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1. Labour market situation in the country

2. Definitions and concepts

Labour market situation in the country

Labor Market and Youth Unemployment

The Macedonian labor market suffers from low activity, low employment rates, high unemployment and (vertical and horizontal) mismatch between supplied labor and demanded skills. Labor force participation rate remains low by international standards, reflecting the low employment coupled with high unemployment rate.

As it was mentioned in the chapter 1.6, in order to reduce the differences between the supplied workforce and the required skills, the Employment Service Agency of the Republic of North Macedonia conduct a survey for analysis of skills needs in the labor market. The purpose of the research is to increase knowledge about the situation and the expected changes in the labor market, by obtaining information from employers for: the needs of new employments in the next 6 to 12 months; the needs of occupations, the planned new employments; the skill needs of candidates for planned new job; the needs of workers with certain occupations, for which employers have experienced a deficiency in filling vacancies.

The unemployment rate, as participation of the number of unemployed in the total labor force was already high at the beginning of the transition in the early 90’s, estimated at 20%, but further increased during transition.  The unemployment rate continued to grow particularly in the privatization process and in 2005 reached a record rate of 37,3% .

These developments suggest that the emergence of the new private sector was insufficient to absorb the decrease in employment caused by the restructuring of state-owned companies, notwithstanding the effect or pressure of rising working-age population. Some researchers say that “the unfavorable business climate during the transition has not only discouraged new business start-ups, but also promoted the blossoming of the informal economy. To discourage the sizeable shadow economy and spur the development of private, and particularly, small and medium-sized enterprise sector, the authorities substantially reduced the personal-income and corporate tax rates at the beginning of 2007”. 

Over the course of the past few years, the economy has witnessed a trend of continuous decline in the unemployment rate. In 2020, the unemployment rate stood at 16.4%, reduced to 15.7% in 2021, and further dropped to 14.4% in 2022. As per the State Statistical Office, during the first quarter of 2023, the unemployment rate has reached 13.3%. [3] However, in the third quarter of 2023, the unemployment rate was 12.8%, which indicates a slight decline, according to the report conducted by the State Statistical Office for the third quarter of 2023. 

Although the dynamics of the movement of the unemployment rate are optimistic, we must be careful in drawing conclusions. Considering the fact that the unemployment rate is determined on the basis of the number of persons registered as unemployed in the Employment Service Agency of North Macedonia, we must bear in mind that for unknown reasons there are unemployed people who are not registered within the Agency. So, taking into account the unknown dark figure of the unemployed, the real unemployment rate in North Macedonia is certainly higher than the official above mentioned.

When it comes to youth unemployment, the numbers since our independence are constantly high. According to the State Statistical Office the youth unemployment rate in the first quarter of 2023 is 24% (aged 15-29). 

As for the third quarter of 2023, the rate is exactly the same, 24% (aged 15-29). 

It is considered that the most important reasons for the high rate are the following:

• Poor qualification structure (a large number of young people are unqualified or semi-qualified);
• Inequity between the need of the labor market with the education system;
• The strict need for employers to employ people with previous work experience;

Also, a great problem is nepotism, cronyism and political patronage, which, combined with the previously mentioned reasons, make young people discouraged and emigrate abroad. 

Youth unemployment and underemployment (workers who are highly skilled but working in low paying jobs and part-time workers who would prefer to be full time) in the Republic of North Macedonia represent a major cost to the country in economic, political and societal terms. Young, rural and unskilled females are less likely to be active in the labor market.

In the Economic Reform Programme 2024-2026 of the Ministry of Finance, is foreseen an activation of young people, members of families, beneficiaries of guaranteed minimum assistance by offering trainings, retraining and employment, which are also provided in the Youth Guarantee. 

In February 2018, the Ministry of Labor and Social Policy together with the Employment Service Agency of North Macedonia and the National Youth Council of Macedonia started the realization of the pilot project Youth Guarantee. The Economic Reform Program provides that “With the Youth Guarantee measure, each young person under the age of 29 will be given an adequate job offer, an opportunity to continue education or be included in some of the internship or training measures for preparation for employment. This will be provided within 4 months after completion of education or registration as an unemployed person in Employment Service Agency of the Republic of North Macedonia.” 

Once the unemployed persons are registered in the unemployment register, they are immediately referred to their first interview with an expert from the Employment Service Agency, who makes the profiling of their employability using a control questionnaire and develops the individual employment plans (IEP). The IEP defines activities that will enable the young unemployed person in the next 4 months to be included again in the educational process (not in regular education) or to be included in some of the measures and services for employment, which will enable him to increase his opportunities for easier employment, i.e. he will be offered adequate employment which corresponds to his education and skills. These activities include group and individual counseling and information; providing job search assistance services; motivational training; inclusion in one of the labor market integration measures (employment, education and training measures). 

According to the Ministry of Labor and Social Policy this measure has positive results. In the first 3 months of its realization in Skopje, Strumica and Gostivar, 419 people were hired, 196 began to attend training and 160 started their practice in a company. According to the information gained from the MLSP, in the first year of implementation (from March to December 2018) the performance of the Youth Guarantee in 2018 is over 41%. 

The Youth Guarantee in 2019 was  applied throughout the whole country (unlike in 2018 when as a pilot project it was implemented only in 3 Macedonian municipalities). According to the ESA, in the period from January 1, 2018 to August 31, 2019, 13728 young people become part of the Youth Guarantee, and 3095 of them get a job in the first 4 months after their registration within the Agency. According to the Macedonian former Prime-Minister, during 2019, 6004 young people find a job through the Youth Guarantee. 

According to the Plan for implementation of the Youth Guarantee, the first phase (2018-2019) included  appropriate political reforms, mapping young people (NEET) and making assessment for the necessary investment for realization of the Youth Guarantee, enlarge the scope of available programs, making partnerships in order to get in touch with young unengaged people and creating monitoring system.

The second phase was carried out from 2020 to 2022, building upon the suitable foundation provided by the first phase. The main aim of the second phase was to accommodate institutional arrangements and coordination mechanisms in order to strengthen the provision of integrated Youth Guarantee services. 

In 2021, of the total number of people who entered the Youth Guarantee process (19,322), 8,064 young people up to 29 years of age or 41% got a job or acquired skills that improved their employability and became competitive on the labor market. As for  2022, the number of young people up to 29 years of age who entered the Youth Guarantee was 20,185, and of them 8,706 or 43% got a job or acquired skills through training.

The new Plan for the implementation of the Youth Guarantee 2023-2026 introduces novelties, where the focus is on the NEET group, i.e. people aged 15-29, who are not in the education process, are not employed, and are not involved in some of the trainings. The measures that are part of the third phase of Youth Guarantee are described in Operational Plan for employment 2023.  

Definitions and concepts

Macedonia follows the definition of International Labor Organization on the recommendations for definitions and concepts – therefore, according to State Statistical Office of Republic of Macedonia, employed are included persons of 15 years of age and more who:

• During the reporting week have worked for money (in cash or in kind) or for profit at least one hour;
• During the reporting week were temporarily absent from work (because of illness; leaves; studies; break in the activity of the business entity etc.), but were formally employed;
• Аre helping on the family estate or in the family enterprise without pay

The classification of the employed according to the economic status is based upon the International Classification of Status in Employment and is worded as follows:

Employers - persons who run their own business entity or owners who work in their shops or owners of an agriculture estate, who employ other people;

Employees - persons who work in state institutions, business entities in public, mixed, collective and undefined ownership or for a private employer;

Self-employed - persons who work in their own business, professional practice or farm for the purpose of earning a profit and who do not employ any other person;

Unpaid family workers - persons who work without pay in a business entity or a farm (owned by a family member).

According to State Statistical Office of Republic of Macedonia, as unemployed are considered the persons between 15-74 years of age who meet the following three conditions:

• During the reporting week they did not work (according to the above-mentioned criteria);
• Have searched actively for a job or have taken concrete activities to find a job;
• Were prepared to accept work in the next two weeks after the reporting week.

The persons that are not included in any of the two categories make up the group of those that are not in the labor force.

• During the reporting week they did not work (according to the above-mentioned criteria);
• Have searched actively for a job or have taken concrete activities to find a job;
• Were prepared to accept work in the next two weeks after the reporting week.

The persons that are not included in any of the two categories make up the group of those that are not in the labor force.