© Jelena Đukić Pejić

Off the Books Work in Western Balkans Offers a Dangerous Social Safety Net

TEXT: Nemanja Rujevic – 28. June 2021
© Jelena Đukić Pejić

Millions of laborers in the six states of the Western Balkans work in the informal economy without contracts or rights. They are the first in line when austerity measures, pandemics and exploitative employers hit. And there is little hope that this precarious state of employment will be ending anytime soon. 

Azra worked far away from the tumult of Baščaršija, the central square in Bosnia and Herzegovina’s capital, Sarajevo. She earned her living in a small drinking house in the suburbs. "Guests pull you by the arm to make you sit in their lap,” she says. “I worked there for a short while, then I left. And the girls I have seen in these sorts of watering holes … it makes me sick to my stomach. And I have a daughter," says the woman who asked to be called Azra. She does not want her real identity disclosed because she is afraid of her employers.

Azra was born and raised in Sarajevo, and as a single mom tried to keep her family afloat by working in cafes and small inns. Sometimes she cleaned the bed sheets in rooms where illegal prostitution was taking place. Sometimes she served inebriated guests for 15-hour shifts and only earned 7.5 euros per day. Sometimes the owners would just decide not to pay her wages.

Not a single day in Azra’s entire working life in Bosnia and Herzegovina has been spent legally employed. After years of toil, she does not have a pay slip or contract to verify her earnings—leaving her ineligible for a pension and jeopardizing her access to health insurance.

The Balkan triangle: state-employer-worker

Azra is one of many. It is estimated that several million workers in the Western Balkans work illegally. This leads to exploitation, as experienced by Azra and corroborated by others interviewed for this article.

It's not that Azra did not fight for her rights. Whenever she would ask her employer for paperwork, she says the answer would be, "If you don't like it, there's the door." Once, desperate for her employer to be held accountable for their actions, she went to turn herself in to the labor inspectors. The inspector told her that she was “lucky that the owner did not burn her with oil from the deep-fryer." "Inspectors do not dare to check certain employers,” says Azra, “because they are afraid of them.”

Mario Reljanović has seen plenty of cases like Azra’s. He is an associate at the Institute of Comparative Law in Belgrade, the capital of Serbia, and specializes in worker's rights. "The state has always had a two-fold relationship towards off the books employment,” says Reljanović. “On one hand, the taxes and contributions are welcome in any state treasury. On the other, I presume that those who set the policies are fully aware of the fact that off the books employment persists primarily because of the great tax burden imposed on the wages, which forces employers to look for off the books solutions and the workers to accept such solutions.”

Reljanović sees problems at every point in the triangle between the state, employers and workers. "There are small businesses who simply cannot employ people legally and still remain profitable, but there are also owners who come to the factory they own in a SUV worth 100,000 euros to hand out wages in cash from an envelope containing 50 euros each, saying that they have no more money,” he says.

The state administrations in the Balkans often view off the books work as a "social policy" of sorts, says Reljanović. The idea is that it's better for people to earn a living—even in this way—than to have no work and rise up in protest.

But what about the workers? "They do not believe that paying taxes will make any significant difference for the better,” says Reljanović. “Nobody believes that they will see retirement—a fear that is well-founded because nothing is being done to reform the pension system. Plenty of people think it is not worth it to be legally employed and have a part of their pay go into the state pension fund. They see their grandparents, who were employed for decades before retirement, with pension checks that rarely go higher than 100 euros per month."

We asked a Belgrade cafe owner, who did not want his name revealed, about the role of pensions in the social safety net. "Pension? What pension? People are sure that there will be no pensions for anyone thirty years from now. They figure it’s better to get paid now, in cash. And anyway, what are they supposed to say to the employer? Ask to be officially employed? If the employer did not do that already, it ain't happening."

The cafe owner claims that all his employees are on the books, because labor inspectors have a habit of homing in on food and drink service. "Maybe they don't hit places owned by people who are well-connected in this city and state,” he says, “but they come to my place constantly."

He also says that the unwritten rule in hospitality services is to register the employee for minimum wage so that the dues to the state are minimal. The rest of the agreed-upon wage is paid out in cash.

Hardest hit by the pandemic

"Hidden economy in the Western Balkans 2020,” a publication by Southeast European Leadership for Development and Integrity (SELDI), presents dramatic numbers that confirm our interviewees’ stories. While the share of workers without written contracts on their job is four percent in Bosnia and Herzegovina and 25 percent in Kosovo, there are many more people in all the countries of the region that have a contract showing a smaller wage than the one they actually receive. That percentage is 19 in Kosovo and Northern Macedonia, and goes up to 34 percent in Albania. This phenomenon is called "envelope wages.” SELDI estimates that the most vulnerable industries for envelope wages are agriculture, real estate, wholesale trade and construction.

Source: Hidden Economy Monitoring System, in SELDI Policy Brief 11: Hidden economy in the Western Balkans, November 2020.

The COVID-19 pandemic has put many jobs in peril, but the first to fall were workers without a contract. There is no procedure for getting fired when you don't have a contract; it's sufficient for the boss to say, "Don't come to work tomorrow." 

Professor Colin C. Williams, a public policy expert at the University of Sheffield and author of “COVID-19 and Undeclared Work in the Western Balkans: Impacts, Challenges and Policy Responses,” writes, “Many of these undeclared workers and enterprises have been also unable to fully access the short-term financial support provided by governments to businesses and workers during the crisis period.”

Sticks and carrots

How can the Western Balkan states make meaningful progress in regulating and formalizing off the books work? Williams writes in the study that the recommended courses of action “involve deterrence measures to increase the costs of non-compliance (sticks) and/or incentive measures to make declared work more beneficial and easier (carrots).”

According to Reljanović, this is what this approach could look like: “Labor inspectors shut down the company or close down the premises until the employer amends all the violations of regulations and pays what is owed to the workers. For other employers, the road could be to drastically decrease the taxes and obligations towards the state, so that they can see the benefit of registering their employees. For example, during the first five years of their business, the state could cover the cost of benefit payments for the employees. But, the employers know that they will be in trouble if they are later caught in violation."

Even if these approaches are effective, a larger problem persists. The region has been devastated by emigration to Western countries, leaving its workforce sorely lacking. Serbia officially has seven million residents, but every year about 50,000 leave it. "But, instead of the price of labor going up because the demand is high, the void is being filled by immigrant workers,” says Reljanović. “And they all work off the books, whether they come from Albania, Pakistan or India. Their position is even worse, because often their passports are confiscated by the employer and their movement is restricted. That is how labor costs are driven down and workplace conditions worsen.“

A new labor law, soon to be introduced in Serbia, contains provisions allowing for residents of 95 countries—all of whom have a non-visa travel arrangement with Serbia—to enter Serbia and work without work visas or permits. Reljanović sees this law as legalization of off the books labor. 

Some employers will be happy about this policy shift because it could solve a labor shortage. The cafe owner from Belgrade that we spoke with at the end of May, when restaurants were allowed to receive guests again due to the fall in the number of new COVID-19 infections, says restaurant owners in the Serbian metropolis are actively looking for waiters and cooks. "But there are none,” he says. “Everyone went to work on the Croatian coast."

The demanding tourist season, on which the economy of the Adriatic coast countries largely depends, also offers opportunity for Azra. Last year she finally got tired of drifting from cafe to cafe in Sarajevo, working illegally, and moved with her daughter to the seafront city of Pula in Croatia.

“My boss cannot let me go here just like that,” says Azra. “I come to work regularly and do everything that I am supposed to. I am on the books and all is according to the law. And the difference is like night and day. I have a lot of work. I can't say that it's easy, but they respect the workers and pay them.”

When Azra remembers her life before Pula, her anguish is almost palpable. "I'm never going back to Bosnia and Herzegovina. Being so poor has changed the people there, for the worse,” she says. “In order for the workers' lot to become better, they have to stand together, and that is never going to happen. Because those workers can be bought off with 100 euros, they will keep silent and the boss will be off the hook, only to keep breaking their backs later."

Nemanja Rujević is a journalist with the German broadcaster DW and a reporter for the Belgrade-based weekly magazine Vreme.

This article appeared in the June 2021 issue of Helvetas MosaicSubscribe to never miss an issue.

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