Workforce leaving, economy suffering – Serbia in search of a solution

Behind the rapid economic growth lie deep structural issues within the labour market. Income inequality, an outflow of the workforce abroad, and a lack of skilled workers are increasingly threatening the sustainability of growth and the position of domestic employers.

According to the March 2025 Macroeconomic Analyses and Trends report, Serbia recorded a real GDP growth of 3.9% in 2024, making it the fastest-growing economy in Europe after Malta. The average net salary in December last year was 108,312 dinars (around €926), surpassing the previously set target of €900.

However, as Dragan Aleksić, professor at the Faculty of Economics in Belgrade, warns, these macroeconomic figures conceal a range of problems. “Half of all employees earn less than three-quarters of the average salary. As a result, significant wage inequality indicates that a large part of the population cannot maintain a satisfactory standard of living based on work income alone. This brings us to one of the major shortcomings of Serbia’s labour market, which is clearly visible in the statistics – high inequality,” he says.

This inequality is particularly apparent at the regional level, he adds.

“For example, the average net salary in the Stari Grad municipality in Belgrade is 183,120 dinars, while in Vranjska Banja it is 73,083 dinars,” Aleksić told Bloomberg Adria.

Workforce outflow and seasonal jobs – a double blow to the market

One of the most pressing issues facing Serbia’s labour market is the seasonal outflow of workers abroad, confirms Tatjana Vidaković from the company Infostud. “The impact is significant and very negative. It is most felt in trade and sales, service sectors, hospitality, and even the IT industry,” she says.

“The labour shortage is especially evident in areas such as construction, tourism, hospitality, and all skilled trades,” she adds in her conversation with Bloomberg Adria.

According to her, during the summer months, most Serbian workers go abroad for seasonal jobs, particularly to the Adriatic coast in Croatia and Montenegro. “It is estimated that Croatia needs 65,000 workers, and Montenegro around 20,000, especially in tourism and hospitality,” says Vidaković.

She states that the most in-demand roles are chefs, head cooks, kitchen assistants, grill masters, pastry chefs, and housekeepers. “The number of applications for seasonal jobs abroad is constantly increasing,” she notes. Over the past two years, there has been a significant rise compared to 2022, the year following the decline of the coronavirus pandemic. The number of applications for jobs abroad, across all categories, during the peak season from April to October 2024 has nearly doubled compared to 2023.

Labour market – less seasonal work, but still unstable

On the other hand, Professor Dragan Aleksić notes that some indicators of the labour market have shown visible improvement in recent years. “Although still far from the levels seen in EU countries, Serbia has significantly narrowed the gap in recent times,” Aleksić says. “For example, in 2015 the employment rate gap for the working-age population (15–64 years) was 12.5 percentage points in favour of the EU average, while by 2024 this had decreased to just over five percentage points,” he adds.

He highlights that data from the Central Registry of Compulsory Social Insurance (CROSO), used to track formal employment, show a continuous increase in the number of employees in formal employment and a reduction in the number of workers employed outside formal contracts.

“Similar findings are evident in the Labour Force Survey, which also confirms a reduction in informal employment. Data from this source also show that the most secure type of employment – permanent job contracts – has increased by around 120,000 in the last four years, while fixed-term employment has decreased by around 43,000,” he says.

Employment patterns changing, but challenges remain – Serbia’s labour market at a crossroads

In the same period, he adds, a decline was also recorded in the two most vulnerable forms of employment – seasonal workers fell from 34,000 to 23,000, and those engaged in temporary and occasional jobs from 46,000 to 42,000.

Serbia works more than the EU

Still, behind these positive numbers lies a more complex picture. “What is rarely mentioned, but also evident from the statistics, is that people in Serbia work significantly more than those in EU countries,” says Aleksić.

“In 2023, the average number of usual weekly working hours in Serbia was 42.5, compared to just under 37 in the EU,” he adds.

According to him, this suggests a much higher prevalence of overtime work in Serbia. “What cannot be seen in the statistics, but is evident from research on worker conditions in the textile and processing industries, is that this overtime work is often unpaid. Other individual accounts also point to various violations of workers’ rights,” emphasises Dragan Aleksić.

Demographics – a quiet but decisive factor

The Serbian labour market is further complicated by unfavourable demographic trends. Every year, around 125,000 people retire, while only 65,000 young people enter the labour market. Aleksić notes that the decline in unemployment is largely the result of this 60,000-person gap, rather than of large-scale employment.

“It’s nearly impossible to find drivers, bakers, tilers, sheet metal workers, or most construction trades. Some of these profiles are already being brought in from abroad, while the rest are quickly employed,” Aleksić told Bloomberg Adria.

Labour market gaps – trades, transport, and construction

Data from Infostud confirm that in 2024, the most in-demand positions were those requiring secondary vocational education: administrative staff, cleaners, sales representatives, waiters, warehouse workers, chefs, shop assistants, production workers, call centre operators, and drivers.

“These roles highlight the importance of sectors that support everyday business operations and ensure their smooth running, and there is a year-round shortage of workers in these occupations,” says Tatjana Vidaković for Bloomberg Adria.

“If a position requires several years of experience or specialised skills, it becomes even harder to find suitable employees,” she adds.

Solutions – tax reform and active measures

Professor Aleksić stresses that “a reform of labour taxation is a key systemic measure that would improve both employment levels and the quality of working conditions”.

“In Serbia, the rate of tax and contributions on wages does not vary according to income level. Except for a minimal progressiveness provided by the non-taxable portion of income, the system is essentially proportional. As a result, employing low-paid workers becomes unprofitable for both employers and employees,” says Aleksić.

This, he emphasises, incentivises people to make various arrangements to avoid paying taxes – ranging from completely informal employment to being officially registered at minimum wage and receiving the remainder in cash.

“The introduction of a progressive system in which the tax rate increases with salary would ease the burden on the lowest incomes and make work more financially worthwhile. Such a reform would further increase employment,” he says.

Considering the current state of the labour market – with more workers leaving than entering each year – if the government does not implement structural reforms to reduce the gap between labour supply and demand, primarily through tax reform and active employment policy, Serbia may face a scenario in which economic growth fails to translate into social progress.

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