Minimum wages in the region – political decisions or a reflection of economic strength

Serbia and Kosovo increased the minimum wage this summer to 450 and 350 euros, respectively. Economists have differing views on how such decisions affect employers, but they agree that the private sector workers are the most impacted. For some, these are political decisions, while others see them as a reflection of economic strength. Experts from Belgrade, Pristina, Skopje, and Tirana discuss for Kosovo Online how these changes could impact life in the region.

Written by: Petar Rosic

On August 28, the Prime Minister of Serbia, Milos Vucevic, announced that an agreement had been reached at the session of the Socio-Economic Council regarding the minimum wage for 2025, which will amount to 53,592 dinars per month.

"After many preparatory meetings, gatherings to hold today’s session, and discussions with the President of the Republic, we reached an agreement to increase the minimum wage by 13.7%, meaning the minimum wage will be 308 dinars per hour, which translates to 53,592 dinars per month," Vucevic said.

The government of Kosovo decided that the minimum wage would be 350 euros gross per month. This decision will take effect on October 1, and Prime Minister Albin Kurti said that more than 150,000 employees, mainly in the private sector, will be affected.

This year is also important for all workers in European Union countries because by November 15, a new EU directive on minimum wages must come into effect. The aim of this directive is to ensure that the minimum wage at the international level amounts to 60% of the average wage.

According to Eurostat data, as of July 2024, minimum wages in European Union countries ranged from 477 euros per month in Bulgaria to 2,571 euros per month in Luxembourg.

Regarding the countries in the region, after Serbia, Albania follows with a minimum wage of around 354 euros, then Bosnia and Herzegovina with 316 euros, and North Macedonia with a minimum wage of 367 euros.

Economist Ljubodrag Savic told Kosovo Online that workers in Serbia earning minimum wages mostly work in the private sector and noted that the minimum wage level in the region is aligned with the development level of the countries.

"I heard from the Minister of Finance, who precisely stated that 114,000 people in Serbia live on minimum wages. The majority of these people are in the private sector. There are some activities sidelined in the public sector, but it's a smaller number. In the public sector, on average, more educated people with higher qualifications are employed, and, of course, that’s one reason why there aren't many people receiving minimum wages there. In the private sector, jobs are mostly manual and physical, where people work without qualifications or with basic qualifications, so in some way, it’s natural that this is the case," he explained.

Speaking about the situation in the region, Savic notes that there is not much difference between the countries.

"As with the difference in development, since Slovenia and Croatia are significantly ahead of us as European Union members, Montenegro also led for several years in terms of the level of average earnings," says the professor.

Former President of the Chamber of Commerce Safet Grxhaliu assessed the decision of the Kosovo government to increase the minimum wage as good but overdue.

"The truth is that it’s a good decision, but it’s late. On the other hand, it’s always a signal that elections are coming. And whenever there are political elections, there are such steps or decisions that simply influence or exploit the wage increase for some kind of promotion of that political party, serving as a pre-election campaign. The truth is that the minimum wage is the lowest in the region, and in that context, we are behind," he told Kosovo Online.

He states that a salary of 350 euros cannot keep up with rising prices and the so-called speculative trade prevailing in Kosovo.

He emphasizes that more attention must be given to the citizens and underscores that Kosovo experiences an annual increase in so-called extreme poverty.

"This is a worrying situation. Last year, we had over 28,000 new citizens submitting requests for assistance. I think this should be a challenge that needs to be addressed, and it can only be resolved through dialogue with the private sector, through the development of the private sector, and by ensuring that economic development has substance, not just numbers," he believes.

On the other hand, he warns that with the increase in the minimum wage under these economic conditions, the private sector will be affected, as it will not be able to bear the burden of wages, which is why public-private dialogue is necessary.

"The government needs to find a solution to support the private sector. Other countries do this as well. In this context, I would never question the strength of the private sector through the increase in the minimum wage. What matters to us is consumption, production, and attracting foreign investments, and there is none of that," concludes Grxhaliu.

Economists from North Macedonia tell Kosovo Online that the increase in the minimum wage in the region will also influence the increase of the minimum wage in North Macedonia and add that otherwise, it could lead to an outflow of the workforce.

The President of the Union of Chambers of Commerce of Macedonia, Trajan Angeloski, warns that increasing the minimum wage could also lead to a reduction in the number of employees, while workers will be expected to be more productive.

"It can be confirmed with certainty that with each wage increase, the number of employees will decrease because efficiency will need to be at a higher level. As for migration, certainly with the modernization of infrastructure and easier transitions from country to country, we will inevitably reach a point where we compete with each other based on wage levels. If a certain region or country has higher wages, it is to be expected that a certain number of workers from one country will seek employment in that country because they would have a more comfortable environment, with higher wages for approximately the same work. These are economic factors, and I think there is no escaping this," says Angeloski.

The Vice President for the Private Sector of the Union of Trade Unions of Macedonia, Ivan Pesevski, also fears that the increase in the minimum wage in the region will lead to the migration of the workforce.

"With the latest increase, we are not the last, but we are the second-to-last in the region, especially in Southeast Europe or the Western Balkans, where almost all countries have surpassed us both in terms of the minimum wage and the average wage. This raises the question of whether this will lead to a bigger problem—the outflow of workers to other countries," says our interlocutor.

According to the estimates of the Union of Trade Unions of Macedonia, the minimum consumer basket for the previous month amounted to over 1,000 euros. This includes food, clothing, medicine, but not credit payments or rent.

"This means that our society is not yet mature enough to live with dignity on two minimum wages, but instead, two average salaries are needed, which is rare to have in one household. Given that the latest statistical data from the Public Revenue Office show that a large portion of the population is earning minimum wages or somewhere between the minimum and average wage, it means that even with an average and minimum wage, families are barely making ends meet, covering only the basic needs to survive the month," Pesevski states.

He points out that the Union of Trade Unions of Macedonia believes that the minimum wage should not be a cent below 450 euros and that this should have been implemented last year.

"Now it’s too late because a large number of people who were working for minimum or near-minimum wages have already left for developed countries, while older workers, due to the language barrier, have not gone further west but to Serbia, Montenegro, Croatia... where the minimum and average wages are double or triple," our interlocutor notes.

Warning of a potential workforce migration, he states that people have no other solution under the current conditions.

Economy expert and fiscal analyst at the company Altax, Eduart Gjokutaj, says that the minimum wage in Albania is defined as a political decision and is not aligned with the country's real economic situation.

"The minimum wage in Albania is defined as a political decision. When minimum wage policies, and economic policies in general, are not aligned with market realities, they create problems during implementation and do not meet people's needs," he told Kosovo Online.

Compared to the region, he says, the minimum wage in Albania has increased, but despite the convergence with other countries, it still lags behind.

"It's not normal to say that the Albanian economy is growing, yet the minimum wage remains lower than in the Balkans. Just the neighboring country (North Macedonia) has at least 15% more than us, and that shows how policies are made there," our interlocutor emphasizes.

He states that many problems in Albania are solved through the informal economy.

"From this, we understand that the increase in the minimum wage must be carried out within the framework of the real situation. This growth is tied not only to people's standard of living but also to their productivity at work. Additionally, businesses need help in coping with political decisions, as these decisions increase operating costs. Political decisions must also take into account the direction our economy will take in the future," Gjokutaj concludes.