- By Mihail Arandarenko and Stefanie BrodmannBrookings (Future Development Blog)
For several years in a row, Western Balkan labor market conditions have been improving. Unemployment rates are declining, reaching historic lows in most countries; employment rates are rising; and the gap with EU countries is gradually shrinking. The last year was no different – although job creation slowed, the quality of newly created jobs improved, as found by the forthcoming Western Balkans Labor Market Trends 2019 report. But behind these positive trends fundamental problems persist. The shares of those in vulnerable and informal employment remain elevated, indicating that the quality of employment is still a major concern. Kosovo still faces the greatest challenges. It has taken two steps forward, one step back: Following a steep rise in 2017, employment fell by 4.5 percent in the second quarter of 2018.
Current improvements in the Western Balkan labor markets are most likely cyclical and dependent on the state of European economy, through two main channels. First, and in the context of a relatively strong EU economy, goods and services from the Western Balkans are in higher demand – and this also boosts Western Balkan labor markets. Second, however, this also means that the EU is attracting additional migrant workers, a trend which will only accelerate as the large cohort of baby boomers will retire in the coming years. For the sending countries, such as Kosovo, the “EU pull” reduces the region’s resident labor force and working age population. In this case, the employment rates in the region improve not due to an increase in the numerator, but to a decrease in the denominator. For Kosovo, the only ‘youth bulge’ country, and for Albania, the only country currently reaping ‘demographic dividend’, this is not necessarily a bad thing in the short run. Nevertheless, all countries are increasingly concerned about the effects of accelerated emigration in the region.