12. Fostering social cohesion in North Macedonia
Over the past decades, North Macedonia has achieved great progress in building a socially cohesive society. With income per capita almost doubling in real terms between 1995 and 2020, extreme poverty was reduced and living standards increased. In recent years, North Macedonia has undertaken important social protection reforms. To sustain this progress, this chapter provides key policy priorities to foster social cohesion through labour market and social protection policies. As creating more jobs is a top priority, growth-enhancing policies need to be complemented by solid active labour market policies that boost participation of many unemployed and vulnerable citizens. This requires solid capacities in the Employment Service Agency (ESA) and broad-based collaboration among the ESA, the private sector, education institutions, social care services and non-governmental organisations. While the social protection system in North Macedonia has benefited from various recent reforms, including the introduction of guaranteed minimum assistance in 2019, existing gaps in adequacy and coverage still need to be addressed. A shift towards community-integrated social services, provided locally, can create pathways by which people in need integrate into society and the labour market.
Key elements of social cohesion ranked very high in North Macedonia in the Initial Assessment of this Multi-dimensional Review of the Western Balkans - good governance, public services, rule of law and justice, decentralisation, quality health services, and freedom of expression. A socially cohesive society is a society that creates the ability and willingness of its members to undertake collective action for the improvement of societal well-being of all its members. Building on the Initial Assessment, the “From Analysis to Action” phase of the project provides suggestions to foster social cohesion in North Macedonia and in other economies of the Western Balkans. The peer-learning workshops on social cohesion (Box 8.1 of Chapter 8), an integral part of the project’s second phase, serving three complementary processes: identification of problems hampering social cohesion, identification of policy key policy challenges, and putting for forward key policy priorities for North Macedonia and for the region (Figure 12.1).
Since its independence, North Macedonia has achieved significant success across various dimensions of social cohesion. Income per capita doubled and the economy’s status moved from lower middle-income to upper middle-income. The economy is relatively more peaceful than others in the region and is increasingly safer (the intentional homicide rate has been decreasing over the past 20 years). On the social side, North Macedonia has improved the standard of living for its citizens, reduced extreme poverty overall and undertaken important social protection reforms
To sustain the pace of building a socially cohesive society, North Macedonia must now tackle a set of important problems that remain. While improving, the employment rate of 43.4% in 2020 trails about 10 percentage points behind the OECD average (Figure 8.1 of Chapter 8). Many unemployed persons stay unemployed for long periods, leading to loss of skills and creating great pressure on the social protection system. North Macedonia has the highest market income inequality among all benchmark economies (Figure 8.6 of Chapter 8). This reflects the relatively high redistributive effects of the tax-benefit system while also indicating that a large number of households have low market incomes. Inequalities between ethnic groups add to the complexity. Low participation in the formal labour market renders the mostly contribution-based social protection system unsustainable and under-dimensioned. Local governments should be on the frontline in addressing this challenge; most places, however, lack the capabilities in terms of organisation and funding.
Six priority actions have a great potential to foster social cohesion in North Macedonia and in the Western Balkans, with activation of vulnerable groups being a key priority for North Macedonia:
Make active labour market policies more effective, particularly for vulnerable groups
Create equal opportunities for vulnerable groups to participate in the labour market
Strengthen women’s role in society by supporting their integration into the labour market
Strengthen targeting, equity and adequacy of social assistance for those most in need
This chapter is divided into four sections, reflecting key areas of analysis and action. Sections 12.1 and 12.2 provide policy implications across the six policy actions through a prism of challenges specific to North Macedonia, cutting across two major policy areas – employment opportunities and social protection. Section 12.3 zooms in on the key policy priority selected and further developed by the peer-learning participants from North Macedonia: Make active labour market policies more effective, especially for vulnerable groups. Section 12.4 provides indicators agains which progress in implementing the various policy priorities can be assessed. This chapter is complemented by the regional chapter on social cohesion (Chapter 8), which highlights specific policy options for the six policy actions based on international practices that may be applied, albeit to different degrees, also to North Macedonia.
12.1.1. Make active labour market policies more effective, especially for vulnerable groups
High long-term unemployment and a lack of employment opportunities for people with no prior job experience calls for well-targeted active labour market policies (ALMPs). In 2019, about 67.7% of unemployed were long-term unemployed (Figure 8.2 of Chapter 8). Many young and many from vulnerable groups, including Roma and Egyptians, do not participate in employment, education or training, with many having no or very limited work experience (Figures 8.3 and 8.7 of Chapter 8). Poor labour market integration of vulnerable people can lead to loss of skills, long-term reliance on welfare assistance and emigration. The young face particularly dire situations when it comes to school-to-work transitions: about 45% of the young report being unemployed for at least four years after finishing school, which means they are very likely to work informally or migrate abroad (European Commission, 2021[1]). Current labour market deficiencies, such as a combination of unemployment, inactivity and lack of opportunities, causes the average male worker in North Macedonia to lose (on average) around 25 years of productive employment. For women, the figure is even higher at 30 years (World Bank, 2018[2]).
To boost the impact ALMPs in North Macedonia, it would be imperative to increase coverage among the most vulnerable groups. On average, only 8.1% of registered unemployed participate in ALMPs, although the share of unemployed youth participating is higher at 11.6% (Table 8.3 of Chapter 8). In addition to the low take up of ALMPs, most participating jobseekers are those with higher education: about 60% of unemployed registered with the Employment Service Agency (ESA) have tertiary education, compared with about 20% having only secondary education (World Bank, 2020[3]). Persons with secondary education account for close to 54% of all unemployed in North Macedonia in 2019 (World Bank/WIIW, 2021[4]). Low registration and take up of ALMPs among people with low skills likely reflects barriers to access (such as lack of information) and a limited offer of services or the small number of locations (World Bank, 2020[3]). Coverage of ALMPs is particularly low among long-term unemployed, Roma and people with disabilities. Although most of the unemployed have been unemployed for long periods, the long-term unemployed account only for about 22% of all ALMPs participants. Roma and people with disabilities are highly affected by long-term unemployment spells yet account only for 3% of ALMP participants (OECD, 2021[5]).
Effective implementation of ALMPs requires adequate capacities of ESA and better collaboration with other stakeholders, including the private sector, social care services and non-governmental organisations (NGOs). The high staff-client ratio of 1:463 (in 2016) limits effective implementation of ALMPs in North Macedonia (European Commission, 2021[1]). Recent estimates (2016) show the effectiveness gap of 54% between average ESA offices and the best performing one, in terms of connecting people with jobs (World Bank, 2018[6]). Improving processes at bad-performing offices to breach the gap in effectiveness could increase job placement by 73% (Table 8.5 of Chapter 8). Likewise, inadequate collaboration with other stakeholders, especially with the private sector, means the ESA does not sufficiently leverage the existing stock of jobs to support job-seekers. Although the law in North Macedonia requires that all vacancies are advertised at the ESA, only about 8 344 vacancies were advertised in this way in 2019 (OECD, 2021[5]; CEIC, 2021[7]). This is very low considering there were about 101 700 job-seekers (OECD, 2021[5]).
12.1.2. Create equal opportunities for vulnerable groups to participate in the labour market
In its efforts to create a socially cohesive society for all, North Macedonia needs to create equal conditions for ethnic Albanians and Roma to participate in the labour market. Both groups together constitute about one-third of North Macedonia’s population, yet they face weaker labour market outcomes than the rest of the population. Over 40% of the poorest quintile are estimated to belong to households of ethnic Albanian origins, with disposable incomes just two-thirds that of households of ethnic Macedonian origins (World Bank, 2018[2]).1 In 2017, only about 22% of Roma aged 15-64 were employed, compared with 40% of non-Roma in neighbouring communities. This is a slight improvement in Roma employment since 2011 but a widening of the gap with non-Roma (Robayo-Abril and Millan, 2019[8]).
Ensuring better opportunities to obtain high quality education is one of the key levers for creating employment opportunities for ethnic Albanians and Roma. North Macedonia’s performance in the OECD Programme for International Student Assessment (PISA) shows that ethnic Albanian students have lower results than their ethnic Macedonian peers (OECD, 2019[9]). Low education outcomes imply that current education system also fails to equip many people with job-ready skills, thus reducing their opportunities for labour market participation. Moreover, ethnic Albanian students attend separate schools with classes taught in Albanian; this leads to inefficiencies as the resources are duplicated and creates further segregation. About 33% of ethnic Roma have completed upper secondary school by age 25, compared to 87% of non-Roma youth, and virtually no Roma are enrolled in tertiary education (World Bank, 2018[2]).
Addressing discrimination and institutional barriers against ethnic Albanian and Roma also matters to access education and employment. Ethnic Albanians are often victims of hidden discrimination including by public officials, which affects their access to various public services. Roma children are also subject to discrimination in schools and often lack the necessary documentation to be able to attend school or receive the certificate of completion. This reflects low awareness of their guaranteed rights (Minority Rights Group, 2021[10]). Lack of necessary documentation among Roma also affects access to basic services. Discrimination against Roma is visible in healthcare. Roma women, for example, have worse health indicators (e.g. fewer prenatal visits, lower quality of care) and their children suffer from stunting more than the rest of the population (World Bank, 2018[2]).
12.1.3. Strengthen women’s role in society by supporting their integration into the labour market
Creating better conditions for labour market participation among women can contribute to higher growth in North Macedonia and greater social cohesion. After Kosovo, North Macedonia has the highest gender gap in labour force participation in the Western Balkans. Women are more likely than men to work in low-income jobs and the estimated ratio of female-to-male earned income is 0.49, which represents the highest regional pay gap (USAID, 2019[11]; Nikoloski, 2019[12]).2 Low labour market participation also creates gender gaps in the pension system, thus affecting women’s well-being also in old age. Older women have lower pensions than men and lower access to the pension system: among those aged 65-79, the gender gap in pension income is 22.7% while the coverage gap is 22.1% (Gerovska Mitev, 2021[13]).
Better and affordable access to childcare is a key for high integration of women into the labour market. While North Macedonia shows improved preschool enrolment (from 22% in 2012 to 35% in 2017), it remains far behind the EU average of 95% (UNICEF, 2020[14]). Quality ratings for childcare services were the lowest of all economies surveyed in the European Quality of Life Survey in 2016 (Eurofund, 2018[15]). On average, it takes more than five years for a child to have a guaranteed place in early childhood education and care (ECEC) before compulsory primary education, which is relatively high against the EU average of 2.8 years (Figure 8.8 of Chapter 8). Low preschool enrolment affects women negatively but also has serious implications for future students, who do not acquire foundational skills relevant for future education.
Addressing institutional barriers, such as flexible options for part-time work, also matters for integrating women into the labour market. The lack of flexible work arrangements, such as part time-work, often undermines the participation of women in North Macedonia. Only about 5.3% of women work part-time, which is very low against averages in the EU (33.9%) and the OECD (36.1%) (Table 8.6 of Chapter 8). High minimum contributions for social security can discourage low-paid, part-time employment (Table 8.6 of Chapter 8).
Cultural norms also play a role in women’s low participation in the labour market and should be addressed through awareness raising, both in the education sector and among the general public. About 41% of women (against just 1.3% of men) who are not in the labour market cite “personal and family obligations” as their primary reason for not looking for a job. In a recent survey, almost half (47%) of women surveyed believe they face discrimination in the labour market (Mojsoska-Blazevski, Petreski and Ayhan, 2017[16]).
12.2.1. Create a more inclusive and fair social security system in North Macedonia
An inclusive and fair social security system calls for a combination of policies that encourage people to participate in formal employment and ensure a rapid transition from unemployment to work. Due to the lack of adequate and stable employment opportunities, many people – especially the young – do not contribute to unemployment insurance long enough to qualify for unemployment benefits. While decreasing, youth unemployment in North Macedonia in 2019 stood at 35% (World Bank/WIIW, 2021[4]). In addition, many long-term unemployed in North Macedonia have lost their unemployment benefit entitlements, with an accompanying risk of exiting the labour market altogether, making future work less likely (Section 12.1.1). Likewise, many persons work informally and are very likely not contributing to the social security system, staying without unemployment benefit entitlements and pension security. Income is estimated to be partially or completely undeclared by about 44% of employees (European Commission, 2019[17]). Almost 74% of individuals engaging in work that is additional to their primary source of employment do so without a formal contract (European Commission, 2021[1]). As social security contributions finance more than half of social protection spending (54.5% in 2017), low coverage is further jeopardising the financial sustainability of the system (Gerovska Mitev, 2019[18]).
Building on the 2009 reform, it would be important to consider further reduction of high social security contributions as a means to reduce the tax burden for many, especially low-wage earners, as current rates encourage them to work informally. In North Macedonia, social contribution rates represent about 20.5% of monthly salary (ILO, 2021[19]). Furthermore, the progressivity of personal income tax3 is very limited (Figure 8.11 in Chapter 8); this implies a relatively high tax wedge, which particularly affects low-wage workers and tends to encourage informal employment practices. The 2009 gross wage reform made an important step in reducing social security contributions, leading to positive initial employment effects (Mojsoska-Blazevski, 2012[20]).
Considering low labour market participation and rapid ageing in North Macedonia, addressing social security coverage can improve the financing of old-age pensions, an integral part of any social security system and a tool to foster social cohesion. More than 60% of social protection spending, or 9.3% of GDP, goes to the mixed pension system. This represents an increase of 1.1 percentage points since 2008 due to a range of policy measures including abolishment of formal indexation mechanisms in favour of ad hoc supplementary pension increases (implemented between 2014 and 2017) (Gerovska Mitev, 2019[18]). Recent reforms maintained a “pay-as-you-go” basic pension, but introduced a fully funded second pillar and price indexation of pensions in 2019. These changes helped to stabilise financial flows in the pension fund but were recently relaxed to allow for larger increases when wage growth meets certain criteria. In view of low labour market participation and population ageing, further efforts are needed to ensure both the long-term sustainability of the social protection system and adequate protection for people.
12.2.2. Strengthen targeting, equity and adequacy of social assistance for those most in need
North Macedonia has made great progress in streamlining social assistance schemes and endeavouring to link them with the labour market. Among several social assistance schemes offered in North Macedonia, the guaranteed minimum assistance (GMA) is its most important means-tested scheme (Table 8.A.4. of Chapter 8). The scheme was introduced in 2019 by a new Law on Social Protection (World Bank, 2020[3]). Eligible for the GMA are households that do not own property and had an income level in the past three months below the guaranteed minimum (the base is MKD 4 000 or EUR 65 per month for one person, increasing according to an equivalence scale for each other adult family member and children) (World Bank, 2020[3]). The GMA can be received together with most other social assistance supplements and allowances (Table 8.A.4. of Chapter 8).
Despite the progress achieved, it is important to ensure high impact of social assistance through better targeting. Although the GMA is now more generous and covers more people than previous schemes, coverage is still very low. In 2020, the GMA covered 1.5% of the population, which is comparatively low given that 21.6% of people in North Macedonia were at risk of poverty in 2019 (Barca et al., 2020[21]).
The recent reform is an important step in improving activation and labour market integration of social assistance beneficiaries. Better labour market integration was one reason to reform social assistance in 2019. It sets out a mutual obligations framework with the objective to incentivise recipients to register as unemployed and to meet obligations set out in their individual employment plans for inclusion in active labour market measures. Failure to respect these obligations can result in a withdrawal of the financial support (OECD, 2021[5]). However, most GMA beneficiaries are persons with low skills and who lack labour market experience, making activation through conditionality challenging (World Bank, 2020[3]). In collaboration with the European Union, the Employment Service Agency (ESA) is currently implementing the project “Labour market activation of vulnerable groups” with a duration of 36 months. The aim is to reduce long-term unemployment and dependence on the GMA by including GMA beneficiaries in specialised skills development programmes and services, including counselling and mentoring support. Various programmes are expected to cover about 4 400 beneficiaries. While this as an important initiative, it would be important to scale up and systematise the approach, especially considering that about 30 708 adults were GMA beneficiaries in 2019 (Table 8.A.4. of Chapter 8).
12.2.3. Deliver community integrated social services
Establishing community-integrated social services is one of the key policy priorities that emerged from the peer-learning workshops. As indicated in the regional chapter on social cohesion (Chapter 8), community-integrated social services encompass a range of approaches and methods for achieving greater co-ordination and effectiveness between different services, such as elderly care, healthcare, education and others, with the objective to achieve improved outcomes for services users.4 During the OECD peer-learning workshop, participants stressed the importance of community-integrated services as a key lever to strengthen social protection, deliver social care services and reduce long-term dependency on social welfare through better labour market integration.
To create an integrated approach, it would be important to provide adequate capacities to local governments, which should be on the frontline of delivering community integrated social services. Local government generally have a good knowledge of challenges and needs of vulnerable groups. Although the Law on Social Protection has strengthened the powers of the social services as part of the decentralisation process (Table 8.7 of Chapter 8), municipalities in North Macedonia still lack adequate capacities to deliver quality social services (European Commission, 2021[1]). Local government revenues amount to 15.7% of total public revenues in 2019, which is relatively low compared to the OECD average of 42.4% of total public revenues (Figure 8.14 of Chapter 8).
More collaborative efforts are needed to create a community-integrated social services in North Macedonia. In recent years, as part of efforts to create an integrated approach for inclusion of social welfare beneficiaries, co-operation among key local stakeholder has improved. As yet, it remains insufficiently implemented (European Commission, 2021[1]). Since 2019, Centres for Social Work and Employment Centres have co-operated to put together individual employment plans to map out beneficiaries’ participation in active employment measures and job seeking. Staff in the two centres communicate regularly and meet as needed, at least once per month. The process has two major limitations. First, co-ordination was lacking between relevant stakeholders at the local level, as well as with institutions at the national level. Second, there is an evident lack of social services provision by CSOs, which usually depend on funds provided by external donors (OECD, 2021[5]).
The implementation of the Census of Population and Housing in 2021 is a key ingredient to facilitate evidence-based policy making, including in planning and co-ordinating social service provision. The Initial Assessment volume of this review identified the lack of a population census as a major constraint for inclusive and accurate policy design in North Macedonia (OECD, 2021[22]). Up-to-date and accurate census information will be key to design and size policy interventions and to improve other data gathering exercises. The results of the 2021 census will also have implications for the public administration (which should grant a minimum representation to minority ethnic groups).5
Reducing long-term unemployment and the number of persons on welfare benefits through faster labour market integration was a key peer-learning policy priority of North Macedonia. Long-term unemployment ranks among the key issues affecting social cohesion in North Macedonia and across the region. Although North Macedonia is slightly below the regional average, the 68% share of long-term unemployed is still significant (Section 12.1.1). Long-term unemployment can lead to loss of skills, self-confidence and motivation, and translate into acute social and health problems that sap a person’s ability to work and to look for a job (OECD, 2014[23]). Likewise, many long-term unemployed, as well as other vulnerable groups, are recipients of social welfare benefits: currently, more than 30 000 people are GMA recipients. As this also creates significant financial pressures on the social security system, faster labour market integration is necessary.
Achieving the above priority will require provision of quality personalised services, interventions to increase skills and capabilities of jobseekers, increased access to available jobs and broad-based partnerships with relevant stakeholders. Several key policy options are proposed, based on suggestions from the peer-learning participants and the OECD (Table 12.1):
Piloting new services and measures to enhance employment outcomes for hard-to-employ persons. This includes counselling and motivation services, such as psychological and mentorship support. In parallel, it is important to increase employability of job-seekers through training in VET centres and on-the-job trainings and, when necessary, providing job subsidies to employers. Specific measures include:
Psychological support, both intensive and continuous. Intensive individual and group psychological would support GMA recipients before engaging them in an active employment measure. Continuous group psychological support would support GMA beneficiaries while they participate in active employment measures.
Mentorship support provides services in line with the needs of GMA recipients through face-to-face meetings, phone conversations, and other means. It typically lasts through the duration of ALMP implementation and carries on once a person is in employment, although the intensity of support is reduced at this point.
Training in vocational occupations. This will be implemented in collaboration with training providers who have experience with continuous adult education. To improve the effectiveness of trainings, occupation needs can be identified by pooling various national sources (annual Skills Needs Survey, research carried out by employers’ organisations and chambers of commerce, and information on the local level provided by employment services centres and municipalities).
On-the-job trainings. This includes training for skills corresponding to employers’ needs in order to improve employment perspectives. During such trainings, employers would receive funds for mentoring and material costs. Employers would be obliged to provide regular updates to the ESA and to employ at least 50% of participants for a period of at least 6 months.
Providing employment subsidies when necessary. This would include financial support to employers (i.e. 100% of minimum net salary for period of 12 months).
Delivering targeted employment activation services and income support in a co-ordinated manner. This requires strengthening capacity in employment centres and centres for social work, especially at the local level, as well as adjustments to existing processes and to the management and information systems, to ensure their interoperability.
Building partnerships with public and private entities, including businesses, the Ministry of Labour and Social Policy, the ESA, VET institutions, chambers of commerce, employers’ organisations and NGOs. Strong involvement of NGOs is particularly important to reach the most vulnerable. This will require identifying which NGOs should be involved in the process, setting up a network of NGOs and finding solutions for financing NGOs.
Leverage existing jobs by increasing collaboration between employers and the ESA. Providing quality services to the private sector may improve the reputation of the ESA as a reliable service provider for employers and also increase the availability of vacancies through job placement. Having dedicated employer relationship staff to manage intake and registration of vacancies, inform employers about available ALMPs, and provide targeted support for SMEs that lack human resource departments and other activities could be further considered.
To ensure faster integration of those who have recently lost employment and are at risk of becoming long-term unemployed, it would be important to introduce statistical profiling. Statistical profiling uses statistical models to predict the likelihood of job-seekers becoming long-term unemployed (Desiere, Langenbucher and Struyven, 2019[24]).
To monitor the policy progress in improving labour market integration of vulnerable groups and in addressing other policy priorities in North Macedonia, the OECD suggests a set of key indicators. These are set out in Table 12.2, which includes values for North Macedonia and benchmark countries (either the OECD or the EU average, based on data availability).
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[34] World Bank/WIIW (2019), Western Balkans Labor Market Trends 2019, World Bank/Vienna Institute for International Economic Studies, Washington DC/Vienna, http://documents1.worldbank.org/curated/en/351461552915471917/pdf/135370-Western-Balkans-Labor-Market-Trends-2019.pdf (accessed on 26 April 2021).
Notes
← 1. Estimations are based on the nationally representative 2017 Quality of Life population survey carried out by the Finance Think research institute.
← 2. Women have particularly low salaries in textile and wearing apparel sectors, which together accounted for 5.2% of total employment and employed 85.2% of women in 2019 (State Statistical Office, 2022[31]). While the average gross salary in February 2020 was EUR 659 per month, in the textile sector, it was EUR 534, and in the wearing apparel sector, it was EUR 423 (Invest North Macedonia, 2021[33]). Considering the high share of women in both sectors, low wages are affecting many women.
← 3. Progressivity of labour taxation is calculated as the percentage point increase of the tax wedge between workers earning 67% of the average wage and workers earning 167% of the average wage (World Bank/WIIW, 2019[34]).
← 4. Definition from the Council of Europe (CoE, 2007[32]).
← 5. The results for the 2021 Census are expected to be published at the end of March 2022, after the editorial closing date for this publication.