Do the Western Balkans Countries Have Sufficient Unemployment Benefit?

A review of unemployment benefit in Albania, Bosnia Herzegovina, Montenegro, North Macedonia, Serbia, and Kosovo before and during the pandemic

In the face of the COVID-19 crisis, there was an upgrade to how countries think about some of the long existing social protection measures. One of these measures is the unemployment benefit. Unemployment benefit (UB) is traditionally offered to those who lost their jobs while working in the formal sector to compensate for a temporary income loss while the individual is looking for another job. UB is usually contributory. This means that the individual was contributing to the unemployment fund as a part of their salary while working in the formal sector. This way, those who lose their jobs can benefit from an existing unemployment fund by the country’s social insurance system. There are also non-contributory UB measures in some countries. This benefit is usually targeted at those who might not be eligible for the contributory UB anymore or fall into certain categories such as incentives for those receiving employment training.

Located in Southeast Europe, Western Balkans is a region with upper middle-income countries. The region includes six countries: Albania, Bosnia Herzegovina, Montenegro, North Macedonia, Serbia, and Kosovo. While located in Europe, none of the six countries are in the European Union.

Source: Author’s own visualizations

For Western Balkans, UB is crucial as the region has high unemployment rates. Based on the 2019 Q2 results, Kosovo had the highest rate of unemployment rate at 25.2 percent of the total population (Wiener Institut für Internationale Wirtschaftsvergleiche, 2020). This rate is higher for women 32.7 percent. Other countries such as Bosnia Herzegovina and North Macedonia also have high unemployment rates reaching close to 20 percent for women. Serbia, while having the lowest unemployment rates in the region, still has 10 percent of those looking for jobs unemployed. These numbers only get worse for the youth. The average unemployment rate for 15-24-year-olds is 33.4 percent for men and 28.7 percent for women (Wiener Institut für Internationale Wirtschaftsvergleiche, 2020). These indicators show the need both for passive labor market programs, mainly UBs, as well as active labor market programs such as trainings to match people with the skills needed. In addition, in the face of a shock period such as the COVID-19 pandemic, UBs provide a strong protection measure for unplanned job loss.

Source: Wiener Institut für Internationale Wirtschaftsvergleiche (2020), SEE Jobs Gateway Database, Unemployment rate (indicator) and Author’s own visualizations

Unemployment Benefit Before COVID-19

All countries in the Western Balkans, except for Kosovo, had already UB regimes with different rules for eligibility before the COVID-19 pandemic. In Montenegro, to be eligible for the contributory UB, an individual needs to be formally employed for at least 9 months uninterrupted or intermittently over the last 18 months (MISSCEO, 2021). In Albania and Serbia, the person needs to have contributed for at least 12 months.

The main recipients in all six countries are formal contract employees because of the design choices made when the programme was being planned. This excludes those working in the informal sector in all the countries. For instance, in Kosovo there are higher percentage of informal sector in Roma, Ashkali and Egyptian (RAE) communities (Kosovo Agency of Statistics and UNICEF, 2020). Also, the RAE population is drastically younger, with the average age of 25.7 compared to the total population at 33.0. Roma populations are younger and less educated across the region. With high youth unemployment rate in the region, RAE communities are more vulnerable to being unemployed or working in the informal sector.

There are some additional requirements in different countries to be eligible for the benefit. Albania asks beneficiaries to be willing to participate in employment promotion programs and be willing to receive training (MISSCEO, 2021). While these requirements help individuals improve their employability, it raises the question on how accessible the employment promotion programs are across the country. Serbia, on the other hand, allows for those self-employed to benefit from the UB as well as employees. Serbia also expects the individual to be between ages 15 to 65 years and register with national employment bureau within 30 days of unemployment (Institute for Social Insurance, 2021). Registering with the national employment bureau is a requirement in other countries as well. While well intentioned, this requirement might reduce the accessibility of the benefit due to lack of knowledge on how to register.

The duration and the amount of the benefit varies across the region. Based on contribution period, in Bosnia an individual can benefit from unemployment up to 24 months; in the rest of the countries in the region, one can benefit up to 12 months based on the contribution period (MISSCEO, 2021). There are also differences in how adequate the benefit is. Two main methods countries use are: 1) a ratio of the minimum wage; 2) a ratio of the wage from the individual’s income from the last few months. Albania uses the first method and applies a flat rate of 50 percent of the minimum wage. Similarly, in Montenegro, the benefit is set at 40 percent of the minimum wage. For a large family with children, dependent on one or two incomes, only a portion of the national minimum wage might not be adequate to cover expenses, therefore this might lead the family to apply for additional social assistance. With regards to the second method, North Macedonia allocates 50 percent of their average monthly net wage from the last 24 months (MISSCEO, 2021). In Serbia, it is 50 percent of the average net wage from the last 6 months, and the individual can continue to benefit from public healthcare (Institute for Social Insurance, 2021). While neither method is perfect, the percentage of previous income will be higher for anyone making more than minimum wage, and therefore will be more adequate for living expenses.

Adjustments to the Unemployment Benefit Under COVID-19

In 2020, COVID-19 made unexpected job losses became unavoidable, especially in the most impacted sectors such as tourism, trade, and transport (World Bank Group, 2020). Therefore, UBs became a crucial tool to reduce the impact of the pandemic on the society. Earlier in the pandemic, in North Macedonia, households that only consist of minors, unemployed and informal sector employees, those that do not qualify for UB, received an average of 7,000 Macedonian denars (US$124) per month. For those who were working in the formal labor market and impacted by the pandemic, around 40 thousand people received unemployment insurance during the pandemic (Gentilini, Almenfi and Dale, 2020). In Montenegro, in April 2020, the government provided a one-time assistance to all registered unemployed individuals in the  the Employment Bureau who do not receive any other cash or in-kind benefits. In Bosnia Herzegovina, the government appropriated over 5 million Euros for UB in 2020. The Albanian government doubled the amount of the UB from April to June 2020 (OECD, 2020). In Serbia, the government stream-lined procedures to apply for UB, allowing the applicants to submit their requests through  email or mail (Gentilini, Almenfi and Dale, 2020). The government temporarily extended the response period to the requests.

Limitations and what works

The long-term unemployment rate, meaning individuals who have been unemployed for more than 12 months, is quite high—the Western Balkans average is 8.8 percent, or around 66 percent of all unemployed people (Wiener Institut für Internationale Wirtschaftsvergleiche, 2020). This indicates that the issues are chronic and are not temporary job loss. In addition, as mentioned in the Kosovo example, informality is high, especially in the Roma communities across the region. Finally, the pandemic has proven an additional challenge with increased number of job loss and reduced access to social protection systems.

In the region, before and during the pandemic, reducing procedures for eligibility, setting the amount of the benefit to an adequate level to cover basic expenses, expanding the coverage of who can receive the benefit, and widening spread the use of digital applications are effective tools. In addition, in the short term, last resort social assistance benefits should target families working in the informal sector, while in the long term, the countries should focus on reducing the size of the informal sector. Therefore, governments should continue facilitating access to these services with the lingering impact of the COVID-19 pandemic and consider reforming their UB measures to fit the needs of their populations better.

References

Gentilini, U., Almenfi, M., Dale, P (2020), "Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures". Living paper, version 14 (December 11, 2020). http://documents.worldbank.org/curated/en/590531592231143435/pdf/Social-...

Institute for Social Insurance (2021), Rights stemming from unemployment insurance: Cash benefit, Serbia www.zso.gov.rs/english/novcana-naknada.htm

Kosovo Agency of Statistics and UNICEF (2020), 2019–2020 Kosovo Multiple Indicator Cluster Survey and 2019–2020 Roma, Ashkali and Egyptian Communities Multiple Indicator Cluster Survey, “Survey Findings Report”. Prishtina, Kosovo: Kosovo Agency of Statistics and UNICEF https://mics.unicef.org/surveys

MISSCEO- The Mutual Information System on Social Protection of the Council of Europe (2021), Database, Council of Europe. http://www.missceo.coe.int/

OECD (2020), “The Covid-19 Crisis in Albania” https://www.wb6cif.eu/wp-content/uploads/2020/05/Covid-19-response-in-ALB-27.4..pdf

Wiener Institut für Internationale Wirtschaftsvergleiche (2020), SEE Jobs Gateway Database, Unemployment rate (indicator) https://data.wiiw.ac.at/seejobsgateway-q.html

World Bank Group (2020), “Western Balkans Regular Economic Report: The Economic and Social Impact of Covid-19 No.17”   https://documents1.worldbank.org/curated/en/606131588087679463/pdf/The-Economic-and-Social-Impact-of-COVID-19-Western-Balkans-Outlook.pdf

World Bank Group (2021), “Western Balkans Regular Economic Report: Subdued Recovery No.19”  https://openknowledge.worldbank.org/bitstream/handle/10986/35509/Subdued...