Labor market flexibility in transition countries: a case study of North Macedonia

Abstract

The aim of this study is to provide a critical overview of labor market performance in North Macedonia. The findings suggest that the differences of labor markets in transition and advanced economies are shrinking over time and labor market flexibility is significantly affecting the unemployment rate. The findings confirm that North Macedonia suffers from a rigid labor market with several structural imbalances: high and persistent structural unemployment, skill shortages, skill mismatches, brain drain, persistent discrimination in the labor market, high informal economy, and inadequate labor taxation. Specifically, low skilled workers, especially, women, youth, older workers, ethnic minorities, and people in less developed regions are among others suffering high rates of unemployment. The findings suggest that high and persistent level of unemployment in Macedonia may arise due to the insufficient level of capital to employ the labor force, the stagnant structural reforms to address macroeconomic imbalances and still unfinished transition characterized by poor economic growth. We recommend to policy makers to implement structural reforms that would address current structural imbalances and increase labor market efficiency and would in turn result in higher potential for economic growth in North Macedonia