Why are so many people unemployed in the region?
Too often, the skills that young people have learned simply don’t match the skills that potential employers need. Often, there would be job openings, but simply not enough people who have the right skills to fill them. This mismatch between the skills that young people acquire in school and those needed by the companies that want to hire them is a pressing issue in the Western Balkans and the Eastern Partnership (EaP) countries.
There are many reasons for this mismatch between the supply and demand of skills. Let us share four different reasons with you:
Reason number one: In many countries, the education system is detached from the real economy. Young people go to school, but they are not taught the necessary skills to find a job.
Reason number two: The economy in the Western Balkans and the EaP countries, in particular, is composed almost exclusively of small and medium-sized enterprises (SMEs). The SMEs across the region typically have relatively low productivity, which means they do not have high growth potential.
For most medium- and high-skilled workers, the public sector, therefore, remains the most attractive employer. The public sector can pay relatively high wages and provides job security. Put simply, the smart people try to go to work for the government, which in turn negatively affects the growth of the private sector. Often the expectations of youth regarding jobs, careers, salaries, and so on do not match with the offers on the labor market or are just unrealistic.
Reason number three: The regions have a history of emigration. If smart and productive people keep leaving, their skills are lacking in the market. This again hinders the growth of the private sector and thus the development of the kind of attractive job opportunities that could have kept them there.
Finally, for those who stay, social security systems with generous benefits too often provide a reason not to work in the formal economy. You get paid anyway, even without the hassle of getting up early every day and showing up in an office or a workshop. In social security systems, it is important to get the incentives right so that people have a reason to go to work.
The devil is in the details...
Now, we have been writing and talking about the Western Balkans and the EaP region as a whole. However, the more we travel to these countries and the more we learn about the topic, we realize that the structure of youth unemployment and the particular reasons for this unemployment differ from one country to another in the region.
The Western Balkans, for instance, generally face a higher portion of the active population that is outside of the labor market, the so-called inactivity rate. This inactivity rate is comparatively lower in the EaP countries.
The European Training Foundation (ETF) just published a study on how migration, human capital, and the labor market interact in the Western Balkans. Companies that want to expand there face not only a lack of labor but also a lack of relevant skills among available workers or unemployed people. This is especially the case in Bosnia and Herzegovina, while companies in Kosovo and Serbia seem to be much less affected by this issue.
There are also differences among the different countries regarding brain drain. Brain drain is particularly significant in Albania, where the highly educated account for around 40% of the total cumulative outflow. In contrast, there is net immigration of highly educated people – and therefore brain gain – in Montenegro, North Macedonia, and Serbia.
What have we been doing in this regard?
Helvetas, through Swedish International Development Cooperation Agency’s (Sida) RECONOMY, promotes inclusive economic development in the region. What does "inclusive" mean? It means a sustainable kind of economic growth that is distributed fairly across society and that creates opportunities for all, especially for those who are most vulnerable – which often means women and youth.
We just returned from Armenia and Georgia, where Katharina assessed the different pilot interventions of RECONOMY. Let us give you an example from this trip: in Georgia, an input provider trains students at a vocational school on how to install windows in an energy-efficient manner. The provider also certifies these trainees. This not only increases the skills of the trainees and prepares the future workforce of companies in this promising field, but also raises the general awareness in Georgia on how energy can be saved when the right windows are properly installed. That is good for jobs that match the labor market's demands, economic growth, and also for the climate.
In Armenia, more than 1,100 people, 70% of them are women, were trained in different short-term courses ranging from cheese making to becoming a tour guide. The industry itself, for example, the Armenian Hiking Association, organizes this training.
But training alone is often not sufficient to bring young people into the labor market. Helvetas is therefore also working on career guidance. Young people and their parents need easy access to labor market information. In Kosovo, the EYE project of the Swiss Agency for Development and Cooperation (SDC), together with the state agency and municipalities, introduced a school-based career center model, that is now fully operational in 15 municipalities.
Let me share one last example that shows yet another dimension of our work, namely how small businesses can deal with bureaucracy. In Ukraine and Moldova, our partner in the frame of RECONOMY has supported business organizations using a tool, that measures the impact of a particular regulation on businesses and that calculates the costs of small businesses to implement this particular regulation. This serves as evidence for advocacy towards the local or national government to change or abandon this regulation, which allows the businesses to save money.
To put it in general terms, RECONOMY aims to promote three things:
Number one: Decent work. RECONOMY strives to promote job opportunities for women and young people that are decent - which means, amongst others, work that is productive and delivers a fair income, and provides security in the workplace.
Number two: Future of work. We want to make sure that policy makers, organizations, and workers are ready for the transformations taking place in the world of work, for instance, digitalization. Individuals, companies, and governments need to be prepared for the new demands of the labor market of the future. RECONOMY supports this by fostering the development of skills, private sector capacity, and framework conditions.
Number three: Green economic development. RECONOMY promotes growth in employment and income-driven public and private investment into economic activities, infrastructure, and assets that help reduce carbon emissions and pollution, enhance energy and resource efficiency, and reduce the loss of biodiversity and ecosystem services.
So, in short, we aim for decent work, getting ready for the future of work, and a greener economy.
Why do we care about decent jobs?
It is our obligation as a society to make sure we leave no one behind. This is the central, transformative promise of the 2030 Agenda for Sustainable Development. Economically, high-quality jobs mean more income for poor families to pull themselves out of poverty.
High-quality jobs mean higher domestic demand for goods and services, which stimulates overall growth. Socially, decent employment often means better social cohesion and the return of displaced persons. Decent work sums up the aspirations of people in their working lives and is thus a universal objective.
It is highly likely that in each labor market multiple aspects of decent work need to be addressed at the same time. It may be almost impossible for an intervention to tackle all of them at the same time. Therefore, programs should prioritize the most relevant substantive elements for decent work in a particular context, based on the actual needs.
We have regular exchanges among the projects in the region about how to measure decent jobs or better employment. The MarketMakers project of the SDC in Bosnia Herzegovina, which is implemented by Helvetas, for example, focuses on job security, employment stability, work-life balance, the possibility of advancement, and compensation.
In summary, it is not enough to create jobs: we need decent jobs to address inequality, foster social cohesion, and sustain economic growth.