Politics and Economy

Two Serbias

By Vladimir Gligorov

Characteristic of Serbia for a longer period, and certainly since the beginning of Yugoslavia’s breakup were two different policies: one, generally speaking, was democratic though not necessarily secular and the other nationalistic. The basic difference between the two was in their goals – one was after a nation state while the other used democratic means to attain its goals. Serbia still pursues two different policies but the balance of power between them changed: democratic strategy now prevails. Stable democratization, however, depends on future relations between these “two Serbias.”

The economic gap between these two Serbias is hardly less deep. A stable democracy depends on economic development but also on social differences. Is the economic gap between the two Serbias – the employed and the unemployed Serbia – deeper and deeper?

Unemployment spiraled in the past 10-odd years: from some 400,000 people to more than 700,000. Employment on the other hand spiraled down: from some four to about three million people. In 2004, 66 percent of population ages 15-64 were employed (57 percent of them above 15 years of age). Today hardly more than 60 percent of total population have jobs (about 47 percent above 15 years of age) while the unemployment rate grew from 12 to 25 percent. These findings of a survey on labor force include persons with grey-market jobs and working in family businesses.

In the longer period the situation of the labor market has been deteriorating – in good times and in bad times alike. Ever since 2001 the employment rate has been negative regardless of development or recession (the only statistical exemptions were registered in 2004, 2007 and 2008). This can be ascribed to a changed production structure: some businesses disappear at faster pace than expected while the new ones emerge at slower pace.

Who are the jobless? Mostly the young, people between 15 and 29 years of age – they make some 43 percent of the unemployed. The percentage is somewhat lower when it comes to people ages 24-29 while the number of the employed in the age group 15-19 is practically negligible. The unemployment rate in this age group dropped by some 15 percent, the same as the overall unemployment rate. This means that the same percentage of the youngest labor force looks for jobs but less than 15 percent of them can actually find them. In other words one of two young persons can actually find a job today.

One of the reasons why this is so is that the educational structure has not changed while the demand for labor has. Comparing the data compiled in April 2013 with those in 2008 one sees that the percentage of persons with high school and university degrees grew from 13 to 16, while the percentage of those who have finished elementary school at most fell from 38 to 36. The percentage of secondary school graduates remained almost the same: 49 in 2008 and 48 in 2013. The same percentages apply to younger generations – the percentage of those with elementary education at most decreased from 34 in 2008 to 33 in 2013, and with secondary education from 59 to 57. The percentage of the young with university diplomas grew from 7 to 10. This indicates that the educational system is problematic.

And what about women when compared with men? In the period 2000-2012 the economic activity rate decreased by some ten percentage points among men and women alike, while the difference in the employment rate remained some 20 percentage points. The employment rate fell by some 15 percentage points but more among men than women, but the employment rate among women is very low anyway – some 38 percent in 2013. On the other hand the unemployment rate is the same among men and women. This means that more women than men leave the labor force. And this may also mean that the labor market is not properly regulated.

How things stand when it comes to professions? In the past five years the employment rate declined among all professions as classified by the Republican Statistics Bureau. Mostly affected are managers (in public and in private sectors), the uneducated, craftsmen, farmers and even technicians. Less affected are public servants, various service providers and military officers.

What does this tell us? Generally speaking, public service is safer the same as some service provisions including those that imply technical skills. On the other hand, agriculture, craftsmanship and other business domains employing unqualified workers such as, say, building construction get rid of redundancy. Some economic branches come out well, others not so well not only because their products are less in demand but also their productivity grows. And yet huge cuts in the labor force in practically all professions – except for certain “protected” ones – indicate that insufficient demand is among major reasons why less qualified workers and women are getting fired, while young people cannot find jobs. This, plus inadequate labor legislation.

How come that some people are employed and others not? Three reasons why so few people work but hardly work hard or do not look for a job at all are usually emphasized. First, the demand for labor is insufficient the same as general demand /expenditure, investment and exports/; this could be ascribed to a deficient economic policy /monetary and fiscal in the first place/. Second, the labor force supply: many people cannot find jobs because of the character of their professions, demographic, regional or some other character; this could be mostly ascribed to the educational system qualifying people for jobs that are not in demand. Third, the labor market is so regulated that it actually stands in the way of job contracts between employers and potential employees.

The data testify that all the three reasons are valid. Consequently, the economic policy in the period to come should be based on the measures for changes in all the three domains. However, at least two consequences of these measures would not necessarily ensure a sustainable economic policy.

One relates to the so-called Kuznets curve implying that social inequality deepens over the process of industrialization. This is already evident in the relatively higher demand for qualified labor. Usually different incomes earned by those who are qualified and those who are unqualified or semi-qualified deepen the social gap, which could grow even deeper with bigger participation of industrial production in the overall production. This could fuel social dissatisfaction and hence undermine so conceived economic policy.

A social conflict deriving from growing social inequality is usually abated through bigger social benefits. Social benefits necessitate funds that must be collected either through taxing or obtained through loans. If both options are limited, as they are, a social policy can be even restrictive and, as such, further contribute to social tension.

All this indicates that what Serbia needs is an economic policy not only propitious to development but also to employment of those whose labor is not in demand at present. To the contrary, economic nationalism needs not be political unpopular. But what would be its attitude towards nationalism as a political strategy? This attitude would depend on the extent to which the democratic system stabilized. Until then we shall have two Serbias – the political Serbia and the economic Serbia.