Persistently high unemployment and low employment rates present a serious concern for
policy makers in Montenegro. Unemployment in the Western Balkans has been historically high
and increased significantly during the global economic crisis. In Montenegro, the unemployment rate
increased from 16.8 percent at the beginning of 2008 to a peak of 20.5 percent by the end of 2009
(Figure 1). It has remained largely unchanged since then. Among the unemployed, most have been
unemployed for more than 12 months.1 Employment rates continue to be very low in Montenegro
with just about 40 percent of the working-age population in gainful employment (Figure 2). As a
result, pressure on social safety nets (SSNs)2
has increased at a time when fiscal resources to provide
support to the poor and vulnerable are more limited. There is now a more urgent need to assess the
effectiveness of social protection spending and to reform social programs so they can respond to
crises more flexibly while also increasing incentive compatibility and promoting employment of
those excluded from the labor market.