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Nov 30, 2017 17:20 EEST
November 30 (SeeNews) - High levels of informal employment in Macedonia is undermining workers, companies, and the country's economy at large, the World Bank said on Thursday.
"High informality rates can be a drag on long-term growth and prevent income convergence, since the informal sector is usually characterized by low educational levels and lower productivity," the World Bank said in its report Western Balkans: Revving Up the Engines of Growth and Prosperity.
The report looks at how Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia - the six countries of the Western Balkans - can speed up economic growth and achieve faster income convergence with the EU.
In Macedonia, the lack of dynamic private-sector job creation and of structural transformation and labour reallocation from low to high productivity sectors have limited the creation of better jobs, the World Bank pointed out.
Most formal private employment is in small and less dynamic firms, with limited turnover, low innovation, and limited growth prospects.
Stringent labour market regulations, including restrictions on temporary work, protection of workers against dismissals, and mandatory severance payments, can harm employment, the bank added, and noted that Macedonia has the most protective legislation in terms of dismissal and hiring procedures in the region.
The unemployment rate in the Western Balkans is almost two times higher than in other small transition economies that are now in the EU. With half of the working age population in the region seeking work and a quarter of job-seekers failing to find it, the need to increase participation in the labour market in the region remains key, the World Bank noted.
It will take as many as six decades for income levels in the Western Balkans to catch up with those of the European Union (EU) if economies in the region continue to grow at the average speed achieved between 1995 and 2015, according to the report. However, reforms and macroeconomic stability that can enable average growth rates of 5% per year would allow the countries of the Western Balkans to converge with the EU in just two decades, instead of six.
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