Why a Worker in the Balkans Produces Less per Hour: Albania at the Bottom, Montenegro at the Top of the Region

How much does an economy produce in one hour of work, and what lies behind the differences among the countries of the region? Data from the International Labour Organization (ILO) show that labour productivity remains one of the major challenges facing the Western Balkan countries. Albania ranks at the bottom and Montenegro at the top of the region, while Serbia occupies a middle position. Kosovo Online’s interlocutors say that one of the reasons lies in a work system structured around a full eight-hour working day, coupled with insufficient investment in employees.

Written by: Katarina Saicic

According to the latest available estimates by the International Labour Organization (ILO), Albania’s gross domestic product per hour worked stood at 18.7 international dollars in 2025, down 4.1 percent from the previous year. Albania thus had the lowest labour productivity among the Western Balkan countries for which the ILO publishes comparable data.

Albania was followed by Bosnia and Herzegovina at 26.3 dollars per hour, Serbia at 29.8, Montenegro at 31.1 and North Macedonia at 34 dollars. The ILO does not provide comparable data for Kosovo in this series. At the same time, the global average stood at 23.3 international dollars per hour worked.

Although the ILO does not provide data for Kosovo, the World Bank has used a labour productivity indicator for Kosovo in its analyses of the Western Balkans. According to these analyses, labour productivity in Kosovo declined by approximately 1.4 percent in 2023. It fell by 1.1 percent in 2022, while growth of just 0.4 percent was recorded in 2021.

The overall picture is therefore not particularly favourable: Kosovo’s economy is growing, but growth in employment and wages has not been accompanied by a proportional increase in productivity.

Impact of Technology and Automation

It is important to note that these indicators do not show how much a worker earns, but rather how much economic value is generated per hour worked. The ILO measures labour productivity as the ratio of gross domestic product to the total number of hours worked by employed persons, with the data expressed in international dollars at purchasing power parity for the purposes of international comparison.

The differences among the countries of the region raise the question of why the same hour of work generates significantly greater economic value in one economy than in another. To what extent is productivity shaped by technology and automation, the education and skills of the workforce, the quality of corporate management, infrastructure and access to capital, as well as by the very structure of the economy?

A particularly important question is what the countries of the region can do to increase productivity without relying on longer working hours. Investment in new technologies, digitalisation, education and professional skills, innovation and modern equipment forms only part of the answer. The business environment, quality of management and the movement of labour from lower-value-added to higher-value-added sectors also play a significant role.

Focusing on More Competitive Sectors

Commenting on the latest data, President of the Kosovo Chamber of Commerce Lulzim Rafuna told Kosovo Online that Kosovo has not yet reached the desired level of labour productivity, but that efforts are being made and gradual progress is being achieved.

According to Rafuna, there are certain differences in labour productivity across the Western Balkans.

“Montenegro ranks first in the region, among other things because it is more focused on tourism, a sector that is highly important to its economy. Serbia and Bosnia and Herzegovina are somewhere in the middle, while North Macedonia has declined due to the situation it is facing. I think Kosovo is making gradual progress, but we need to look at the latest data. We have now increased the minimum wage, which is why the gap between the public and private sectors is substantial. Kosovo has not yet reached the level we want, but we are gradually moving forward,” he said in an interview with Kosovo Online.

Asked about the consequences for the economy and gross domestic product when productivity is low, Rafuna said that they were, naturally, unfavourable.

“That is why the state should focus on sectors in which it can become more competitive and use them to increase productivity. This is one of the key prerequisites for economic growth,” Rafuna concluded.

Considerable Scope for Improvement in Serbia

Economist Veljko M. Mijuskovic told Kosovo Online that Serbia occupies a middle position in the region in terms of productivity, meaning that the situation is not poor, but that the country has room to improve its performance.

Mijuskovic explained that a lower level of labour productivity does not mean that workers are lazy or less willing to work, but rather that the problem generally stems from deeper underlying factors.

“What the International Labour Organization measures is the contribution of an individual employee to gross domestic product. For Serbia, that figure is between 28 and 29 international dollars per hour, which places it somewhere in the middle of the region, meaning that it could improve its performance,” Mijuskovic said.

He added that it was important to emphasise that the state can influence productivity levels by establishing an appropriate institutional framework.

“This entails further digitalisation, continued investment in education and, more broadly, the creation of a macroeconomic environment that encourages productivity. Serbia’s economic performance is good, and initially our focus was also on increasing employment. That is no longer the primary issue. Now that employment has been raised to an appropriate level, the focus is on increasing the number of international dollars generated per hour — in other words, raising productivity. There is therefore a direct positive correlation between a country’s economic performance and what is regarded as productive employment,” the economist said.

As he pointed out, it is the responsibility of the state to create a favourable environment through further education and training, as this is one of the fundamental drivers of higher productivity.

“In addition, there is digitalisation and the transition to new technologies, whether artificial intelligence, machine learning or any other new technological tools that can help increase productivity. And, of course, there is the need to create a better macroeconomic environment by simplifying procedures for establishing businesses and facilitating their subsequent operations,” our interlocutor explained.

Mijuskovic noted that problems can also arise at the micro level within companies, including difficulties involving individual employees.

“There may also be problems at the individual employee level, but these already belong to the micro level of an organisation and may involve issues such as whether a particular job suits someone, the pace at which tasks are performed, working conditions and similar factors. Every employee should perform to the best of their ability when we assess these outcomes, and that depends primarily on the relationship between the employee and the management of the particular organisation. This micro, or individual, dimension does exist, but it is not the determining factor at the level of the national economy,” Mijuskovic concluded.

Only 52 Percent of the Population Employed in North Macedonia

Kristijan Kozeski, an assistant at Ss. Cyril and Methodius University in Skopje, said that the region’s low labour productivity must be viewed in the context of the structural characteristics of its economies. He noted that the principal problem in North Macedonia is that only 52 percent of the population participates in the labour market.

He believes that the phenomenon must be interpreted within a broader framework.

“As a national economy, we are too small to be analysed solely as an individual national unit, and whenever we analyse the labour market, it is useful to adopt a regional perspective in terms of labour mobility, the level of technology used in these countries, the structure of the economy, and so forth. When discussing labour productivity, we must understand it as a consequence, as an outcome of the structural characteristics of an economy. By structural characteristics, I mean the quality of jobs, the skills and educational attainment of the workforce, and the importance of the sectors involved in generating gross value added — in other words, which sectors contribute the most to gross value added and total employment, and which sectors absorb a significant amount of labour, whether measured by the number of workers or hours worked,” Kozeski said.

He stressed that this matters because these sectors differ in terms of efficiency and technological development and consequently generate different levels of labour productivity.

“We must bear in mind that our total gross domestic product is generated by only half of the working-age population. In other words, when we look at labour force participation, the latest data show that it stands at around 52 percent. This means that half of the working-age population that should be creating added value and expanding the economic pie simply does not participate in generating new value in the economy, regardless of whether productivity is recording higher or lower growth rates. This in itself entails other consequences,” he said.

Asked which productivity factors the state can influence, Kozeski said that concrete measures were required.

“When we break down the factors involved, some are personal. We have a large pool of discouraged workers who do not want to participate in the labour market. Over time, their skills and qualifications deteriorate because they have been out of work for extended periods, while technology changes rapidly. Their employability, or ability to find sustainable employment, therefore declines. On the other hand, as I said earlier, this is also linked to particular sectors and to the characteristics of the jobs themselves. Measures and policies should focus on supporting this category of workers if we are to achieve better prospects for labour productivity growth. In addition, greater access to financing should be made available, particularly to micro and small businesses. They need easier access to financing, including credit lines that are financially sustainable for them, with favourable interest rates and similar arrangements. Why? Because micro and small businesses are the largest employers in our country. They absorb the largest share of the workforce,” Kozeski explained.

Employment System and Lack of Performance Measurement in Albania

Employment expert and lecturer at Marin Barleti University in Tirana Erion Muça said that labour productivity in Albania is at a very low level, primarily because of the country’s employment system and the lack of mechanisms for measuring workplace performance and efficiency.

Speaking to Kosovo Online, Muça explained that employment relations in Albania are based on full-time work of eight hours per day, while, on the other hand, mechanisms for measuring performance and efficiency at work — and consequently productivity — are lacking.

“Albania is understood to be one of those countries where the public sector has mechanisms for measuring productivity, but they do not function properly. At the same time, mechanisms for measuring productivity are largely absent in the private sector, making low productivity something that is difficult to change. Many private companies fail to develop and grow because employees in Albania generally work effectively for only three to four hours a day, while spending the remainder of their time either deliberately slowing the pace of work or simply trying to appear busy at the workplace. Productivity is not sustained throughout the working day, and this leads to a decline in employees’ productivity levels. Another problem in this area is that employees here are assessed according to the hours they work rather than according to their output or the final results of their work,” Muça said.

In his view, Albania lacks models for standardising the internal organisation of many companies.

“There is therefore a lack of an appropriate organisational structure and an appropriate organisational culture. By this I mean that many companies do not operate as modern enterprises in terms of their internal organisation, leaving them insufficiently familiar with the principles of modern strategic business management. At its core, such management must incorporate employee motivation and encourage employees to perform better through an internal framework that begins with appropriate financial compensation for the work performed and extends to respect for employees and sensitivity to the needs and problems they may face,” the professor said.

He added that companies must provide opportunities for internal advancement over the course of an employee’s career, which is another important means of motivating workers.

As regards state investment in productivity, Muça said that there had been some improvement and that this appeared to be an important element related to the structure of Albania’s labour market.

“We must bear in mind that many young people today work as freelancers, making use of their talents and skills. These young people avoid traditional full-time employment and instead offer their expertise to companies through contractual arrangements. They cooperate with these companies by providing services and work based on their skills, according to agreed timeframes and costs,” Muça said.

According to him, another factor negatively affecting productivity is the lifestyle to which some young people have become accustomed.

“I am referring to those young people who do not want to exert themselves too much, who do not want to become overly involved in their work and who do not want to develop their skills. This mentality, which can reach the point of laziness, means that many of these young people are not committed to achieving strong results and do not demand enough of themselves to attain certain professional goals. They want to work at a very slow pace, usually in a job found for them by their mother or father, and simply remain there to collect their salary at the end of the month,” Muça concluded.