Western Balkans Competitiveness Outlook 2024: North Macedonia

9. Employment policy

Abstract

Effective employment policies are crucial for forging a strong economy and fostering economic development and social inclusion. This chapter aims to assess the regulatory framework and policies governing employment and the institutional capacity for implementation. The first sub-dimension focuses on inclusive labour market governance, specifically the employment regulatory and policy framework, labour inspectorates, social dialogue and inclusive employment policies. The second sub-dimension, social protection and activation policies, analyses public employment services, mutual obligations framework, and active labour market programmes. The third sub-dimension, skills for adaptable labour markets, assesses the skills mismatches in the labour market and initiatives for developing digital and green skills. The fourth sub-dimension, expanding the skills pool, focuses on attracting highly skilled migrants and diaspora.

Key findings

North Macedonia’s overall score for employment policy has slightly declined since 2021, although it remains above the average for the region (Table 9.1). This decrease in score was largely attributable to the economy’s limited efforts toward developing a comprehensive policy framework to expand its skills pool, which was analysed for the first time in this assessment cycle. However, North Macedonia exhibited some progress in other areas, particularly in strengthening its social protection and activation policies.

Table 9.1. North Macedonia’s scores for employment policy

Dimension	Sub-dimension	2018 score	2021 score	2024 score	2024 WB6 average
Employment	8.1: Inclusive labour market governance			3.3	3.2
	8.2: Social protection and activation policies			3.7	3.1
	8.3: Skills for adaptable labour markets			3.2	2.6
	8.4: Expanding the skills pool			1.8	2.4
North Macedonia’s overall score		2.3	3.3	3.1	2.9

The key findings are:

• Recent initiatives, including the new Strategy for Gender Equality (2022-27) and a new project on developing a roadmap to support female entrepreneurship, have sought to increase women's employment rates in North Macedonia. Despite these efforts, the economy's women’s employment rate stood at 49.2% in 2022, lagging behind the EU average (67.7%) by 18.5 percentage points.

• Informality remains a persistent challenge, accounting for approximately 30% of national GDP. The economy must expand its efforts in this area, particularly through strengthened roles for labour inspectorates. The recent adoption of the new Strategy for the Formalisation of the Informal Economy (2023-25) is a step in the right direction.

• Active labour market programmes (ALMPs) in North Macedonia are relatively well developed. One notable advance has been the recent implementation of the new Youth Guarantee Implementation Plan (2023-26), which aims to increase the employability of young individuals and bring them into the economy’s labour market. However, ensuring that these programmes effectively target and engage various vulnerable or disadvantaged groups will be crucial going forward.

• Substantial improvements have been made toward promoting the development of digital skills, as evidenced by the inauguration of the “MladiHUB-Digital Youth” initiative and a voucher programme for co-financing digital skills training. However, further advances are limited by the absence of a comprehensive digital skills strategic framework.

• Inconsistent progress has been achieved toward strengthening North Macedonia’s approach toward leveraging foreign talents. While the government recently adopted the Resolution on Migration Policy (2021-25) to attract and integrate immigrants to address labour market needs, progress in aligning national legislation with the EU acquis on labour market access has remained slow. Moreover, ongoing high emigration rates of local talent exacerbate this challenge of addressing skills shortages and maintaining a highly skilled workforce.

State of play and key developments

In recent years, North Macedonia has experienced steady improvements in its employment outcomes, although relatively low activity and employment rates still characterise its labour market. In 2022, the economy’s employment rate was around 56.7%, which marked a notable increase of around six percentage points since 2017 (ILOSTAT, 2023[1]; ILO, 2019[2]). Additionally, the activity rate among individuals aged 15-64 reached 66.2% in 2022, although it remained the second lowest among the six Western Balkan economies. Despite the gains, there remains a significant disparity between these figures and those observed in the EU, where employment and activity rates stood at 69.8% and 74.5%, respectively (Eurostat, 2024[3]).

Sub-dimension 8.1: Inclusive labour market governance

Since the previous assessment cycle, progress has been made toward strengthening the legal framework for employment, primarily through the planning and adopting new legislation. Namely, a new rulebook on occupational safety and health (OSH) was published in October 2022, while a consultative process for drafting a new Law on OSH was also recently launched. These changes to OSH regulations were spearheaded by the National OSH Council, an advisory body to the government that includes diverse stakeholders with relevant expertise.1 Beyond new laws, other legislation was amended. For instance, amendments to the Law on Labour Relations extended the maximum duration of work engagements for projects of national interest. They established Sunday as a day of rest for all workers. These recent changes aim to engender improvements in work hour regulations and health and safety conditions, two key areas that ensure a healthy working environment for employees.

The current regulatory framework is comprehensive, as minimum standards are established regarding working time, paid holidays, and health and safety conditions. Both standard and non-standard forms of employment are included under the employment framework. Non-standard forms of employment – including self-employment, fixed-term contracts, seasonal work, part-time work, and employment contracts involving working from home – are all incorporated into the Law on Labour Relations. The prevalence of work-from-home (or digital freelancing) has surged since the COVID-19 pandemic; between May 2020 and August 2021, the number of online freelancers per 100 000 population showed the most substantial increase in the region (Gigmetar, 2021[4]) (ETF, 2022[5]).

The policy framework for employment comprises several key documents, most notably the National Strategy on Occupational Safety and Health 2021-25 and its accompanying Action Plan. This strategy outlines the government’s overarching vision and its more specific objectives and priorities for the five-year period. Namely, the three strategic priorities are strengthening the OSH legal framework, bolstering the government’s organisational capacities and human resources, and empowering existing systems to respond to emerging threats (Ministry of Labour and Social Policy of North Macedonia, 2021[6]). There are also ongoing efforts, through the drafting of a new Law on Labour Relations, to encourage a better work-life balance among labourers through the introduction of new measures, such as introducing paternal leave and the possibility to request flexible work (part-time or remote work or adjusted hours) for workers with children up to age eight. Moreover, the new General Collective Agreement, signed in July 2023 between unions and the Ministry of Labour and Social Policy, increased employees’ right to paid leave due to personal or family circumstances from seven to ten days.

An emerging component of this policy framework has been efforts to combat informality in the economy. While informal employment has declined in recent years, it remains significant in North Macedonia, accounting for approximately 30% of GDP according to the latest government estimates (Ministry of Finance of North Macedonia, 2023[7]). As such, the government adopted its new Strategy for the Formalisation of the Informal Economy 2023-27 and an accompanying Action Plan (2023-25) in September 2023. The strategy aims to reduce the number of unregistered entities and informal activities and facilitate the integration of informal businesses and self-employed workers into the formal economy. Proposed measures include establishing an infrastructure for detecting and monitoring informal work, establishing offices to provide counselling to small businesses seeking to register and enter the formal economy, and the creation of the National Council for Coordinating the Activities and Monitoring the Implementation of the Action Plan related to the Strategy for the Formalisation of the Informal Economy (Ministry of Finance of North Macedonia, 2023[7]). Given the document’s nascent status, its impact on reducing informality has yet to be observed, although it contains performance indicators to facilitate regular monitoring and evaluation of planned activities, including the objective of reducing the informal economy to 26% of GDP by 2027.

Another objective related to countering informality is outlined in the National Employment Strategy 2021‑27, which seeks to reduce the share of workers in informal employment to 10% by the end of 2027 (ETF, 2023[8]). Apart from this strategy, there has been no progress in some policy areas that could reduce informal employment, such as alleviating the burden on the low-wage sector through social security and tax reductions. The low level of remuneration and poor conditions in some sectors and occupations can partially incentivise workers to remain in the informal economy.

While the policies guiding labour inspectorates are clearly defined in the Strategic Plan of the State Labour Inspectorate 2022-24, there have been limited efforts since 2021 to further strengthen the capacities of these entities in North Macedonia. In 2022, the 110 labour inspectorates performed a total of 24 965 inspections (16 026 for labour relations and the remaining 8 939 for OSH), resulting in 500 payment orders, 84 misdemeanour proceedings initiated, and 14 criminal complaints filed. Given that the State Labour Inspectorate only had around 102 fully active inspectors,2 each inspector was responsible for conducting an average of 247 inspections annually, reflecting a high burden placed upon this entity. No new tools or processes have been introduced to render the work of labour inspectorates more practical, nor has these inspectorates’ role been strengthened in the areas of awareness raising or prevention – although they had a stronger envisioned role in detecting and preventing informality under the new Strategy for the Formalisation of the Informal Economy 2023-27. While their inputs and outputs are monitored on a monthly, quarterly and yearly basis, no public audit has been performed on labour inspectorates’ operations and capacities. This lack of assessment means that no mechanisms exist to use results to increase personnel numbers, salaries, or training opportunities, which can limit these entities’ ability to carry out their duties.

In recent years, North Macedonia has experienced a revitalisation in collective bargaining and social dialogue. Chapters 8 and 9 of the Law on Labour Relations outline the rights of workers and employers to organise and conduct collective bargaining as well as regulate the conditions under which this process can occur. Collective bargaining takes place at both the sector and national level and has led to changes regarding wages, working time, access to training and non-standard forms of employment, underscoring the breadth of issues covered during these processes. Similarly, tripartism and social dialogue cover numerous key issues, ranging from minimum wage and pension policies to new forms of work. Tripartite social dialogue is overseen by the Economic and Social Council.

North Macedonia has undertaken several measures to strengthen performance in this area further. Firstly, the new Decent Work Programme 2023-25 includes outcomes and outputs that promote collective bargaining and social dialogue. This programme was signed by the government, trade unions, employers’ organisations, and the International Labour Organization (ILO). Moreover, signing the new General Collective Agreement in July 2023 – the first one in 15 years – represented a success in social dialogue’s ability to develop systemic solutions to promoting labour rights. Finally, given that wages are a central point for both collective bargaining and social dialogue, the repeated increases in the minimum wage may contribute positively to poverty reduction without exerting an adverse effect on employment (Nikoloski, 2022[9]). Indeed, the most recent increase in 2023 marked a 12% rise from the previous year, driven by implementing a new methodology that set the minimum net wage at MKD 20 175 (EUR 327). Yet, despite these increases to minimum wage, there are no policies or initiatives to reduce non-wage labour costs or taxes for low-wage earners, highlighting an area for further action.

Inclusive employment policies are moderately developed and underpinned by a high level of priority allocated by the government and a wide scope of potential beneficiaries. Indeed, vulnerable groups – including Roma and other ethnic minorities, people with disabilities, low-skilled workers, older jobseekers, homeless individuals, and formerly convicted persons – are all covered in respective employment policies. To ensure these policies realise their intended objectives, impact assessments for programmes targeting disadvantaged groups are conducted and revised regularly. Nevertheless, poverty and social exclusion remain a pressing issue among vulnerable groups, in particular Roma and people with disabilities. Implementation of Roma inclusion policies is found to be slow (Mojsoska-Blazevsk, 2021[10]).

Measures to improve the inclusivity of the labour market have also been heavily centred on addressing gender inequality and improving the participation of women. However, North Macedonia exhibits a gender employment gap twice as large as that of the EU, and women’s employment rates are 18.5 percentage points lower than the EU average (49.2% versus 67.7%, respectively) (Eurostat, 2023[11]). In response to such low levels of women’s employment, the Ministry of Labour and Social Policy has passed several new policies aimed at reducing gender-based discrimination in the labour market, including the Strategy for Gender Equality 2022-27 and the National Strategy for Equality and Non-Discrimination 2022-26. Moreover, there has been continued progress in monitoring gender equality – as highlighted by the publication of the second edition of the Gender Equality Index in 2022 – and in analysing barriers to employment and conducting impact assessments to reduce gender inequalities.

These initiatives have been supported by designated gender budgeting, which has been in place since 2019, although there is no specific budget assigned to the strategy for supporting the labour force participation of women. External donors also contribute financial assistance: one prominent example is the study launched in May 2023 with the support of the European Bank for Reconstruction and Development to support the development of a roadmap aimed at fostering female entrepreneurship (Pyrkalo, 2023[12]). However, persistent issues, such as insufficient access and quality of childcare services, limited flexible work options, and the lack of shared parental leave, limit further progress toward closing this gender employment gap.

A central policy in this area is the National Employment Strategy (2021-27), which identifies the key challenges, priorities, objectives and targets for improving employment policies and outcomes (Ministry of Labour and Social Policy of North Macedonia, 2021[13]). One of the three key goals is to strengthen the inclusiveness of labour market policies, with success measured through reducing the gender employment gap, the proportion of individuals experiencing long‑term unemployment, and the share of citizens at risk of poverty and social exclusion.

Sub-dimension 8.2: Social protection and activation policies

In 2023, the unemployment rate in North Macedonia was 13.2%, which was the second highest rate in the Western Balkans (World Bank, 2024[14]). Furthermore, this rate is significantly above the EU-27 average of 6.0%. The unemployment rate of young people was high, at 27.2% in 2023, which again was among the highest in the region and nearly double that of the EU (15.8%) (World Bank, 2024[15]). In 2021, North Macedonia had the highest share of long-term unemployed (meaning more than one year) among unemployed in the region (79.5% in 2021), roughly twice as high as the EU-27 average (Vienna Institute for International Economic Studies, 2024[16]).

North Macedonia boasts one of the region's most well-developed public employment services (PES), although there is still substantial scope to strengthen its capacities and activities. In June 2022, 112 733 jobseekers were registered with North Macedonia’s PES, the Employment Services Agency (ESA), a figure that remains higher than pre-pandemic levels recorded in 2019. It is important to note that this number likely underestimates the number of unemployed individuals in the economy; particularly, individuals from vulnerable groups may be less likely to register. Yet, even only accounting for registered jobsekeers, this figure significantly exceeds the number of registered vacancies (9 130 as of June 2022) (Republic of North Macedonia State Statistical Office, 2024[17]). Nevertheless, the number of registered vacancies has been increasing over the past years; these must be registered with the ESA.

Apart from overseeing the registration of jobseekers and vacancies, the ESA offers a host of services, ranging from counselling for unemployed individuals (including intensive support for vulnerable groups) to providing outreach activities and recruitment services to employers. With respect to counselling services, the first interview for registered jobseekers usually aims to briefly gather key information, and subsequent sessions will help develop an individual action plan. Individuals who are judged to have “major employability problems” are identified and offered more tailored, intensive services (ETF, 2023[8]). A total of 65 552 persons benefited from employment services provided by the ESA in 2022.

Given the importance of the ESA to the labour market of North Macedonia, initiatives to increase its capacity are vital. Yet, its capacities remain weak given the level and structure of unemployment with a high share of vulnerable groups. There is a relatively high caseload for PES counsellors, with a ratio of one staff member to every 1 226 beneficiaries (ETF, 2023[8]). Moreover, there are persistent challenges arising from limited government funding as well as insufficient investment in IT infrastructure (although there has been some progress in digitalising employment services). No progress can be recorded in performance management or in assessing PES functioning, complicating efforts to gauge the impact of such obstacles on their effectiveness.

In recent years, no changes have been made to North Macedonia’s unemployment benefit system. Rights to benefits are defined by the Law on Employment and Insurance in Case of Unemployment; eligibility is contingent on proving an individual is actively searching (which can be demonstrated through participating in active labour market programmes, regularly re-registering with the ESA, or attending arranged interviews), and they cannot decline suitable offers. Active jobseekers are eligible to receive benefits equivalent to 50% of their average wage over the past 24 months; after 12 months, the benefit decreases to 40% of this net wage. Only 4% of registered jobseekers received unemployment benefits in 2022,3 one of the lowest levels among the Western Balkan economies. Part of the reason for this low level of coverage might be attributable to the relatively restrictive eligibility conditions. Recipients of unemployment benefits must prove that they have completed at least nine months of continuous work (or twelve months with breaks) in the previous eighteen months – a condition that excludes first-time jobseekers or long-term unemployed individuals (Mojsoska-Blazevsk, 2021[10]).

The framework for social assistance is less generous. The base minimum assistance (guaranteed minimum income, or GMI) for one household member is MKD 4 000 (EUR 65) per month; for each additional household member, different coefficients are applied depending on the number or specific circumstances of these individuals.4 Unlike unemployment benefits, the amount does not decline over time, which could potentially discourage looking for work. Similar to those receiving unemployment benefits, beneficiaries of social assistance must accept any suitable job offer or risk facing sanctions if they are registered as unemployed with the ESA. Additionally, they are advised to develop an individual employment plan and, for their first three years, participate in employment services provided by the ESA.

The design and implementation of active labour market programmes (ALMPs) in North Macedonia are relatively advanced compared to other Western Balkan economies, although there is potential to enhance their use and impact. ALMPs largely target the relevant vulnerable groups, although a notable exclusion is older workers, who have higher inactivity rates than other age groups. As such, there is an opportunity for ALMPs to engage this demographic to prevent early exit from the labour market, which could better use the available labour force as the economy struggles with emigration and an ageing workforce. Conversely, while little attention is paid to older jobseekers, there is a substantial focus of ALMPs on combating youth unemployment. Notably, North Macedonia was the first of the WB6 economies to implement a Youth Guarantee scheme, launching its pilot programme in 2018. By 2019, the initiative was successfully implemented throughout the economy and benefited from EU funding in 2020-23. More recently, the government adopted its new Youth Guarantee Implementation Plan (2023-26), which aims to continue improving service delivery and collecting and dispersing appropriate job offers to this target population. The initiative represents a relatively ambitious effort to increase the employability of young individuals and bring them into the labour market (ILO, 2023[18]).

There is scope to improve the delivery of ALMPs to vulnerable groups. The ESA has set up a Roma mentoring programme to provide better information and to refer them to ALMPs. According to a 2022 report by the European Centre for Social Welfare Policy and Research, 431 Roma participated in some form of ALMPs in 2020, an increase from 251 in 2019 (Mojsoska-Blazevsk, 2021[10]). However, selected ALMPs – primarily those related to training measures and wage subsidy programmes – have undergone an impact evaluation carried out by the Regional Cooperation Council (RCC) in 2021 (Nikoloski, 2021[19]). The study found that most ALMPs were not optimally targeted and their impact varies depending on the group receiving the treatment. For example, most programmes yielded better employment prospects, but this benefit was less likely to be observed across the subset of older recipients or those experiencing long-term unemployment. Bolstering the efficacy of these programmes could lead to their broadened use: in 2022, only 11 631 individuals participated in ALMPs – with a meagre 2 300 participating in training measures (ETF, 2023[8]). Incentives to participate in training measures for vulnerable groups may not be sufficiently strong, given that individuals must (temporarily) halt their income-generating activities to participate in these programmes.5

Sub-dimension 8.3: Skills for adaptable labour markets

Regarding cultivating skills for the labour market, there is significant scope to improve skills development and adaptation in North Macedonia. In 2021, the employment rate of low-skilled workers was only 27.4%, compared to 61.1% of medium-skilled workers and 79.7% of high-skilled workers.6 In fact, most of the low-skilled working-age population does not participate in the labour market. Of this subset of the population, women are even more disadvantaged, with low-skilled women reporting an average employment rate of only 16.3% (Vienna Institute for International Economic Studies, 2024[16]). Moreover, according to the European Survey on Jobs and Skills, North Macedonia reports a low rate of participation in both school-based and workplace-based learning compared to EU levels (ETF, 2023[20]). Participants in the survey responded that their performance would likely improve given better IT and technical training, highlighting the existence of unmet needs related to continuous work-related training.

North Macedonia has made some progress in addressing skills mismatch since the last assessment. There is an institutional framework in place for co-ordinating activities between different government entities (including ministries and national agencies) and social partners to address this mismatch, including through curricula revisions. Each January, the Ministry of Labour and Social Policy hosts meetings with representatives from companies (as well as educational stakeholders) to discuss the desired educational profiles by employers and encourage student enrolment according to labour market needs. Moreover, there have been recent efforts to involve companies more closely in the curricula design for dual vocational education and training. Another instance of bolstering this co-operation has been the ongoing “Learn smart, work professionally” campaign (Box 9.1).

Box 9.1. Fostering dialogue to address skills mismatch in North Macedonia

In 2022, the government of North Macedonia launched the “Learn smart, work professionally” outreach campaign. The overarching objective of this initiative was to foster engagement between the government, employers, and secondary vocational schools in the economy to better understand the skills and qualifications that were in demand in the labour market. The most recent round of dialogue took place between February and March 2023 throughout all regions of North Macedonia. This dialogue resulted in hundreds of companies expressing their interest in hiring students for internships or practical education learning experiences.

Such an initiative, which aims to harmonise school systems with the needs of the labour market, is especially impactful in an economy like North Macedonia, which has particularly high unemployment rates. By fostering dialogue between the school systems and companies, this “Learn smart, work professionally” campaign represents a significant advance toward reducing skills mismatches across all sectors and levels of education.

Source: Adapted from the inputs collected from the Ministry of Education and Science as part of the CO 2024 assessment framework.

Apart from these efforts to strengthen collaboration between employers and the education sector, the government has undertaken several measures to promote work-based learning to reduce skills imbalances further. Students can participate in “practical educational learning” (an apprenticeship), during which they work with an employer to gain experience and cultivate skills during summer holidays. Additionally, a strategy establishing an adult learning framework was in place, although it expired in 2023; a new Adult Education Act is currently in the process of adoption. This new legislation will introduce a system of skills validation and certification, which would help to accurately assess individuals’ qualifications and enable employers to identify candidates with the specific desired skills needed for open roles.

North Macedonia stands out as one of the regional frontrunners in fostering skills for the digital transition due to its many programmes dedicated to supporting these competencies. While the economy lacks a comprehensive digital skills strategic framework, the government has started to work on the elaboration of a strategy – an aim further bolstered by North Macedonia’s participation in a regional dialogue on digital skills development through the Western Balkan Digital Skills Multi Stakeholder Working Group (ETF, 2022[5]). However, several programmes have been implemented to support the development of young people's digital skills at different education levels. One illustrative example was the “MladiHUB-Digital Youth” initiative; funded by the UK Government; the programme offers young people vouchers for digital and soft skills training courses in exchange for work in community initiatives (UKaid, 2019[21]). Another instance was a national initiative launched during the COVID-19 pandemic to provide 2 500 vouchers to young people in tertiary education to co-finance IT and digital skills training (ETF, 2022[5]). A broader example includes raising awareness about the importance of digital skills in the modern workforce, to encourage both employers and employees to prioritise upskilling. Additionally, there are studies conducted on the current and future development of employment in key ICT occupations and the IT sector.

Yet, despite these numerous measures, digital skills development among the citizens of North Macedonia remains relatively low, with only 26% of individuals possessing basic digital skills and an additional 8% with above-basic skills (Table 9.2). This is far below the EU average of 54%. Moreover, a lower share of employees in North Macedonia reported participating in digital skills training than those in the EU. According to the European Survey in Jobs and Skills, only 23% of respondents from North Macedonia reported that new digital technologies were introduced at their workplace – only slightly over one-half of EU averages (ETF, 2023[20]).

Table 9.2. Individuals with basic or above-basic overall digital skills in North Macedonia, the WB6 economies and the EU (2021)

Percentage of all individuals

	MKD	WB6	EU
Individuals with basic or above basic overall digital skills	34.6	34.8	53.9

Note: Kosovo data (used to calculate the WB6 average) were from the latest available year (2019).

Sources: Eurostat (2023[22]; 2020[23]).

Compared to digital skills, efforts to promote skills for the green transition have been much more limited in scope. Currently, no strategies or action plans outline comprehensive objectives and measures for supporting the acquisition of relevant skills or preparing workers for the green transition. The most relevant strategy is North Macedonia’s Long-term Strategy on Climate Action, published in 2021, which sets the goal of creating 10 000 “green jobs” by 2035. Other policies, such as the Industrial Strategy (2018-27) and the Strategy for Energy Development until 2040, underscore the importance of ensuring that skills match market needs, but no clear reference is made to skills for the green transition in particular (Nedanovski and Daniloska, 2022[24]). The economy has developed a Roadmap for a Just Transition that addresses the issue of the closure of coal mines and the impact on employment, indicating some preliminary efforts to mitigate the negative effects of downsizing coal mining (see Chapter 14). However, major challenges to cultivating skills for the green transition in the labour force persist due to the insufficient institutional capacity of the Ministry of Labour and Social Policy and limited knowledge regarding the importance of these skills.

Sub-dimension 8.4: Expanding the skills pool

North Macedonia's Resolution on Migration Policy (2021-25) outlines key objectives governing migration, including the management of regular and irregular migration, integration, and attracting skilled immigrants to address labour market needs (Government of North Macedonia, 2022[25]). Despite a delay due to political instability, the resolution was adopted in late 2021, and an intra-governmental co‑ordination body was established to ensure effective implementation. The lead authority in migration matters is the Ministry of Internal Affairs.

With the aim of making the most of foreign talents, the Resolution on Migration Policy envisages policies for residence, the admission of foreigners, visa regulations, and social cohesion. Indeed, improvements to the asylum system are seen as an investment in the development and recognition of skills. Despite various strategic documents in place, the adoption of a new strategy for the integration of refugees and foreigners has been pending since September 2021.

Annual disaggregated data on socio-economic indicators for both immigrants and emigrants are published on line by the State Statistical Office (Republic of North Macedonia State Statistical Office, 2024[26]). Although publications like the Migration Profile 2021 and the Migration Governance Index contain migration-related data, census data are absent, limited institutional exchange of information, and inadequate collection of data on emigration and returnees – all of which restrict access to reliable, accurate data on the extent of migration movements. To address this, North Macedonia supplements census data with information on regular and illegal entries and exits collected by the Ministry of Internal Affairs.

Progress in aligning national legislation with the EU acquis on labour market access, specifically concerning non-discrimination rules against EU workers in all sectors based on nationality, has been slow. This is evident in the case of foreign workers entering the economy who must obtain a work permit from the ESA. The issuance of various work permits aligns with annual quotas established in the Law on the Employment of Foreigners (European Commission, 2023[27]). EU citizens remain ineligible for public administration positions, and specific roles within private companies are restricted exclusively to citizens of North Macedonia. In 2022, North Macedonia granted 800 work permits to foreign workers, and an additional 334 during the first five months of 2023.

North Macedonia is actively advancing its integration with the European Network of Employment Services (EURES) and the European Labour Authority (ELA), concurrently focusing on enhancing the skills of public servants. Training activities are under way to strengthen the capacity of the Employment Service Agency, align legislation, and share best practices by EURES and ELA regulations. Given the limited number of agreements, the economy also faces the imperative to continue negotiations for bilateral agreements on social security co-ordination and healthcare insurance with EU Member States. Moreover, challenges persist in the mutual recognition of professional qualifications, attributed to the non-adoption of relevant law and pending alignment with EU directives, necessitating efforts to strengthen the institutional capacity of the Ministry of Education and Science (MoES).

With nearly 700 000 Macedonian citizens residing abroad, North Macedonia has taken significant steps in engaging its diaspora, as outlined in the National Strategy for Cooperation with the Diaspora (2019-23) (Prague Process Secretariat, 2022[28]) (Government of the Republic of North Macedonia, 2019[29]). The country has re-established the position of Minister without Portfolio in Charge of Diaspora in 2022, who has the lead on the implementation of the strategy and collaborates with the National Council on Diaspora and other key institutions (OECD, 2022[30]). While prioritising an increased political involvement and the realisation of civil as well as social rights, the strategy aims to map the diaspora, identify priorities, foster co-operation, and establish cultural and business connections. In the fields of education, science and youth, North Macedonia aims for enhanced collaboration through networking platforms, joint research projects, and educational initiatives, promoting return migration and knowledge transfers. The policy framework, which includes the National Strategy, Migration Policy Resolutions, and relevant laws, reflects a recent shift towards a dedicated diaspora engagement approach. Despite bureaucratic and political challenges in the policy-making process, the government successfully published the strategy in 2019 (Qaisrani et al., 2023[31]). However, it should be noted that the Strategy expired in 2023, and there is no available information regarding plans for a new strategy.

North Macedonia has implemented diverse initiatives to attract diaspora skills, with notable efforts from the independent think tank Macedonia2025, which focuses on economic co-operation, leadership development, and capacity building. Collaborating with the organisation United Macedonia Diaspora, Macedonia2025 organises internships for young diaspora graduates in local companies. The group also hosts the annual Macedonia2025 Summit and operates the Connect2MK online platform, linking local businesses with diaspora experts for mentorship and partnerships. In the meantime, the MoES has established the Skills Observatory, while the Ministry of Labour and Social Policy employs econometric models for skills forecasting (albeit with untapped potential). Additionally, the Bitove Entrepreneurship Programme, funded by a Macedonia2025 member, collaborates with the Canadian Executive Service Organization, offering in-depth mentorship for small and medium-sized enterprises.

Overview of implementation of Competitiveness Outlook 2021 recommendations

North Macedonia has exhibited varied progress toward implementing the recommendations of the previous CO assessment (Table 9.3). Specifically, the economy achieved more progress in further strengthening its regulatory framework guiding working conditions as well as combating the informal economy. Conversely, its advances toward monitoring the employability of graduates or investing in adult learning were much more limited.

Table 9.3. North Macedonia’s progress on past recommendations for employment policy

Competitiveness Outlook 2021 recommendations	Progress status	Level of progress
Continue improvements to working conditions, to align with the EU acquis.	Progress has been made in regulating Sunday work through amendments to the Law on Labour Relations, and the new National Strategy on Occupational Safety and Health 2021-25 has made some strides in strengthening OSH regulations for workers.	Moderate
Define and implement activities to combat informal employment.	In September 2023, the government of North Macedonia adopted a new Strategy for the Formalisation of the Informal Economy (2023-27) and an Action Plan (2023‑25). Moreover, programme inputs and outputs for combating informal employment have been monitored.	Moderate
Assess the minimum wage's impact on poverty reduction and informal employment.	While the government has not undertaken an analysis of the wage structure, a recent assessment of the impact of increasing the minimum wage has been made.	Limited
Increase employment rates among women by improving access to and coverage of high-quality childcare.	North Macedonia published the second report on measuring the Gender Equality Index. Additionally, the government adopted the Strategy for Gender Equality 2022-27 and the Action Plan for Gender Equality 2022-24. These policies are supported by a system of gender budgeting. However, women still have lower labour market activity rates and employment rates and, on average, work as unpaid family workers more often than men.	Limited
Monitor the employability of VET system graduates, differentiating between various VET streams, dual VET streams, and universities, through regular tracer studies.	The Economic Chamber of North Macedonia conducts surveys on the participation of employees in continuing training and education.	Limited
Introduce incentives to invest in adult learning.	The government of North Macedonia is currently in the process of adopting the new Adult Education Act, which will serve as the new adult learning framework. However, there have been no improvements in introducing vocational guidance for adults, nor is there a well-defined strategy for developing digital skills among adult workers.	Limited

The way forward for employment policy

Given the progress toward implementing previous recommendations, there is still significant room for North Macedonia to continue strengthening its employment policy framework and subsequently achieve improved labour market outcomes. In particular, policy makers should aim to:

• Continue to increase the capacity of labour inspectorates. Given the prevalence of unregistered workers in the economy, including in the public sector, it is crucial that labour inspectorates are adequately resourced so that they can effectively detect poor working conditions and informal employment. Moreover, labour inspectorates should expand the implementation of preventive measures, particularly against the misuse of non-standard and undeclared work. It is recommended to develop a comprehensive and publicly available monitoring system for working conditions and to analyse results to draw policy conclusions. Improved co-operation among relevant stakeholders is also crucial.

• Increase support for vulnerable groups to expand their access to the labour market. Despite the policy priority conferred by the government on improving the inclusivity of labour market policies, unemployment and poverty rates remain high among certain groups, including Roma individuals, older individuals, and those with disabilities. One potential avenue for bolstering this support is monitoring implementation of the National Strategy for Equality and Non-Discrimination (2022-26) to evaluate ongoing or unanticipated obstacles.

• Continue activities to reduce gender inequalities. Despite the progress made toward implementing targeted policies aiming to reduce the gender employment gap in North Macedonia, employment and activity rates among female workers remain much lower than for their male counterparts. One important measure is to define a specific budget to support the strategy for enhancing women's labour force participation.

• Strengthen efforts supporting developing or adapting relevant skills for the green transition. The government of North Macedonia should begin preparations for developing a strategic framework that explicitly and comprehensively addresses the context, challenges, and goals for promoting skills for the green transition in the economy, as well as an accompanying action plan and monitoring plan. This strategy should also incorporate plans for mitigating the negative employment effects of downsizing carbon-intensive sectors, such as coal mining (Box 9.2).

Box 9.2. Adapting the labour force in support of the green transition: Efforts of Estonia

Estonia’s efforts to support the green transition are most evident in terms of restructuring the carbon‑intensive economic activities of one of its counties, Ida-Viru. The government of Estonia sought to reduce – and eventually cease – all energy production from oil shale, an objective complicated by the fact that nearly 50% of Ida-Viru’s GDP came from fossil fuels. Thus, measures were designed to concurrently support the diversification of the economy away from oil shale while still protecting employment and incomes.

At a national level, the Estonian PES developed an array of mechanisms to incentivise both employees and employers to participate in this restructuring effort. Some of these measures included grants for employers transitioning from a carbon-intensive sector to a different industry; allowances for employees who worked in carbon-intensive sectors to return to school and acquire a new profession; and micro‑credential allowances for employees in the oil shale industry to obtain new qualifications.

Moreover, the European Union has pledged EUR 354 million in grants from its Just Transition Fund to support further phasing out the use of oil shale in energy production in Ida-Viru. These funds will be used to support the reskilling and upskilling of an estimated 11 000 workers and jobseekers, as well as the creation of approximately 1 100 jobs in the renewable energy sector.

Sources: Duell (2023[32]); European Commission (2022[33]).

References

[32] Duell, N. (2023), PES Support to Greening of the Labour Market, European Commission, Brussels, https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjN65jd3JGGAxUXVaQEHTOiBM0QFnoECBEQAQ&url=https%3A%2F%2Fec.europa.eu%2Fsocial%2FBlobServlet%3FdocId%3D26998%26langId%3Den&usg=AOvVaw1VHJliZaO-t7DoqJHMrlHc&opi=89978449.

[20] ETF (2023), European Skills and Jobs Survey: Statistical Profile for North Macedonia, https://www.etf.europa.eu/sites/default/files/2023-10/Statistical%20profile_MK_EN_edited.pdf (accessed on 14 March 2024).

[8] ETF (2023), Key Developments in Education, Training and Employment – North Macedonia, https://www.etf.europa.eu/sites/default/files/2023-12/Key%20policy%20developments_North%20Macedonia_2023.pdf (accessed on 14 March 2024).

[5] ETF (2022), Embracing the Digital Age: The Future of the Work in the Western Balkans, https://www.etf.europa.eu/sites/default/files/2022-07/Embracing%20the%20digital%20age.pdf (accessed on 14 March 2024).

[27] European Commission (2023), North Macedonia 2023 Report, https://neighbourhood-enlargement.ec.europa.eu/system/files/2023-11/SWD_2023_693%20North%20Macedonia%20report.pdf (accessed on 24 January 2024).

[33] European Commission (2022), EU Cohesion Policy: €354 Million for Estonia to Phase out Oil Shale in Energy Production, https://ec.europa.eu/regional_policy/whats-new/newsroom/10-10-2022-eu-cohesion-policy-eur354-million-for-estonia-to-phase-out-oil-shale-in-energy-production_en (accessed on 15 March 2024).

[3] Eurostat (2024), Labour Force Participation Rate (% of Total Population Aged 15-64), https://ec.europa.eu/eurostat/databrowser/view/tipslm60/default/table?lang=en. (accessed on 17 July 2024).

[11] Eurostat (2023), Enlargement countries - Labour Market Statistics, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Enlargement_countries_-_labour_market_statistics&oldid=627514#Employment_rates (accessed on 13 March 2024).

[22] Eurostat (2023), Individuals’ Level of Digital Skills (from 2021 onwards), https://ec.europa.eu/eurostat/databrowser/view/ISOC_SK_DSKL_I21__custom_2397093/bookmark/table?lang=en&bookmarkId=dc481686-c938-4e07-b03c-8e039f532857 (accessed on 13 March 2024).

[23] Eurostat (2020), Individuals’ Level of Digital Skills (until 2019), https://ec.europa.eu/eurostat/databrowser/product/view/isoc_sk_dskl_i?category=degurb.degurb_isoc.du_isoc_sk.du_isoc_sku (accessed on 23 April 2024).

[4] Gigmetar (2021), Gig Workers in the Region, http://gigmetar.publicpolicy.rs/en/region5-2/ (accessed on 17 July 2024).

[25] Government of North Macedonia (2022), Review of the Implementation Status of the Global Compact for Migration (GCM) in the Republic of North Macedonia, https://migrationnetwork.un.org/system/files/docs/North%20Macedonia%20-%20Voluntary%20GCM%20Review.pdf (accessed on 14 March 2024).

[29] Government of the Republic of North Macedonia (2019), National Strategy of teh Republic of North macedonia for Cooperation with the Diaspora 2019-2023, https://north-macedonia.iom.int/sites/g/files/tmzbdl2301/files/documents/2023-02/National%20Strategy%20of%20the%20Republic%20of%20North%20Macedonia%20for%20cooperation%20with%20the%20diaspora%202019-2023_0.pdf.

[18] ILO (2023), Decent Work Country Programme 2023-2025: North Macedonia, https://www.ilo.org/wcmsp5/groups/public/---europe/---ro-geneva/---sro-budapest/documents/genericdocument/wcms_887216.pdf (accessed on 15 March 2024).

[2] ILO (2019), Decent Work Country Programme 2019-2022: North Macedonia, https://www.ilo.org/wcmsp5/groups/public/---ed_mas/---program/documents/genericdocument/wcms_679165.pdf (accessed on 15 March 2024).

[1] ILOSTAT (2023), Country profiles: North Macedonia, https://ilostat.ilo.org/data/country-profiles/ (accessed on 15 March 2024).

[7] Ministry of Finance of North Macedonia (2023), Systematically Tackling Informal Economy, https://finance.gov.mk/2023/11/04/systemically-tackling-informal-economy/?lang=en (accessed on 14 March 2024).

[13] Ministry of Labour and Social Policy of North Macedonia (2021), National Employment Strategy 2021-2027 with Employment Action Plan 2021-2023, https://www.mtsp.gov.mk/content/pdf/2021/trud/strategija_vrabotuvanje_2021_eng.pdf.

[6] Ministry of Labour and Social Policy of North Macedonia (2021), Strategy for Safety and Health at Work, https://www.mtsp.gov.mk/content/pdf/bzr/New%20node/Strategija%20BZR%202021-2025%20sl%20(12.2021).pdf.

[10] Mojsoska-Blazevsk, N. (2021), Performance of Western Balkan Economies regarding the European Pillar of Social Rights: 2021 Review on North Macedonia, Regional Cooperation Council, https://www.esap.online/docs/153/performance-of-western-balkan-economies-regarding-the-european-pillar-of-social-rights-2021-review-on-north-macedonia (accessed on 14 March 2024).

[24] Nedanovski, P. and N. Daniloska (2022), Analysis of the Green Skills Situation in the Republic of North Macedonia, UNICEF, https://www.unicef.org/northmacedonia/reports/analysis-green-skills-situation-republic-north-macedonia (accessed on 15 March 2024).

[9] Nikoloski, D. (2022), “What are the effects of the minimum wage on employment in North Macedonia?”, Economics and Business, Vol. 280/281, https://ekonomijaibiznis.mk/ControlPanel/AdminControls/jscripts/tiny_mce/FileManager/Funcations.aspxupload/Ekonomija/minimaln%20plata%2001%202022.pdf (accessed on 14 March 2024).

[19] Nikoloski, D. (2021), Impact Assessment of the Active Labour Market Measures in North Macedonia, Regional Cooperation Council, Sarajevo, https://www.esap.online/download/docs/Impact-assessment-of%20the-active-labour-market-measures-North-Macedonia.pdf/5a502e7b867089f6912db00a77570aba.pdf.

[30] OECD (2022), Labour Migration in the Western Balkans:, https://www.oecd.org/south-east-europe/programme/labourmigrationinthewesternbalkans-page.htm (accessed on 8 March 2023).

[28] Prague Process Secretariat (2022), North Macedonia, https://north-macedonia.iom.int/sites/g/files/tmzbdl2301/files/documents/2023-02/National%20Strategy%20of%20the%20Republic%20of%20North%20Macedonia%20for%20cooperation%20with%20the%20diaspora%202019-2023_0.pdf (accessed on 14 March 2024).

[12] Pyrkalo, S. (2023), Roadmap to Support Female Entrepreneurship Launched in North Macedonia, European Bank for Reconstruction and Development, https://www.ebrd.com/news/2023/roadmap-to-support-female-entrepreneurship-launched-in-north-macedonia.html (accessed on 15 March 2024).

[31] Qaisrani, A. et al. (2023), Study of the Diasporas’ Contributions to the Socio-Economic Development in the Western Balkans, International Centre for Migration Policy Development, Vienna, https://www.icmpd.org/file/download/59589/file/ECONDIAS_Comparative-report_FINAL.pdf (accessed on 15 March 2024).

[17] Republic of North Macedonia State Statistical Office (2024), Announcement: Vacancies, https://www.stat.gov.mk/PrethodniSoopstenijaOblast.aspx?id=112&rbrObl=14 (accessed on 17 July 2024).

[26] Republic of North Macedonia State Statistical Office (2024), Homepage, https://www.stat.gov.mk/Default_en.aspx. (accessed on 17 July 2024).

[21] UKaid (2019), MladiHUB-Digital Youth, https://masit.org.mk/wp-content/uploads/2019/11/one-pager-mladihab-project-nmsm-eng.pdf.

[16] Vienna Institute for International Economic Studies (2024), The Jobs Gateway in South Eastern Europe, https://data.wiiw.ac.at/seejobsgateway.html (accessed on 13 March 2024).

[14] World Bank (2024), Unemployment, total (% of Total Labor Force) (Modeled ILO Estimate) - North Macedonia, https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=MK (accessed on 26 April 2024).

[15] World Bank (2024), Unemployment, Youth Total (% of Total Labor Force Ages 15-24) (Modeled ILO Estimate) - North Macedonia, European Union, https://data.worldbank.org/indicator/SL.UEM.1524.ZS?locations=MK-EU (accessed on 26 April 2024).

Notes

← 1.  These stakeholders include trade unions, employers’ organisations, government institutions, professional associations, and universities with OSH-related programmes.

← 2.  As of June 2023, there were 131 inspectors employed by the State Labour Inspectorate. However, 29 of these 131 inspectors either did not own a licence or did not perform inspection supervision.

← 3.  For more details, see: https://av.gov.mk/korisnici-na-prava2.nspx.

← 4.  For additional household members, the coefficients are 0.5 for the second member, 0.4 for the third and fourth members, and 0.2 for the fifth member. The base amount increases by 0.1 for each child member of the household. Pregnant single women and single parents also receive increased assistance (0.5) for a specific duration. Finally, individuals who cannot work due to disabilities or health conditions receive increased coefficients for up to three household members (by 0.5, 0.2, and 0.2, respectively).

← 5.  Views were shared during a fact-finding mission.

← 6.  The International Standard Classification of Education (ISCED) determines skill level. Low‑skilled workers fall between ISCED 0 and 2, obtaining a maximum of lower secondary education. Medium-skilled workers constitute those with either ISCED 3 (upper secondary education) or ISCED 4 (post-secondary non-tertiary education). Finally, high-skilled workers must have completed either a short-cycle tertiary education (ISCED 5) or a bachelor’s degree or above.