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Kosovo's Labour Market in a "Collapsed" State ILO Calls for Labour Intensive Reconstruction Effort

GENEVA (ILO News) - At least two-thirds of Kosovo's working age population is officially out of work and those with jobs are working in what a report prepared for the International Labour Organization described as "a vast grey economy" under employment conditions that amount to "a legal vacuum."

Press release | 19 October 1999

GENEVA (ILO News) - At least two-thirds of Kosovo's working age population is officially out of work and those with jobs are working in what a report prepared for the International Labour Organization described as "a vast grey economy" under employment conditions that amount to "a legal vacuum."

A report entitled "Employment and Workers' Protection in Kosovo" made public today in Geneva details an economy and society in which the fundamental labour market institutions have declined to a catastrophic extent during a decade which saw civil strife and warfare combined with a precipitous drop in overall GDP of 50 per cent.

The report notes that while it is extremely difficult to obtain reliable data, (with so many official records proving either unreliable or destroyed) the current population of Kosovo is estimated at about 1.8-1.9 million people, down from 2.3 million in 1997.

In terms of demographics, the population is predominantly young. At the outset of the 1990s, 58% of Kosovars were under the age of 25 and the decade saw a consistently high birth rate.

Among Kosovo's working-age population of around 1,330,000 people, only 35 per cent (approximately 469,000) can be described as economically active while 65 per cent (861,000) are economically inactive or unemployed. Agricultural activities employ 106,300 people, approximately 23 per cent of the active workforce. Women would appear to be particularly hard-hit by unemployment as, the report notes, "a large percentage of the economically active population are men."

"Along with its employment system," the report says, "Kosovo's wage system also collapsed." While many businesses continued to pay wages, during and after the NATO campaign, war damage resulted in the provisional closure of some of the main employers in Kosovo's economy. No salaries were paid in public services, which were abandoned by the Serbs. Public enterprises accounted for as much as 80 per cent of Kosovo's GDP, covering such key infrastructure as energy production, water supply, transport and telecommunications, which are essential to the rest of the economy.

Administrative and legal machinery have been similarly degraded. The report says that the systems of social protection (governing old-age and disability pensions and health and unemployment insurance), which were already malfunctioning before the war as well the overall legal and judicial system governing employment and collective labour relations in general are also in a state of collapse.

The result, according to Mr. Lajos Hethy, the author of the report and a former Secretary of State of the Hungarian Ministry of Labour, is much the same: "the simultaneous loss of all these support structures means that employed people are seeing their salaries disappear with no job prospects available while pensioners and the unemployed have seen their revenues cut."

"The current labour market and social systems," Mr. Hethy insisted, "must be turned around in order to provide badly needed jobs, income and social protection to a sorely affected population in a highly volatile situation."

The report emphasizes that the employment problem is not only due to declining economic performance and military action, but can be traced back to several interacting factors, including discriminatory legislation and hiring practices of the Federal Republic of Yugoslavia during the 1990s. The adoption of the FYR's Labour Act for Extraordinary Circumstances resulted in the dismissal of 145,000 Kosovo Albanians from civil administration, public services and economic enterprises.

Commenting on the report, Mr. Juan Somavia, ILO Director General, said that the social inequity that brought catastrophe to Kosovo was deepened by decades of distortions in the labour market: He added "the social instrument of the labour market which once served to divide ethnic groups needs to be developed as a fundamental tool for healing the economic and social fabric of post-war Kosovo."

Strategic Priorities

The ILO report highlights four strategic priorities necessary to kickstarting the reconstruction programme and laying the basis for an improved labour market and social system in Kosovo. These priorities are:

  • To restart and maintain production in public enterprises, initially in power plants (a top priority of the UN Administration) and mines, in order to boost activity in other sectors, such as agriculture and food processing;
  • To reduce the extremely high unemployment rate as soon as possible by direct job creation in labour intensive reconstruction projects;
  • To promote and assist from the labour side those economic processes which are most employment generating, such as investment in small and medium sized enterprises and vocational training in construction related trades such as carpentry, electricity and plumbing;
  • To revive or reestablish the unemployment insurance and pension systems to contribute to the support of the large number of people who are likely to remain jobless in the short to medium term and to the survival the many (including widows, orphans, the elderly and the disabled) who may never work and currently have no financial assistance whatsoever.

Assets to build on

In spite of the considerable difficulties faced by the workforce in Kosovo today the report cites three potentially positive counter currents which may eventually contribute to an improved labour market as the predominantly clandestine or underground nature of today's economy come increasingly to the surface of the new authorities.

First, it is estimated that 400,000 Kosovars work abroad and their remittances are important, particularly to the ethnic Albanian community, which has operated an extensive "parallel" network of activities in such areas as education and health services, from which they were excluded. It is estimated that these "parallel" jobs provided paid employment prior to the military conflict, for an estimated 24,500 people, a number which could well grow.

Second, Albanian experts report that the "grey economy"does provide a considerable source of income and provisional employment, although it is not known what impact such unreported and unregistered (and untaxed) activities have on overall employment.

Third, the presence of the UN Administration as well as other international organizations and NGOs has already made a contribution to employment by hiring local technical staff (in the form of assistants, interpreters, secretaries, drivers etc.). More substantial employment benefits can be expected to result from the reconstruction and rehabilitation programs managed by UNDP, UNICEF; KFOR and others, both in terms of the quantity and quality of jobs and the respect for legal standards.

The report notes that "the UN Administration, as a direct or indirect employer and maintainer of Kosovo public services of some 47,000 employees is in a position to enforce labour law, to set up proper registration in its own field of authority and to formulate similar requirements for the rest of the Kosovo economy. Such efforts could be backed by job inspection, following up the implementation of essential labour requirements."

The report proposes a two-stage action plan to boost employment, develop a wage system and sustainable financing for public service salaries, reinforce social assistance schemes and contribute to the enforcement of labour law and the reestablishment of tripartite labour relations.