Finding a recipe for job-rich growth Mihail Arandarenko Creating Jobs for Equity and Prosperity UNDP and ILO Conference, Skopje 16-17 April 2015

Outline of the presentation Challenges Policy issues – how to break the vicious circle of low growth without jobs New opportunities – learning from each other, upscaling and replicating programmes in the context of regional and European integration

Labour market failure in the Western Balkans – laundry list (Why did Rome fall) Labour legislation, lack of FDI, underdevelopment, landlocked countries, corruption, state capture, business environment, informal economy, wars, conflicts, ethnic diversity, religious diversity, emigration, aid dependency, international advice, cronyism, irresponsive elites, institutional mis-configurations, delayed transition, labour taxes, tax wedge, labour costs, employment protection, hiring rules, firing rules, labour courts, severance payments, unemployment benefits, social assistance, pension systems, labour inspections, wage inequality, segmented labour markets, low female participation rate, family solidarity, lack of trust, low living costs, high non-labour incomes, education, training systems, skill mismatch, over-education, under-education, school to work transition, illiteracy, remittances, high reservation wages, trade unions, minimum wage, collective bargaining systems, public-private wage differentials, working time rules, barriers to firm entry, monopolies, tycoons, agricultural over-population, disguised unemployment, self-management legacy, de-industrialization, public debt, austerity programmes, global economic crisis, lack of ALMPs, consumption-oriented growth model, overvalued currencies, trade deficits, terms of trade, population ageing, youth bulge, regional disparities, lack of entrepreneurship, seasonal workers, immigrants, Chinese,

Challenges: No magic bullets—just necessary conditions Growth policies All three legs are needed Employment programming, projects Employment policies 4

. . . But different legs have been emphasized at different times Initial emphasis on “getting the growth framework right” (1st leg) Macroeconomic stabilization, price iberalization, Privatization/private sector development Anticipated result: “A rising tide that lifts all boats” Often linked to post-conflict recovery BUT: resulting growth was often “jobless”, while crisis brought more job losses 5

This gave rise to growing emphasis on labour market policies (2nd leg) Later: Growing focus on labour market policies BUT: No full agreement on which policies are needed Result: There’s no common approach for fixing the region’s labour market problems beyond broad objectives and general principles 6

South East Europe 2020 SEE 2020 Vision Integrated growth Smart growth deeper regional trade and investment linkages and policies enhancing the flow of goods, investment, services and persons Smart growth commitment to compete on value added, promoting knowledge and innovation across the board Inclusive growth skills development, employment creation and labour market participation by all, including vulnerable groups and minorities SEE 2020 Vision The SEE 2020 Vision outlined here is firmly anchored into the Europe 2020 strategy and similarly to EU 2020, the smart, sustainable and inclusive growth pillars deal with adding value, effective and sustainable use of resources and sharing the benefits of growth respectively. However, the objectives and targets of these pillars are being adjusted to region’s needs. The smart, sustainable and inclusive growth dimensions were enriched with two other, region-specific dimensions: integrated growth (aiming for greater integration of regional markets) and governance for growth (providing a framework for building administrative and institutional capacities and fighting corruption). Sustainable growth enhancing competitiveness, entrepre-neurship and a commitment to greener and more energy-efficient development Governance for growth improving the capacity of public administrations to strengthen the rule of law and reduce corruption so as to create a business-friendly environment 7

Problem of SEE policy transition Departure point – highly idiosyncratic labour markets, problems that require tailor made solutions (‘find what fits’) Final destination and reference point – European Union and European policy space (Europe 2020, 2030? Strategy, EES, Empoyment package etc.) Even the annual governance cycle – European Semester Secure that problems are always addressed based on local diagnostics, but in a manner which secures the convergence to EU policy framework and quantitative targets

Avoid two types of strategic / policy errors Start from European solutions and impose them without regard for local situation Example – general shift from direct to indirect taxes Ignore the need for EU policy convergence Example – continue to rely on absolute poverty measures Intermediate, technical goals are less important than those related to human development

What to do? Stimulate Economic Growth Institutions & Infrastructure Financial & Goods Market Efficiency Efforts to diversify National production and export bases need to be strengthened further National Economic Strategies and Policies need to include Employment as a central goal Augment Labour Market Policy with a view to, above-all, improve operational efficiency of the labour market Employment services Active labour market programmes - ALMP expenditure is low by EU standards Ensure Labour Market (and other) Institutions are complementary Bear in mind real changes rather than semantic ones 10

Active Labour Market Policy and Programmes Active Labour Market Programmes: Targetted programmes can be especially effective: e.g. Self-employment/business formalisation programme in Macedonia targetting the long-term unemployed, youth… ALMPs which focus on marginal groups can be especially effective Raise employability activate the unemployed and increase labour force participation But, can depress wages (and income inequality is rising in the region) General limitations - Will not resolve major structural difficulties with the economy 11

Active Labour Market Policy and Programmes The Role of Evaluations Process evaluations – support the modificaiton of key design issues in ALMPs – supports improvement of programmes: What Works and What Does Not (and Why?) Net impact evaluations – Are the programme beneficiaries really better off? Does it pay to invest in the programme? 12

Opportunities: A new approach, based on two elements Greater focus on the third leg—projects and programmes that: Are working Can be scaled up Replicated in other countries Supported under IPA II Strengthening the policy (second leg) role of: Integrated approaches Green economy, employment policies 13

Supporting the inclusion of vulnerable groups Large sections of the population at risk of social exclusion Social inclusion approach needed, and is compatible with SPF-I.  Provide minimum income guarantees through employment or transfers.  Set realistic minima, and reach out through for example casework. Exclusion risk cannot be effectively tackled through categorical programmes.  Social inclusion approaches require a mix of approaches, and require a recognition of and willingness to explore promotion and transformative roles of SP.  Three necessary elements  for closer integration of cash and care 1) re-thinking minimal elgibility criteria 2) the simplification of assessment procedures and 3) the assignment of a case manager Social impact assessment and  policy evaluations: especially of ALMPs Sub- regional cooperation and mutual learning  

Addressing inactivity and low work intensity – good practice examples Women entrepreneurship programmes – Montenegro Employment of persons with disabilities – Croatia (including the re-orientation of public works), Serbia Increasing orientation of ALMPs toward vulnerable groups – FYR Macedonia, Kosovo

Addressing the youth employment crisis Two main ways – supporting the school to work transition - often government sponsored A range of initiatives throughout the region to reach the most vulnerable youth (dropouts, without qualifications, rural, SA beneficiaries, with disabilities etc) – UN JP YEPs, 2nd chance programmes Two types complementary YEPs typically contain components of institutional development, creation of information base, and a range of carefully designed small programmes, monitoring and evaluation component Successful experience with YEP-type programmes and 2nd chance programmes In Serbia – work practice programme scaled up and taken over by PES In FYRoM, BIH, Albania, Kosovo1244 – majority of funds for youth ALMPs through YEPs In Turkey – successful inovative components related to skills development, cooperation with private sector Second chance programmes – developed under UN / IPA programmes, countries taking over

Reforming vocational training Overcoming negative attitudes – both supply and demand side The role of partnerships with private sector – examples from Turkey, BiH Establishment of skills observatories Scaling up VET programmes should be based on monitoring ( ideally tracing) mechanism Scope for replicating – e.g. FYRoM

Policy implications of the greening of the economy Coordinate environmental, economic and social concerns in national development policies Coordinate investments in jobs and skills, improve flexibility (life-long learning) Better match skill supply to labour market requirements Specific training and expanding opportunities for disadvantaged groups Transforming informal pre-green jobs (e.g. in waste management) into formal, decent green jobs – addressing multiple challenges in Serbia Raise awareness and link it with skills development

A suggestion: OMC for the region Creating new instruments for exchange of information, policy ideas and best practices inspired by the EU OMC at the regional level Mutual learning programme (peer reviews) SEE employment and social policy observatory Joint policy platforms for policymakers (Eurpopean Semester light?)