Since its independence, Kosovo has made remarkable progress in increasing the well-being of its citizens. Despite a narrow productive base, Kosovo had the highest economic growth in the region over the period 2015‑19. Kosovo has also made important steps towards institution building. As a result, living standards have improved. To continue building a socially cohesive society through labour market and social protection, this chapter puts forward key policy priorities for Kosovo. Kosovo should prioritise strengthening links between the skills formation system and labour market needs. To further increase labour market participation, especially among women and vulnerable groups, it is important to also address the existing weakness in maternity leave and provide options for paternity leave, as well as taking action against discrimination. Kosovo has a unique social protection system, with universal social pensions and last-resort income support compensating for missing social insurance mechanisms. While this has benefits in terms of coverage, the absence of financed employment-linked entitlements tends to limit worker protection and to generate adverse labour market incentives. Providing unemployment insurance, improving the functioning of the pensions system and ensuring that social assistance reaches those most in need, would improve access to adequate safety nets. In addition, Kosovo should also improve the delivery of social services.
Multi-dimensional Review of the Western Balkans
11. Fostering social cohesion in Kosovo
Abstract
Key elements of social cohesion ranked very high in Kosovo in the Initial Assessment of this Multi‑dimensional Review of the Western Balkans – health insurance and social protection, self-employment and careers, good governance and policy making, social development, and financial sustainability. A socially cohesive society is a society that creates the ability and willingness of its members to undertake collective action for the improvement of societal well-being of all its members. Building on the Initial Assessment (OECD, 2021[1]), the “From Analysis to Action” phase of the project provides suggestions to foster social cohesion in Kosovo and in other economies of the Western Balkans. The peer-learning workshops on social cohesion (Box 8.1 of Chapter 8), an integral part of the project’s second phase, served three complementary processes: to identify problems hampering social cohesion, identify key policy challenges, and put forward key policy priorities for Kosovo and for the region (Figure 11.1).
Figure 11.1. Achieving social cohesion in Kosovo and in the Western Balkans
Note: Purple = policy actions developed by peer-learning participants. Orange = policy actions suggested by the OECD.
Source: OECD peer-learning workshops.
Over the last decade, Kosovo has made remarkable progress across several dimensions of social cohesion. Despite a narrow productive base, with an average rate of 4.9% in the period 2015-19, Kosovo’s economic growth has been the highest in the Western Balkans (World Bank, 2021[2]). Kosovo has also made important steps towards institution building. As a result, living standards have improved and life satisfaction is the highest in the region: at 6.41 in 2019, it surpassed the regional average of 5.9 (Gallup, 2020[3]). Citizens of Kosovo feel comparatively safe when walking alone at night and are satisfied with their housing and the road infrastructure.
To sustain the pace of building a socially cohesive society, Kosovo must now tackle a set of important problems that remain (Figure 11.1). The 2020 unemployment rate was 25.9%, and the employment-to-population ratio amounted to 28.4%, one of the lowest in the world. At the same time, most (69.1%) unemployed persons find themselves in this state for one year or longer. Weak labour market outcomes especially affect youth and women. More than one-third of young persons (aged 15-24) were not in employment, education and training (NEET), the highest share among Western Balkan economies and 2.5 times the OECD average. At the same time, almost 80% of women were inactive in the labour market in 2019. Some ethnic communities continue to face worse outcomes than the rest of the population. The unemployment rates among Roma, Ashkali and Egyptian communities are about 90% (European Commission, 2019[4]). Social protection coverage is fragmented and comparatively low. In turn, social protection expenditure falls short of international comparisons and is not well targeted to those most in need, leaving many poor families unassisted. The low capacity of local governments, in combination with weakly-targeted intergovernmental grants to municipalities, does not provide for adequate social care.
Six priority actions have great potential to foster social cohesion in Kosovo, with strengthening the link between the labour market and skill formation being the key peer-learning priority:
Strengthen the link between the labour market and skill formation, including education and active labour market policies (ALMPs) (peer-learning priority)
Create equal opportunities for vulnerable groups to participate in the labour market
Strengthen women’s role in society by supporting their integration into the labour market
Create a more inclusive and fair social security system
Strengthen targeting and equity of social assistance
Deliver community integrated social care services
This chapter is divided into three sections. Sections 11.1 and 11.2 provide policy implications across the six policy actions through a prism of challenges specific to Kosovo. Section 11.3 provides indicators against which progress in implementing all the policy priorities for Kosovo can be measured. This chapter is complemented by the regional chapter on social cohesion (Chapter 8) by providing more specific policy options based on international practices that may be applied, albeit to a different degree, also to Kosovo.
11.1. Supporting people in Kosovo to find opportunities in the labour market
11.1.1. Strengthen the link between labour market needs and skill formation
Peer-learning participants from Kosovo selected strengthening the link between the labour market and skill formation as a key priority to bring people into the labour market and to create jobs (Box 11.1). Almost half of job seekers in Kosovo have no formal education or only primary education and could benefit from well-targeted upskilling and reskilling (Figure 11.2 – Panel A). Likewise, employers do not find the right skills among workers: 44% of firms report being constrained by the inadequately educated workforce. Skills gaps are particularly high in larger firms and foreign firms (Figure 11.2 – Panel B). High emigration is widening the skills gap, especially in the areas of information technology (IT) and medicine (European Commission, 2020[5]). Poor links between the labour market and skill formation explain the current skills gaps, both when it comes to formal level of education and the level of adult learning. Considering its income level, the economy’s performance in the Programme for International Student Assessment (PISA) is very low (Figure 2.1 of Chapter 2). About 37% of adults do not pass the very basic level of literacy tests (compared to 15% in Austria) (World Bank/WIIW, 2020[6]).
Figure 11.2. Many Kosovars with lower educational attainment find it difficult to secure employment and enterprises cannot find the needed workforce
Note: Panel B - The graphs show the share of firms that attempted to hire but reported difficulties due to applicants lacking skills or required experience. “Non-routine” jobs refer to managers, professionals and higher-level technicians, whose job descriptions usually contain “non-routine” cognitive and socioemotional tasks. This corresponds to Type A occupations in STEP methodology. “Routine jobs” refer to all other occupations, which are Type B occupations in STEP methodology. Note that although Type B occupations are mostly “routine” jobs, they can include some “non-routine” manual tasks.
Source: Panel A - Kosovo Agency of Statistics (2021[7]), Askdata (Database), https://ask.rks-gov.net; Panel B - adapted based on World Bank/WIIW (2020[6]), Western Balkans Labour Market Trends, https://wiiw.ac.at/western-balkans-labor-market-trends-2020-dlp-5300.pdf (original estimates based on the World Bank STEP Employer Surveys).
To close the current skills gap, peer-learning participants from Kosovo selected three major policy measures related to skill formation. The three measures include: adapt education programmes to focus on labour market needs; foster linkages with the labour market through ALMPs; and mobilise tools to better measure and anticipate skills needs in the labour market. Participants also identified several actions needed to start implementing the selected measures (Table 11.1 in Box 11.1).
Both vocational education and training (VET) and university education need to be modernised and better aligned with labour market needs, the first peer-learning policy measure. VET is an important branch of the education system, with around half of pupils in upper-secondary education choosing these tracks (Kosovo Agency of Statistics, 2021[7]). VET programmes, however, are not well aligned with labour market needs: an estimated 77% of VET profiles are not based on occupational standards, reflecting a large discrepancy with labour market demand (KEC, 2021[8]). Furthermore, outdated curricula and profiles do not prepare students for the workplace. Curricula in Kosovo’s VET schools have traditionally focused on subject and content knowledge rather than skills. Combined with low teaching quality and lack of opportunities for practical work-based learning, this has resulted in graduates who are ill-prepared for the job market (ETF, 2019[9]). At the university level, the key issue is that many people enrol in social sciences and very few in STEM fields (science, technology, engineering and math). At the same time, at the higher education level, there is very low commitment to scientific work among professors. For VET, peer-learning participants provided several priority actions, stressing the need to revise curricula and strengthen collaboration with the private sector, such as through work-based learning (Table 11.1).
Second, ALMPs, should be an integral part of the process in creating opportunities for people to flourish in the labour market, both as skilled employees and potential entrepreneurs. In 2020, Kosovo’s unemployment rate was 25.9%, the highest in the region (Kosovo Agency of Statistics, 2021[10]), with 71.7% of the unemployed being long-term unemployed (Figure 8.2 in Chapter 8). Likewise, many young people (aged 15-24), women and citizens from vulnerable groups – including Roma, Ashkali and Egyptians – are unemployed (Figures 8.3 and 8.7 of Chapter 8). Poor labour market integration of these groups can lead to loss of skills, hamper entrepreneurship, lead to long-term reliance on welfare assistance and emigration. The young face particularly dire situations when it comes to school-to-work transitions. Even those young that have employment often have poor quality jobs, reflected by low wages and precarious work conditions. About 60% of youth work without a contract, while 80% of those with a contract are temporarily employed (World Bank, 2020[11]).
Current strategic documents show labour market integration of vulnerable groups as one of the key priorities in Kosovo; a more comprehensive and better co-ordinated implementation of ALMPs would be required to address labour market challenges. The key strategy document is the Sector Strategy on Employment and Social Welfare 2018-2022 and its Action Plan on Increasing Youth Employment 2018-2020 (World Bank, 2020[11]). On average, only 8.5% of the registered unemployed participate in ALMPs, although the share of unemployed youth participating is higher (about 23%) (Table 8.3 of Chapter 8). Kosovo has a relatively large number of ALMPs; however, they tend to be fragmented across different institutions, are small in scale and depend on donor funding. At the same time, while the key institution for the implementation is the Employment Agency, the implementation of various measures is often very limited due to budgetary constraints. With EUR 6.6 million (0.09% of GDP) (Rizvanolli, Gashi and Joshua, 2019[12]), spending on ALMPs is very low compared with the OECD average of 0.42% (World Bank, 2019[13]).
Further, effective implementation of ALMPs requires adequate capacities within the Employment Agency, especially in working with the private sector. High workload limits the effectiveness of the Employment Agency: the ratio of job seekers to counsellors is about 770:1, one of the highest client-to-staff ratio in the region (Table 8.4 of Chapter 8). The ratio remains high against international benchmarks such as Slovenia (137:1) (Chapter 8). Given the lack of resources, the Employment Agency is not in the position to set ambitious goals. Considering there were about 84 000 long-term unemployed persons in 2019 (World Bank/WIIW, 2021[14]), a plan to reintegrate 3 000 long-term unemployed persons in the labour market through public employment and training (reform measure 18 in the Economic Reform Programme 2021-2023) (European Commission, 2021[15]) is very small. At the same time, monitoring and evaluation of ALMPs is very limited, which undermines efforts to improve ALMP effectiveness and their impact on the employability of participants (European Commission, 2021[15]). Recent evaluation shows that the Employment Agency does not sufficiently engage with the private sector for its wage subsidy programme2 when selecting participants. Of all enterprises that participated in the wage subsidy programme, only about 36% employers have actually reviewed participant CVs and only 22% interviewed candidates. This lack of engagement in selection likely limits the participants’ prospects for keeping jobs after the subsidies have been exhausted: 60% of subsidised workers stayed in the company for less than 12 months (Rizvanolli, Gashi and Joshua, 2019[12]). At the same, this implies suboptimal use of public finances.
Finally, to better align skills formation and ALMPs with labour market needs, Kosovo should mobilise tools to better measure and anticipate skills needs in the labour market. To inform policies, peer-learning participants emphasised the need to put in place mechanisms that will allow measurement and anticipation of skills needs. First, they envisaged establishing a platform to match the labour force with current and future labour market demands across different sectors. Complementarily they stressed the need to develop and implement the Skills Forecasts System. Finally, they highlighted also the need to specifically focus on measuring and anticipating ICT skills needs, given its large potential. To successfully anticipate future skills, international experience shows that two elements matter: first, it would be important to ensure broad participation of stakeholders in the process, including workers, the private sector and public administration; and second, a direct relationship between the data generated and public policy is also important (OECD, 2016[16]).
Box 11.1. Strengthen links between the labour market and skill formation
To strengthen links between the labour market and skills formation, peer-learning participants suggested several measures that would complement current policy efforts in Kosovo. More specifically, participants from Kosovo, representing the Office of the Prime Minister, the Ministry of Regional Development, the Employment Agency, and the Civil Rights Program of Kosovo, suggested three key measures (Table 11.1):
Adapt education programmes focusing on labour market needs.
Foster linkages with the labour market through ALMPs.
Develop a system to measure and anticipate skills needs in the economy.
Table 11.1. Peer-learning priorities in Kosovo
Putting the three measures into action will require several conditions including: cross-institutional collaboration (e.g. between the Ministry of Education, Science and Technology, the Ministry of Labour and Social Welfare, the Ministry of Economy, the business community, academia and others) and co‑ordination (e.g. between the Ministry of Education, Science and Technology, the Employment Agency and education institutions) on specific activities, such as developing curricula and types of training activities, and ensuring adequate budgets.
Source: OECD peer-learning workshops.
To increase the impact ALMPs in Kosovo, it is imperative to increase coverage among the most vulnerable groups, while ensuring effective placement. Although the share of registered unemployed participating in ALMPs (8.5%) in Kosovo is the highest in the region, significant scope still exists to increase coverage (Table 8.3 of Chapter 8). Substantially higher shares were seen in Croatia (22.1%), Slovak Republic (26.8%) and Hungary (71.4%) in 2016 (European Commission, 2021[17]). The share of registered unemployed young was higher at 22.9% (Table 8.3 of Chapter 8). Women represent only 35% of ALMP beneficiaries (Stanko, 2021[18]), with the low share participating likely to reflecting that only few women register as unemployed and are entitled to participate in ALMPs. Efforts to reach out to all women could be an important lever to bring them back to the labour market and create new opportunities. Although about 90% of Roma and Ashkali are estimated to be unemployed, they often do not register with the Employment Agency and are targeted through only a few measures3 (OECD, 2021[19]). Finally, placement in various ALMPs is often not very effective. Recent evaluation shows the hard-to-place categories are often placed in ALMPs that do not fit well with their previous education and training (Rizvanolli, Gashi and Joshua, 2019[12]).
Strengthening labour market institutions is also important, especially considering poor working conditions for many and high rates of informality. Average weekly working hours in formal work in Kosovo are well above regional and EU averages, the likelihood of which is increased by the fact that the majority of workers hold temporary contracts (Figure 11.4 of the Initial Assessment Report on Kosovo). About 18.1% of all formal employees work more than 50 hours per week, more than double the OECD average of 7% in 2018 (OECD, 2020[20]). In many sectors, workers do not receive financial compensation for long working hours, due to either lack of employer adherence to working contracts or lack of work contracts altogether. While low labour demand and high labour supply provide scope for such abuses, inadequately designed labour law, the weak capacity and efficiency of labour inspectorates, and the lack of trade unions, especially in the private sector, intensify the issue (Jakurti, 2020[21]). Labour inspectorates lack human and financial resources and technical equipment (inspectorates still use paper documentation for internal processes). In parallel, limited collaboration with other relevant institutions, such as tax authorities, leads to uncoordinated and extensive visits to businesses, which raises the cost of operating formally (World Bank, 2017[22]). Finally, occupational safety should also be improved. With 6 fatal accidents per 100 000 employees in 2018,4 Kosovo surpasses some other benchmark economies such as Croatia (1.8 in 2015), the Slovak Republic (1.7 in 2014) and Greece (1.3 in 2014).5
11.1.2. Create equal opportunities for vulnerable groups to participate in the labour market
In its efforts to create a socially cohesive society for all, Kosovo needs to create equal conditions for labour market participation for all, while paying particular attention to vulnerable groups including Roma, Ashkali and Egyptians. Although population estimates vary significantly, as many as 2.1% of the Kosovo population could be Roma, Ashkali and Egyptian (ILO, 2017[23]).6 Many members of the Roma and Ashkali communities, in particular, live in poverty and trail behind the rest of the population in many ways (European Commission, 2020[24]). Only 13% of Roma participated in employment in comparison to 20% of non-Roma neighbours in Kosovo, the lowest rate in the region. The Ashkali community also faces poor labour market outcomes: 16% of the community has been registered as unemployed (compared with 19% of Roma) (Huibregtse, 2018[25]). Those with employment often work in the informal sector and low-skilled jobs, characterised by high insecurity and low status (European Commission, 2020[24]). Both groups are also left behind in terms of other dimensions of well-being, including low health coverage, poor access to education, and limited access to public services and infrastructure (Robayo-Abril and Millan, 2019[26]; European Commission, 2020[24]).
Ensuring better opportunities to obtain high quality education is one of the key levers for creating employment opportunities for Roma, Ashkali and Egyptians. In 2017, only 68.1% of Roma, Ashkali and Egyptian children entered primary school compared with 91.6% of the overall population. At the upper-secondary level, only 30.3% or Roma and Ashkali attended education, compared with 82% of the overall population. Significant dropout rates are also seen in these communities (Huibregtse, 2018[25]). Non-attendance and dropout from school are also due to high prevalence of poverty among these communities, with some children being required to support their families by earning income. Child labour (5-17 years) is more prevalent (16.6%) among Roma, Ashkali and Egyptian communities than in the overall population (10.7%) (ILO, 2017[23]). Roma, Ashkali and Egyptian community members also lag in terms of education outcomes, with lower literacy rates for both women (73%) and men (87%), compared with 98% of the overall population (Huibregtse, 2018[25]). A significant number of young persons (15-24) do not participate in employment, education and training – 78% of Roma, in comparison to 47% of non- Roma neighbours and 27% of the general population (Robayo-Abril and Millan, 2019[26]).
Kosovo is making efforts to improve educational outcomes for the Roma, Ashkali and Egyptians, but remains dependent on donor initiatives due to lack of funding. Enrolment rates in universities for students from the Roma, Ashkali and Egyptian communities have increased steadily in recent years. Learning centres, often established and funded by donors, have contributed to higher enrolment and lower dropout rates from compulsory education (European Commission, 2020[24]).
11.1.3. Further strengthen women’s role in society by supporting their integration into the labour market
Considering the large gender gap, creating conditions across all sectors for equal labour market participation between women and men can contribute toward higher economic growth and greater social cohesion in Kosovo. Women’s employment outcomes lag significantly behind international benchmarks (Figure 8.4 of Chapter 8). At 20.8% in 2020, Kosovo has one the lowest rate of women’s labour market participation in the world (Table 8.6 of Chapter 8). Given the low labour market participation, only 14.6% women receive pensions (Government of Kosovo, 2020[27]). While the gender pay gap (10.5% in 2017) is below the EU average (12.9%), considerable variation exists between education levels. For persons with no or primary education, the unadjusted gender pay gap stood at 24% (Government of Kosovo, 2020[27]).
Addressing weaknesses in maternity leave and improving options for paternity leave would be an important step forward. A survey among men and women in Kosovo found that about one-third of respondents blame maternity leave as the main reason for discrimination of women in the labour market (Morina and Delibashzade, 2017[28]). Moreover, the fact that employers have to fully finance the maternity leave for the six months of leave, acts as a disincentive to employ women of child-bearing age (Garcia Martinez and Cucchi, 2017[29]; European Commission, 2019[4]).
Increasing options for childcare can unleash space for women to join the labour market. Limited care facilities for both the elderly and children act as an additional barrier to women participating in the labour market. In 2017/18, only 4% of Kosovar children aged 0 to 5 attended public preschool education, including kindergartens and nurseries (World Bank, 2017[22]; Thaçi, Rraci and Bajrami, 2018[30]). Likewise, given Kosovo’s poor performance in the recent OECD Programme for International Student Assessment (PISA), investing in early childhood education and care (ECEC) can improve performance at later stages. A new law on ECEC is in preparation, which aims (among others) to facilitate the licensing of pre-school facilities other than public, particularly through community-based and public-private partnerships (PPPs) (Haxhikadrija, 2019[31]).
Improving reproductive health services and the availability of contraception can further increase women’s labour market participation by reducing the number of unwanted pregnancies. Women in Kosovo have limited access to reproductive healthcare services and are often unaware of the availability of such services. In a survey on health by the Kosovo Women’s Network, only 35% reported knowing that Main Family Medicine Centres provided reproductive health services. Use of modern contraceptives remains low: only 11% of women reported usage. Likewise, 82% of respondents had never had a doctor or nurse explain a family planning method to them (Farnsworth, Goebbels and Ajeti, 2016[32]).
Cultural norms also play a role in women’s low labour market participation and could be addressed through awareness raising, both in the education sector and among the general public. Traditional gender roles in Kosovo assign the responsibility for care roles in the family, attending the needs of their children and completing household chores almost exclusively to women (World Bank/Ministry of Labour and Social Welfare/Public Employment Agency of Kosovo, 2018[33]; UNICEF, 2017[34]). A survey found that about half of respondents state women’s care responsibilities for children and elderly in the family as the key reason for their labour market inactivity, while 30% named the lack of employment opportunities. Additionally, 60% of respondents agreed that women face discrimination in the labour market, with more than 40% of them blaming patriarchal mind-sets for such discrimination (Morina and Delibashzade, 2017[28]).
Improving property rights and ownership also matters for improving conditions for women to engage in the labour market and potentially become entrepreneurs. Only 7% of businesses in Kosovo are owned by women, substantially lower than the regional average of 32% in 2019 (World Bank, 2019[35]). Women’s access to finance is limited in Kosovo: only 15% of women business owners have used commercial bank loans (Stanko, 2021[18]). Lack of property ownership by women is among the underlying factors. Only 8% of women owned real estate and land in 2014, which they would need as collateral in order to make their businesses grow over time. Despite equal property rights of men and women by law, women are found to often lose their inheritance for the benefit of their brothers (UNICEF, 2017[34]). Property ownership of women is even less common in rural areas (World Bank/Ministry of Labour and Social Welfare/Public Employment Agency of Kosovo, 2018[33]).
To address gender gaps, Kosovo should build on progress to promote, enforce and monitor equality and non-discrimination based on sex. The government has placed women’s integration in the labour market high on the economy’s agenda, both as part of its Strategy on Employment and Social Welfare 2018-2022 and as a priority area for the recently established Employment Agency. Likewise, a legal framework for women’s rights is in place (Law on Protection from Discrimination).
11.2. Building effective, inclusive and financially sustainable social protection in Kosovo
11.2.1. Creating a more inclusive and fair social security system in Kosovo
Closing the gaps in the social security system, in terms of both unemployment and health insurance, can provide better social protection to Kosovars in time of need. First, Kosovo has no unemployment insurance scheme in place;7 financial support for the unemployed is mainly provided by the last-resort income support Social Assistance Scheme (Section 11.2.2). Without publicly available health insurance, citizens bear an estimated 40% of total healthcare costs out-of-pocket, compared to an average of 13% in the OECD (Kosovo Women’s Network, 2016[36]; World Bank, 2021[2]).
Kosovo has a solid pension system in place, yet proper incentives are required to ensure its appropriate functioning and financial sustainability. Kosovo currently has a three-pillar pension system, which has important advantages in terms of implementation, coverage and transparency.8 In 2018, the existing system was supplemented by an ex-contributory pension scheme for those who could prove they had contributed over 15 years to the former Yugoslav pay-as-you-go system. It sets a minimum contributory pension of EUR 158, which constitutes 44% of the average net wage (World Bank, 2018[37]). Despite having a solid pension design, lack of private savings and overreliance on government revenues to finance pension expenditure is affecting pension adequacy and – in the absence of major reforms – might jeopardise its long-term financial sustainability. Currently, pensions rely mostly on Pillar I, which is government funded: 95% of all pensions come from government revenues (Mustafa, 2021[38]). Contributions to Pillar II make up 10% of gross wages (Mustafa and Haxhikadrija, 2019[39]). Given the low employment rates in Kosovo, the majority of citizens do not save under Pillar II (Mustafa, 2021[38]).
Plans to reform social protection in Kosovo by introducing a Social Insurance Fund and Health Insurance Fund are a subject of continued discussion. A 2019 concept note proposed the introduction of a Social Insurance Fund aimed to provide a full reform of the pension system, work disability, sick leave and unemployment insurance (Mustafa and Haxhikadrija, 2019[39]). The reform would shift the current financing of social protection expenditure towards contributions paid by the employed and employers.9 Details about the reform approach by the new government remain open (Gashi, 2021[40]). Likewise, the highly anticipated Health Insurance Fund (created by the Law on Health Insurance adopted in 2014 (Republic of Kosovo, 2014[41])) needs to be implemented and sustainably financed, as it includes important steps towards universal access. The envisaged Health Insurance Fund would be financed by contributions of 3.5% of gross wages paid by employees and employers (Mustafa and Haxhikadrija, 2019[39]). Several potential drawbacks are noted. First, it may increase the tax wedge; second, given Kosovo’s high unemployment rates, it is unclear how much can be raised through contributions; and third, a large share of the unemployed and those who work informally would not be covered through such a scheme (Gashi, 2021[40]).
11.2.2. Strengthen targeting and equity of social assistance for those most in need
Social assistance in Kosovo should ensure better equity by better prioritising persons in need. The three main programs of social assistance in Kosovo are the Social Assistance Scheme (SAS), a universal basic pension and a status-based war veteran’s pension (Table 8.A.3 of Chapter 8). In 2016, veteran-related benefits (1.6% of GDP) received larger expenditure than the means-targeted social assistance scheme (0.48% of GDP) (World Bank, 2018[37]), limiting the poverty-reduction impact of social assistance spending.
Kosovo’s SAS, a key poverty-reduction scheme, could increase its impact on poverty reduction by reassessing its current categorical exclusion criteria, which are likely to exclude many poor persons and create disincentives for work. Despite 18% of persons in Kosovo living in poverty in 2017 (Haxhikadrija, 2020[42]), only 6% of persons were receiving social assistance (European Commission, 2020[5]), the only programme aiming specifically to protect against poverty, and only about 35% of households in the poorest income quintile were receiving SAS (Haxhikadrija, 2020[43]). At 11.7%, the effectiveness of social transfers in reducing the at-risk-of-poverty rate in Kosovo was very low, compared with an EU average of 33.2% in 2018 (Government of Kosovo, 2019[44]).The categorical eligibility criteria – such as land ownership, size of dwelling, household composition (e.g. youngest child is younger than five),10 income from other sources (including basic pensions), and having more than one family member able to work – should be reassessed, as they often exclude persons in need. The latter (i.e. when a second family member becomes able to work, for example because he/she reaches 18 years of age) may act as an disincentive to work, as the family no longer qualifies for SAS unless one of the able-bodied members of the household seeks dependent status (for example by obtaining diasability certification). Likewise, even low-paid formal work renders the family of the working individual ineligible for SAS (World Bank, 2019[45]).
Complementarily, a basic pension has been an important tool of old-age poverty alleviation in Kosovo. The universal basic pension provides every citizen over 65 years old residing in Kosovo with a benefit of EUR 100 per month, which translates into an adequacy of 97.2% of the at-risk-of-poverty threshold. This renders the basic pension a more generous social transfer than the SAS (Table 8.A.3 of Chapter 8). At 2.43% of GDP in 2020, spending on the basic pension was more than double that of SAS funding (IMF, 2021[46]). For families who qualify for SAS, when calculating benefit levels, the amount given will be reduced by excluding any individual recipients of basic pension from the family size (World Bank, 2019[45]).
To improve equity of the SAS, it would be important to contain growth in spending on status groups. War veteran’s pensions, in contrast, cover 165.2% of the poverty threshold. War veterans receive pensions regardless of age and employment status (Table 8.A.3 of Chapter 8); in 2020, pensions were granted to 38 156 persons. In reaction to increased spending on war-related benefits in recent years, veteran pensions have been the subject of reform attempts. A cap on spending of 0.7% of GDP (introduced in 2016) has been unsuccessful given the continued high expenditure of 1.1% of GDP on them in 2020 (IMF, 2021[46]).
Reform plans in Kosovo aim to further promote inclusion into the labour market while reducing poverty. Reforming the SAS has been subject to a concept note in 2019, which envisages three main changes: removing the strict categorical eligibility criteria; introducing a new poverty test that would include all observable income and household members; and applying an equivalence scale to give more weight to larger households (Gashi, 2021[40]). With these changes, the expected impact of SAS on poverty reduction is estimated to be 29.4% (up from 11.7% currently). The number of beneficiaries would increase from 106 416 to 167 766 (Haxhikadrija, 2020[42]). Also, by allowing SAS beneficiaries to gain income for a limited period of time, while being encouraged to look for work, disincentives to work would be removed (Haxhikadrija, 2020[42]). Reform of the SAS is one of the aims listed in the Government Programme 2021-2025; the impacts of its implementation remain to be seen (Gashi, 2021[40]).
11.2.3. Deliver social services through a community integrated approach
Establishing community-integrated social services is one of the key regional policy priorities that emerged from the peer-learning workshops. As indicated in Chapter 8, community-integrated social services encompasses a range of approaches and methods for achieving greater co-ordination and effectiveness among different services, such as elderly care, healthcare, education and others, with the objective to achieve improved outcomes for services users.11 During the OECD peer-learning workshop, participants stressed the importance of community-integrated social services as a key lever to strengthen social protection, deliver social care services and reduce long-term dependency on social welfare through better labour market integration.
To create an integrated approach, it would be important to target local government spending more strategically. The Law on Local Self-Government (2008) assigns to municipalities full and exclusive competencies for providing social services locally (Surdulli and Kelmendi, 2021[47]). In line with the competencies transfer, the Ministry of Labour and Social Welfare financing for social services is supported through a general grant for each municipality. Local government revenues represent 28.8% of total public revenues in 2019, which is high compared with the region (Figure 8.14 of Chapter 8). However, in contrast to health and education spending, where funding is based on factors such population size, age, number of staff and care centres, no specific financial formula exists for social service delivery to be allocated to the municipalities; this limits provision of social services in Kosovo (Shehu et al., 2018[48]).
Improving capacities of local stakeholders and providing better population data can improve delivery of social services. The Centres for Social Work offer mainly services for cases of violence in the family and to place orphaned and abandoned children in families. Services to the sick and disabled are managed by NGOs. Yet, social services are of poor quality – or even absent – in some municipalities, with smaller ones struggling more to allocate funds to services (Mustafa and Haxhikadrija, 2019[39]). Many municipalities also lack accurate data on population, which negatively impacts planning and implementation of activities (Mehmeti, 2018[49]).
Completing the decentralisation of social services in Kosovo through the adoption of the Law on Social and Family Services and the Law on Local Government Finance, and by ensuring their subsequent implementation, can create supportive conditions for a community-integrated approach. First, the draft of the Law on Social and Family Services, which provides clear assignment of roles and responsibilities between central and municipal level, has not been finalised and submitted for adoption. At the same time, clarity is needed on the approach to deliver new social services, including their management, contracting, reporting, monitoring and communication. Second, the draft of the Law on Local Government Finance envisages establishing a Specific Grant for Social Services, which will also include administrative instructions for distribution of the funding. Survey findings indicate that Centres for Social Work will require capacity building in budget planning and management, if funding will be disbursed to them directly (Surdulli and Kelmendi, 2021[47]).12
The creation of the Social Registry may help improve co-ordination among all actors. Co-ordination between social services and Employment services is currently a challenge, hampering efforts to create community-integrated approach to social services. The Social Registry, which is currently being developed is planning to link education, health services, social services and employment services (Haxhikadrija, 2020[42]).
11.3. Indicators to monitor the overall policy progress in Kosovo
To monitor policy progress in improving labour market integration of vulnerable groups and addressing other policy priorities in Kosovo, the OECD suggests a set of key indicators. These are set out in Table 11.2 which includes values for Kosovo and benchmark countries (either the OECD or the EU average, based on data availability).
Table 11.2. Indicators to monitor progress in implementing policy in Kosovo
2019, unless otherwise specified
Note: *2020, **2018 ***2017, ****2016. The benchmark values are based on the current OECD averages, with the following exceptions: In-work at-risk-of-poverty rate (%) for which the benchmark value is based on the EU average; Caseloads (number of jobseekers) of public employment service (PES) staff and Persons above retirement age receiving a pension (% of persons above retirement age) for which the benchmark value is based on Slovenia; and ALMP participants (% of registered unemployed) for which the benchmark value is based on Hungary.
Source: World Bank (2021[2]), World Development Indicators (database), https://databank.worldbank.org/source/world-development-indicators; ILO (2021[50]), ILOStat (database), https://ilostat.ilo.org/data/; CPESSEC (2019[51]), Centre of Public Employment Services of Southeast European Countries, https://www.docdroid.net/qvBC3jr/statisticki-bilten-br-9-cpessec-finalno-converted-pdf; RCC (2021[52]) Regional Cooperation Council, https://www.rcc.int/download/docs/Study-on-Youth-Employment-in-the%20Western-Balkans-08072021.pdf/7464a4c82ee558440dfbea2e23028483.pdf; Jahja Lubishtani (2018[53]), The Effectiveness of Active Labour Market Policies in Reducing Unemployment in Transition Economies, https://core.ac.uk/download/pdf/226765796.pdf; World Bank (2018[54]), Functional Reviews of the Public Employment Services in the Western Balkans, https://openknowledge.worldbank.org/bitstream/handle/10986/35656/Functional-Reviews-of-the-Public-Employment-Services-in-the-Western-Balkans-Overview.pdf?sequence=1&isAllowed=y; European Commission (2016[55]), Assessment Report on PES Capacity, https://ec.europa.eu/social/BlobServlet?docId=16967&langId=en; OECD (2021[19]), Competitiveness in South East Europe 2021: A Policy Outlook, https://doi.org/10.1787/dcbc2ea9-en; Kosovo Agency of Statistics (2021[56]), Kosovo Agency of Statistics (database), https://ask.rks-gov.net/en/kosovo-agency-of-statistics; World Bank/WIIW (2021[14]), SEE Jobs Gateway (database), https://data.wiiw.ac.at/seejobsgateway-q.html.
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Notes
← 1. On a scale of 0-10.
← 2. Wage subsidy stipulates the signing of an employment contract of at least 12 months between the employer and the subsidised worker, although the actual subsidy is of shorter duration (Rizvanolli, Gashi and Joshua, 2019[12]).
← 3. Some targeted programmes are offered in the field of adult learning, such as “Literacy for women and girls” for Roma, Ashkali and Egyptian communities (OECD, 2021[19]).
← 4. Calculation based on European Commission fatal accidents data (European Commission, 2019[4]) and SEE Jobs Gateway employment data (World Bank/WIIW, 2021[14]).
← 5. Calculations based on World Health Organization data (WHO, 2018[58]).
← 6. Data based on the 2011 census.
← 7. During the COVID-19 pandemic, benefits were exceptionally allocated to support the unemployed (OECD, 2021[19]).
← 8. Pillar I (Statutory pension schemes) is financed and managed by the government. Pillar II (a statutory funded scheme of individual pension savings) is managed by the Kosovo Pension Savings Trust (KPST). Pillar III comprises supplementary pension schemes.
← 9. Currently, the system is financed largely through taxes; employers and employees both pay contributions only for pensions (mandatory 5% for each).
← 10. This may exclude many poor families with school-age children and is very unique to Kosovo (World Bank, 2019[45]).
← 11. Definition from the Council of Europe (CoE, 2007[57]).
← 12. Draft Law on Local Government Finance has been in the drafting process since 2019 has not been adopted, with potential reasons for postponement being the Covid-19 pandemic and changes in government (Surdulli and Kelmendi, 2021[47]).