain more people in employment, increase labour supply and
modernise social protection systems

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The former Yugoslav Republic of Macedonia has to increase the low employment rate in
order to embark on a higher economic and social development path and to achieve
progress towards fulfilling the Lisbon Strategy goal of full employment. Above we argued
that this challenge requires a comprehensive package of reform measures and activities
in different areas, from micro, to macroeconomic, employment and educational policies.
Though in the country specific context, that is high unemployment, increasing labour
supply might not be a priority on a medium-run, addressing the gender activity gap is
necessary to the extent that low labour market participation of females is non-voluntary.
Hence, the specific groups where the country faces greatest challenge of increasing
employment and/or participation are women and older workers, whereas in the area of
unemployment, efforts should be focused on youth and long-term unemployment.
Increasing participation and employment rates of women, particularly those with low
education and skills and from certain ethnic minorities, can be achieved through the
following priorities.
Priorities:

Support women, especially from ethnic minorities, to enter and remain into formal
education system and to acquire professional qualifications;

Expand the network of public childcare institutions as well as institutions for other
dependants care, at affordable price and provide incentives for (greater) private
provision of these services;

Provide tailor made training, retraining and work-practice measures to increase

women endowment with general and/or specific skills, including job-seeking
skills;

Increase the scope of employment programs targeted at women such as wage

subsidies, support for self-employment (family business), raise awareness and
support rural and agricultural women to start a business;

Amend labour legislation in order to reduce possibility for gender pay (and other
types of) gap and make progress in implementation of equal opportunities
legislation;

Find instruments to promote flexible working arrangements, such as work

sharing, part-time work, work from home, flexible working time, etc. Social
dialogue can also be used as an effective instrument.

Ageing of Macedonian population as well as the low ratio of contributors to pension

system to pensioners, raises the need for undertaking specific measures for increasing
participation and (formal) employment of older workers. The National Action Plan for
Employment 2009-2010 sets relatively high national target for employment of older
workers aged 55-64, that is employment rate of 33% in 2010.
Priorities:

Develop the adult education system and provide training and retraining for older
workers, especially those with long unemployment spells whose skills and
knowledge depreciated;

Review and address incentives in the benefit system and social assistance
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system for inactivity of older persons or passive job search. For example, current
possibility that older workers claim unemployment benefits until retirement should
be instead administered as part of the social assistance system;

Increase the scope of active employment programs for older persons, such as
wage employment, self-employment and start-up incentives.

Labour market in the former Yugoslav Republic of Macedonia is characterised with a

difficult school-to-work transition, for several reasons such as low net job creation, lack
of work experience, inadequate skills and knowledge, etc.
Priorities:

Improve career guidance and orientation, both in the ESA and in schools and
offer it as a separate discipline or interdisciplinary subject in secondary schools;

Ensure that young persons receive job-seeking skills (writing a CV, interview and
presentation skills, etc.) during the formal education process;

Develop a more individualised approach (i.e. individual action plans) to young

unemployed persons at risk of becoming and staying unemployed, for instance
those with low education. With the current staff and resources constraint, ESA
should concentrate on the former young workers and provide self-help services
for young persons with higher and relevant education and skills (like updated
web assessed database of job vacancies).

In the same manner, ESA should provide additional training in general skills
(mainly foreign language and IT) through Job Clubs only for young workers at
risk; other young workers should have acquired those skills in the formal
education process.

Include more young persons into work experience programmes, wage subsidies
and self-employment programmes;

The high share of long-term unemployed in the former Yugoslav Republic of Macedonia
is detrimental to the functioning of the labour market because these people face
depreciation of their human capital and their skills, making them vulnerable to social
marginalisation and labour market exclusion.
Priorities:

Skills upgrading should be at a core focus of employment policies, especially for

people at risk of becoming long-term unemployed, such as older people, ethnic
minorities, and people in more remote regions;

Develop an effective system of training and retraining and close links between
the responsible institutions, to be able to quickly respond to a lack of certain skills
in the labour market. The Skills demand survey implemented by ESA should be
mainly used for formulating short-term training courses in ESA, in conjunction
with the Vocational Education and Training Centre;

Review current targeting of active employment policies, especially of selfemployment programs and start-ups which should not be offered to long-term
unemployed whose skills and knowledge are likely to have depreciated and/or
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are not relevant in the current labour market and economic environments;

The national regional development strategy should ensure more balanced

development across the regions and should be accompanied by a
comprehensive regional development plans, based on regions current state and
comparative advantages, educational structure of population, infrastructure, etc;

Policymakers should make informed choices when designing the educational and
training policy. The first Skill needs analysis in the former Yugoslav Republic of
Macedonia was conducted in 2006 by the ESA, and is afterwards conducted annually,
but suffers from some methodological problems and narrow focus. In 2009, the first
Labour Demand survey was conducted and results should be published by end 2009.
This is a more comprehensive study which will provide more detailed information on
demanded skills and deficit supply.
Priorities:

Further improve methodology of Skill needs survey as well as the capacity of

ESA staff to analyse and anticipate future labour market needs;

Use finding from the survey to

registered unemployed (those
currently, has to be done in
secondary vocational schools;
trained persons in finding a job;

Given that Labour Demand survey is richer, the authorities should ensure that it
is implemented with regular periodicity, say annually; Findings from the Labour
demand survey (and other similar surveys/studies if existing) to formulate general
and vocational education policy;

Curriculum should be made more flexible with a possibility to reflect the local
labour market needs.

As a general principle in the country which is currently undermined is that the

policy formulation should be based on relevant and deep data analysis. Data
should be more readily available to the public, government and for research
purposes.

provide short-term training and courses for the

with low sand/or inadequate skills), which as
close cooperation with the VET Centre and
ESA should then follow how successful are

Improve adaptability of workers and enterprises

Though in the past, the former Yugoslav Republic of Macedonia was a country with a
rather strict Employment Protection Legislation (EPL), the implementation of this
legislation was lagging behind and firms were finding a ways out of the strictness mainly
by using the civil law contracts or informally employing workers. These two practices
were also used as a toll for reducing the high labour costs due to the high tax wedge. In
other words, firms found ways to enjoy a more flexible and cheaper environment but that
was on detriment of workers security.
The 2005 Labour Code increased labour market flexibility in the area of flexible work
arrangements as did the Law on Temporary Work Agencies introduced in 2006.
Moreover, with the personal income tax reform and social insurance contributions reform
from 2007, 2008 and 2009, the tax wedge was reduced, especially for low-skilled
149

workers. These labour market reforms should have a positive effect both on employers,
who now enjoy greater flexibility and lower costs of staying formal, and on workers
whose social security increased, as well as their incentives to supply their labour.
Certainly, there is a room for improvement in terms of legislation, its implementation and
protection of workers. For instance, currently the main users of temporary contracts are
government institutions instead of the private sector.
Flexibility, seen as the incidence of fixed-term, part-time and similar working contracts,
might be a concern for the policymakers if workers hired under such contracts have low
training, promotion and salary prospects, and/or difficulty in finding a regular job, even
if they are socially insured. Since young persons and females are most likely to work
under such work contracts, there is a need for a deeper analysis that would show if
flexible contracts reveal and support labour market segmentation.
Flexicurity, on the other hand, should ensure successful job-to-job transitions, outflows
from inactivity and unemployment to employment, vertical movements in an
organisations hierarchy and access to training. Today, workers should be equipped with
more general, transferable knowledge and skills which makes them more flexible and
adaptable to changing labour market, and equally important, they should continuously
update and upgrade their skills which would reduce their vulnerability to
structural/occupational changes in labour demand.
The benefit system is part of the flexicurity concept with a role to provide some income
support to the unemployed while searching for another job, but its possible disincentives
for job search or employment should be considered. Income support should be
accompanied with effective employment policies such as job brokerage and training
opportunities.
Priorities:

Focus more on implementation of the concept of flexicurity, not simply by

adjusting the labour legislation to allow more flexibility, but also ensuring that the
legislation is properly implemented, especially in the segment of protection of
workers rights;

Provide incentives (not necessarily financial) for employers to invest more in

educating their workers;

Government should make progress in building institutions for adult education and
implement measures to increase participation of adults in the lifelong learning;

Education system should develop key competencies of students rather than

specific area knowledge, but it is also important that the recently introduced
external based examination is also checking students general knowledge and
understanding;

Government should conduct/sponsor a deeper analysis in the area of flexible

working contracts to understand better whether there is a certain labour market
segmentation attached to them.

Increase investment in human capital through better education and skills

150

The analysis of the labour market in the former Yugoslav Republic of Macedonia clearly
shows that it suffers from insufficient and inadequate of human capital. The Government
is continuously increasing spending on education, for introduction of compulsory
secondary education with penalties for parents whole children are not in school, opening
new universities or dispersed studies, scholarships for assistant professors to obtain
Masters or PhD diploma at high-quality international schools, translation of most famous
textbooks on Macedonian, public campaigns for students and their parents to obtain
more education, etc. Even if these policies on a long-run increase average educational
attainment of Macedonian citizens, the quality of acquired education should also be
improved and linked more closely with the labour market.
In addition, more investments are needed in the infrastructure of schools, school
premises, equipment and gyms, especially in rural areas.
Priorities:

Educational policy and outcomes should be compatible with the labour market
needs and signals between labour market and education improved, for example
by standardised testing of students knowledge, by involvement of social partners
in educational policy formulation, by using the findings from Skills needs and
Labour demand surveys for formulating educational and training policies, etc.

The increased access to tertiary education via (i) large-scale dispersion of statefunded undergraduate programmes accompanied by loose entry requirements,
(ii) weakly regulated market entry of private 'for-profit' providers and (iii) overnight
creation of holders of the highest academic degrees, seriously undermines the
competitiveness of Macedonian education in the medium- and long-run. The
capacity of the quality assurance institutions should be strengthened.

Macedonian authorities must address the permanent underfunding and poor

management of budgetary resources in state-funded universities.

Efforts to improve the educational and skill structure of the labour force in the
former Yugoslav Republic of Macedonia must not be restricted to increased
aggregate spending on education and higher educational attainment. Greater
emphasis is also needed on tailoring market-responsive and higher-quality
secondary (especially vocational) and tertiary education programmes.

Continue pursuing policies to increase participation in upper secondary and

tertiary education especially for ethnic minorities and females, and to reduce
drop-outs;

Reform continuing VET, increase its quality and make it more flexible and
adaptable to the labour market in order to avoid people ending up with skills that
are not demanded in the labour market;

Invest more in teacher training and revise teachers remuneration system;

Enhance central regulations in terms of setting and monitoring national education

standards, and ensure their implementation; this also applies to the Evaluation
Agency that is supposed to conduct external assessment of the quality of
education but has not became operational yet.

151

Good governance of employment and social policies is necessary for a faster progress
towards the Lisbon objectives for employment. The country should ensure establishment
of a broad partnership for change between social partners, parliamentary bodies and
stakeholders. In parallel, the capacity of the parties needs to be further strengthened and
new representativeness criteria applied in order to improve the tripartite and bipartite
social dialogue.
Though in recent period, mainly under the CARDS projects, cooperation between labour
market institutions has been strengthened, there is a room for improvement in this area.
Moreover, the division of responsibilities between institutions should be more clear and
transparency and accountability in their operation enhanced.
Priorities:

Establish clear criteria for representativeness of social partners in the Economic

and Social Council and other tripartite bodies.

Establish a system for providing training for social partners according to their
needs.

Successful and proper implementation of employment policy depends crucially on the

capacity and the organisational setup of the main labour market institutions. Despite the
recent progress, there is a need for further strengthening of the capacity which also
should be more self-led instead of donor driven.
Priorities:

Increase number of employees in the Labour Department in the MLSP and

provide continuous training of the employees. In addition, the areas covered by
the department seems too broad and hence there might be a scope for diving it
into 2 separate departments.

Increase number of employees and technical equipment of other labour market

institutions, the ESA, SLI, etc. With the current resources, the workload of their
employees is too high to ensure quality.

Ensure adequate staffing for more effective administration and management of

the IPA instrument;

Address the principal-agent problem between the MLSP and ESA and increase
accountability of all labour market institutions by introducing carefully selected
performance indicators and targets. For example, the average vacancy duration
might be one of the performance targets for ESA which should be introduced and
monitored by MLSP. In addition, principal-agent problem might be mitigated by
changing organisational structure, for instance the minister of labour and social
policy could be either a permanent chairman of the board.

High registered unemployment and limitations of staff and time resources

necessitates that the ESA should make basic vacancy information as freely
available as possible, maximising the interactive job broking and the self-help
philosophy (recently developed) and concentrate more on disadvantaged groups
(those with low education, long-term unemployed, etc.);

152

There is a need for decentralization of ESA management, implementation of

bottom-up approach in which local offices could propose (new) and implement
active policies based on the local labour market needs, and greater involvement
of stakeholders in the employment policy on local level.

The system of monitoring and reporting on the conditions on the labour market
should be strengthened. Recently, the MLSP and ESA agreed on the main
indicators to be followed, and hopefully in short time period improved and more
detailed information would be available. However, the ESA should become more
opened for data provision for research purposes.

The ISCO occupational classification should be fully implemented which would

likely improve job brokerage role of the ESA.

153

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158

159

Annex 1 Planned and realised active programmes, participants and spending in 2008
No.
1.

2.

3.

Type of programme/ measure

Self-employment programme

Planned
employments /
participants
500

Planned assets
(in MKD den)
97,235,600.00

Actual
employment /
participants
529
( 325 men and
204 woman)

Spent assets
(in MKD den)
102,487,500.00

Sustainability of
programmes /
measures
All 529 firms are
supervised and it is
confirmed that they work
in accordance with their
registration branch

- young unemployed persons,

under 27

250

82

82

- unemployed woman
- long-term unemployed
Formalisation of non-registered
businesses

100
150
107

18,136,500.00

153
294
113
( 78 men and 35
woman)

19,153,500.00

153
294
All 529 firms were
controlled if they work in
the registered activity

5,928.00

61,363,600.00

5701

50,776,000.00

- vocational training,
requalification or additional
training for unemployed persons
for a known employer

3,000

54,000,000.00

2543
( 523 men and
2020 woman)

45,774,000.00

- general training (foreign

languages and computers ) in Job
Clubs

2,000

1,900,000.00

2278
( 675 men and
1602 woman)

1,900,000.00

Training and re-qualification

160

1829 persons (72% of

participants) signed
employment contract

- pilot training for certain

professions and skills deficient on
the labour market

108

5,313,600.00

60
( all men)

2,952,000.00

- lectures and training for starting

up a business

820

150,000.00

820
( 565 men and
255 woman)

150,000.00

Employment subsidies
- for children without parents

600
50

110,150,000.00
6,750,000.00

338
42 35 woman)

94,436,000.00
540,000.00

- for persons with special needs

200

72,800,000.00

156
( 103 men and 53
woman)

96,114,461.00

156 persons were

employed

- for lone parents

200

14,400,000.00

80
( 15 men and 65
woman)

5,760,000.00

80 persons were
employed

- for elderly persons (55 to 64

years of age)

150

16,200,000.00

135
(87 men and 53
woman)

15,336,000.00

142 persons were

employed

5.

Work-experience programme in
support of the first employment of
young persons up to 27 years

30

360,000.00

141
( 55 men and 86
woman)

1,692,000.00

6.

Promotion of the operational plan

I.
II.

Total
Programme for employment of
Roma population
Start-up programme with lowinterest loans
TOTAL (I+II+III):

4.

III.

6,946,221.00

57 passed the exam

and obtained certificates

4 persons were
employed

2 employed persons

6,946,221.00

7165
100

294,191,921.00
2,400,000.00

6822
60

275,560,821.00
1,440,000.00

2000

387,450,000.00

1964

385,740,000.00

9265

684,041,921.00

8846

662,671,221.00

Source: Ministry of Labour and Social Policy.

161

Training is on-going
1,964 employed
persons

Annex 2 Conducted survey on main stakeholders and the results

Introduction
This analysis reflects the outcomes of the survey conducted through face-to-face interviews
with main identified stakeholders in the field of labour market and employment policy in the
period July August 2009. A total of 15 interviews were conducted (Table 1) in order to
inform the study about stakeholders views on the potential weaknesses and challenges in
the labour market as well as prospective reforms. Before the interviews were conducted, the
questionnaire was distributed electronically to more than 40 (forty) representatives of state
institutions, international organizations in the country, academic sector; NGOs associated to
these areas and other relevant bodies. However, following the low response, the team
decided to conduct 15 face-to-face interviews.
The survey was based on questionnaire (Annex 1) tailored to the country context and study
objectives, covering the following sections: 1) Introduction; 2) General Profile of the
respondent; 3) Section on Economic Situation, Developments and Challenges (3 questions
with 8 sub-questions); 4) Labour Market Situation, Development and Challenges (9
questions); and 5) Employment Policies, Situation, Developments and Priorities (8
questions). Some questions were formulated as open ended questions rather than multiplechoice to generate more qualitative responses. Interviewed representatives could choose to
respond to questions from the different sections depending on the level of linkage of their
work to and interest for the areas covered with the questionnaire.
Table - Stakeholders interviewed
No. of
representatives
interviewed

Institution / Organization

Area of interest / work

Ministry of Labour and Social

Policy

Economic Situation;
Labour Market Situation;
Employment Policies

UNDP

Labour Market Situation;

World Bank

Economic Situation;
Labour Market Situation;
Employment Policies

OSCE

Economic Situation

Academic Sector

Economic Situation;
Labour Market Situation;
Employment Policies

Association of Trade Unions of

Macedonia

Economic Situation;
Labour Market Situation;
Employment Policies

Independent Trade Union for

Education, Science and Culture

Economic Situation;
Labour Market Situation;
Employment Policies

Private Employment Agency

Labour Market Situation

Business Magazine

Economic Situation

162

Economic Situation, Developments and Challenges

Out of 15 experts interviewed, 10 responded to questions from the section on Economic
Situation, Development and Challenges. This section comprised three questions, with the
first one addressing the current economic situation and recent developments (2006
onwards) if compared to 1990s in terms of: a) economic growth (GDP), b) labour productivity
improvements, c) employment growth and d) performance of state owned enterprises
(SOEs) that undergo restructuring opposed to new market entrants.
Seven respondents (70%) assessed the economic growth in terms of GDP in the period
2006 - onwards as declining or sluggish if compared to 1990s. The main reasons given are
long period of transition, inappropriate model of privatization, inadequate measures that
would stimulate economic growth, lack of initiative and policies to attract FDI and lack of
technology and know-how. These explanations somehow contradict the real GDP figures,
which started to increase moderately in the period after 1995, and the highest growth rates
in the whole transition period that were recorded in 2007 and 2008. Additionally, noteworthy
economic policies and measures have been introduced to improve the investment climate
and reduce obstacles to doing business. Three of the respondents have acknowledged
these improvements and assessed the economic situation in terms of GDP as stabilised or
moving upward if compared to early 1990s. The main reason outlined was the increase of
FDI in the past three years if compared to the period before 1994, when no investments
were recorded or any effort was made to improve the business environment.
Labour productivity improvements in the period 2006 onwards, if compared to 1990s, were
assessed as modest by five respondents (50%) as GDP growth came along with
employment growth. According to some of the respondents in mid 1990s labour productivity
growth was due to increased layoffs. Although, emerging companies have contributed to
increased productivity due to improved management, technical innovations and improved
quality of labour, still according to the interviewees much needs to be done in this respect,
particularly considering the low performance of restructured SOEs. They stressed the need
of introducing modern payment systems (performance pay) that would motivate employees
and improve performance. Additionally, companies need to invest more in training and
technology. Five of the interviewed experts, on the other hand, assessed the recent labour
productivity developments as weak or slow if compared to 1990s. Some of them pointed out
the lack of reforms in the wider economic and political-legal environments that affect the low
performance of public administration and private companies.
Five respondents, out of ten assessed employment growth in past three years as moderate
or increasing if compared to 1990s. Nevertheless, the experts pointed out lack of quality jobs
and high share of poorly paid and low productivity jobs. Then again, five of the interviewees
considered employment as decreasing or lethargic in the recent period due to lack of
investments, not very active private sector, the economic situation and in particular
recession.
Performance of SOEs that underwent restructuring as opposed to new market entrants was
assessed by most experts as weak due to poor management and lack of investments in
technology and know-how. De nuovo enterprises outperform these companies which
according to the respondents dont work under commercial terms and have weak
technological capacities and managerial styles.
Interviewees listed the following weaknesses that fiscal policy (including pension reform,
public healthcare, social protection spending) might pose on the labour market performance
and reforms in the period 2009 2014: not efficient (although not excessive) public
spending, low institutional capacity and high overall tax burden (especially for low income
earners). The key fiscal policy challenges listed were: to adjust government spending and
tax rates, to reduce labour taxation together with administrative burden on companies, to

163

improve law enforcement and thus control over tax payment in light of reduced economic
activity of enterprises due to financial crisis, to reduce informal economy, to improve
collection capacity of contributions and thus increase their share in total revenues. As
regards monetary and exchange rate policies, the respondents pointed out that the monetary
policy has been restrained mainly by the MKD-EUR peg. Main challenge outlined for the
forthcoming period is maintaining the stability of the MKD denar in view of inflationary
pressures and the crisis, while ensuring on the other side credit support to companies
without endangering the peg. In terms of entrepreneurship, industrial and trade policies,
although many respondents pointed out recent improvements in development of strategic
documents and measures encouraging entrepreneurship, competitiveness and
innovativeness of the small and middle size enterprises, still they stressed that currently
there is not enough support for business start-ups and that there is a lack of specific
industrial and trade policies. According to the experts, SOEs that undergo restructuring do
not work under commercial terms, provide poor and/or not accessible, affordable services,
do not work efficiently and thus frequently cause misallocation of labour and capital and are
highly influenced by politics in terms of employment or maintaining prices.
In view of the key economic weaknesses and challenges listed above, the experts proposed
the following recommendations on prospective directions of labour market reforms:
reforming the system of social assistance, matching labour demand and supply, introducing
incentives in SOEs that would improve their efficiency, reduce losses and make them more
transparent, investing in technology and human resources management and, in general,
improving the management styles both in SOEs and new market entrants, development of
appropriate regulatory framework and monitoring mechanisms that would encourage
competition in provision of services, improve access to and quality of services, as well as
accountability of SOEs, efficient judiciary and simplified legislation that would remove
obstacles to doing business, stable monetary policy, no interference of politics in decisionmaking in public enterprises, on-the-job training and motivation incentives for employees that
would improve their knowledge and skills, work ethic and company performance on the
market, introducing measures that would support self-employment and reduce the share of
unregistered businesses, introducing accessible credit lines for companies, greater role of
private agencies for employment and strengthened capacity of the Employment Service
Agency. However, the recommendations given were wide-ranging, not specifically related to
the weaknesses and challenges that were previously listed by the experts in terms of
economic policies.
Labour Market Situation, Development and Challenges
As regards the second section of the questionnaire on the Labour Market Situation,
Development and Challenges, most of the interviewed experts (12 out of 15 interviewees)
responded to the questions. This section comprised 9 questions, with first one addressing
employment/unemployment rates in the period 2006 - onwards at national level and among
specific groups (female workers, young workers aged 15-24 and long-term unemployed).
Most of the respondents (7 out of 12) assessed the recent country tendencies in terms of
employment and unemployment rates at national level as modest improvement. Some of
them pointed out that unemployment rates are decreasing due to the increased active role of
the Employment Service Agency and the implementation of National Action Plan for
Employment and annual Operational Plans for ALMPs. Others stressed that unemployment
is to be increased in the following period, without any specific reasons outlined. On the other
hand, 3 (three) of the respondents assessed employment/unemployment rates as increasing
/decreasing due to the improved growth performance, structural reforms and improvements
in the operation of companies. Surprisingly, respondents were not familiar with gender
specifics of the national labour market, such as the existence of the employment gender
gap.

164

In terms of employment/unemployment rates among young workers aged 15 24, 6 of the

interviewees assessed them as decreasing/increasing in the period 2006 onwards due to
the difficult labour market entry mainly due to insufficient job creation. On the other hand,
according to five of the experts, employment rate among youth is increasing, as companies
are+- beginning to search for new skills such as languages and IT knowledge that older
workers usually do not posses.
Almost all of the experts pointed out that there is a high share of long-term unemployed
(above 80%), due to lack of or inadequate skills of workers, as well as lack of specific
measures at national level such as loans, training programs, formal and non-formal
education courses or similar incentives that would address the needs of this group.
Moreover, some of the respondents stated that the figures of long-term unemployed are not
as high as officially presented as many unemployed are being registered to get free health
insurance and social assistance and many of them work in the shadow economy.
The interviewed experts identified the following groups in the country as most prone to
persistently high unemployment: unskilled and less educated, youth, long-term unemployed,
older workers, persons with disabilities and Roma. They also drew attention to minority
ethnic communities, and rural population who have poor access to the labour market.
In terms of recent country wage developments, 2006 onwards, the respondents noted
slight increase in public administration salaries, though not enough if compared to real costs
of living. Other experts criticised the newly introduced government policy that was foreseeing
three year increases of wages of public administration by 10%. Their arguments are that
wages need to be increased for scarce workers/skills (machine engineers, IT specialists,
technology engineers etc.) as they are most likely to undergo brain drain. In general, the
respondents pointed out that that the level of wages in both public and private sector are not
adjusted to real costs of living which are in the rise and recommended more active
involvement of employees in trade unions. Additionally, some of them stressed the need of
establishing statutory minimum wage. Respondents, in general, were familiar with the
introduction of the gross wage system, although they did not assess the reform package in
light of challenges ahead.
The high share of informal employment or shadow economy was explained with: low
institutional enforcement capacity, insufficient job creation, inappropriate or lack of education
or certain qualifications and difficult business environment with lack of opportunities for
private enterprises.
As regards the new Law on Health and Safety at Work adopted in 2007, most of the
interviewed experts were not familiar with it. Nevertheless, four of the respondents
commended employers need to be more actively involved and familiar with their rights and
obligations in this area. Also, adequate financial means, human resources and facilities are
necessary for its enforcement particularly considering the limited capacity of the State
Labour Inspectorate.
The labour market situation was assessed by the respondents as more difficult for women.
Namely, although now there are more employment opportunities for women, still their
participation is lower and they usually occupy low-paid jobs. Additionally, due to traditional
family role of women particularly among some ethnicities, there is lack of awareness, as well
as appropriate education and qualification for women to enter the labour market. Also,
household work and inability to share responsibilities with their spouses was mentioned as a
reason for lower economic activity of women or for accepting lower job positions or wages.
Flexible working hours, working from home, and availability of childcare were pointed out as
necessary preconditions for increased female participation in the labour market. As regards
the effectiveness of the Law on Equal Opportunities for Women and Men and National
Action Plan for Gender Equality 2007-2012, adopted by the Government in 2006 and 2007
respectively, most of the respondents were not familiar with these documents. Some of the

165

interviewees drew attention to poor implementation of the new legislation, both by national
and local governments.
Although foreseen in many strategic policies and programs, still according to the experts
interviewed, the Macedonian labour market does not ensure equal access to employment for
workers from vulnerable groups. Although, there are more opportunities now for youth aged
15 24, still the labour market remains closed for older workers, unskilled and long-term
unemployed, persons with disabilities and especially Roma. Roma population is facing
discrimination, poverty and lack of education. Active labour market policies should
particularly focus on these groups.
Key recommendations outlined by respondents that would address weaknesses and
challenges in the period 2009 2014 include: ensuring better match between supplied and
demanded skills, further increase of the market flexibility, introducing reforms in the
education system, strengthened dialogue between national and local governments,
employers and employees, improved law enforcement, incentives that would stimulate new
business start-ups and improve the business environment, awareness raising programs for
the consequences of working in the informal sector (shadow economy), simplified
procedures for employment, carefully targeted active labour market policies, strengthened
capacity of the Public Revenue Office, State Labour Inspectorate and the Employment
Service Agency, and increased inspection supervision.
Employment policies: situation, developments and priorities
Only 8 out of 15 interviewees responded to the questions related to Employment policies:
situation, developments and priorities. This part of the questionnaire comprised of 8
questions as regards achievement of Macedonian students, reforms of the education
system, demand for labour and payroll taxes reforms, ALMPs and capacity of labour market
institutions.
In terms of the reasons for quite low achievement of Macedonian students if compared to
their peers from neighbouring countries and EU-27, respondents provided similar
explanations: numerous obstacles, in particular financial ones, for exchange of experience
and knowledge with their peers, lack of work and study opportunities, modest reforms in the
education system which led to obsolesce of the education programs, lack of specialised
programs, corruption, low instruction time, poor school attendance and high level of dropouts, lack of teacher training and fair rewarding system, no career development opportunities
for teachers, inappropriate assessment of students knowledge and lack of quality
assurance.
Half of the respondents were not familiar with the recent reforms in the education system or
with other measures introduced for improving adult education and training. On the other
hand, 3 of the respondents assessed the reforms as modest with slight improvements.
While, the recently adopted legislation introduces systematic changes, implementation is not
progressing.
All respondents assessed the recently introduced payroll taxes reforms (2006 and 2009) as
positive one. According to the experts, the introduction of the flat tax system in 2007 has
simplified the system to great extent and reduced the tax burden. On the other hand, tax
system reform in 2009 will contribute to greater transparency, improved tax collection,
reduce administrative burden on companies, and increased level of social insurance.
As regards the Law on Employment and Insurance in Case of Unemployment, most of the
respondents welcomed increased control over the access to unemployment benefits. Still,
most of the respondents were not familiar with the eligibility criteria for the unemployment
insurance and the proportion of unemployed who receive this benefit.

166

Almost all respondents welcomed the recent greater emphasize on ALMPs, but pointed out
to certain problems in terms of impact of the policies. In particular, the ALMPs were
assessed as having high unit cost and low participation. Cheaper programs are needed such
as counselling, job search assistance and on-the-job training. The capacity of labour market
institutions such as ESA, according to the experts is still rather low in terms of high staff
caseload, lack of expertise to implement the strategy and other relevant policies and
measures. The risk groups are respectively covered, but monitoring and evaluation is
needed to track progress and results.
All respondents assessed the technical and human capacity of main labour market
institutions as weak. Main reasons included: lack of investments and management reforms,
lack of qualified staff, lack of monitoring and motivation incentives for employees, lack of
training, etc.
The experts provided the following recommendations for employment policies considering
the main labour market challenges and priorities for the forthcoming period: introducing
policies and measures that proved to be successful in EU member states, encouraging
youth and female employment, supportive business and legal environment for start-ups,
greater domestic and foreign investments, improving law enforcement, strengthening the
capacity of labour market institutions, introducing comprehensive reforms in the education
system that would respond to labour market needs, reducing tax burden but carefully
managing fiscal expenditures, improving business environment friendly to improve growth
performance, reform further education system and increase skills of employees.

167