The former Yugoslav Republic (FYR) of Macedonia has since 1991 been going through a difficult
period of transition from a command to a market economy. This process has resulted in high
unemployment rates and increasing levels of poverty. Despite significant progress in macroeconomic
stabilisation and the process of privatisation, which is almost complete, job creation has been limited
while changes in the sectoral structure of employment and labour reallocation from less to more
productive jobs have been modest. Foreign and local investment, with the exception of the textile and
steel industries, has been low due to the high level of political instability in the country and in the
Balkans in general.
Even when allowance is made for possible inaccuracies in the official data on FYR Macedonia,
unemployment is extremely high (37.1% in 2003), and the employment rate extremely low (38.5% in
2003) by EU standards. Young people present higher unemployment levels than average (1.7 times
more in 2003) and experience a difficult transition from education to work, often passing through
precarious types of employment (including informal sector activities). The gender gap in
unemployment has disappeared over time although participation of women in the labour market has
been declining. Regional disparities in unemployment remain pronounced. Note that the State
Statistical Office’s Labour Force Survey (LFS) data show lower unemployment than administrative
sources (registered unemployment). This can be explained by the incentive for some inactive and
informal economy workers to register as unemployed in order to be eligible for free (state-provided)
health care, when they do not have other means of entitlement.
Despite some year-to-year variation, the level of employment has been essentially static over the
medium term. Given the positive trend in the working-age population, this has led to an ongoing fall in
the employment rate. Projections about the near future (next five years) predict further demographic
pressure on the labour market that should be addressed by more job creation if employment levels
are not to fall further.
The low employment rate is also a reason for the low participation rate, especially among women
from ethnic minorities. Low rural/rural or urban/urban labour mobility has been recorded in many
studies on the labour market in FYR Macedonia, which further adds to local skill mismatches and
affects the unemployment rate.