Albania still had the highest level of informal workers among regional EU aspirant Western Balkan economies at the end of 2016, according to a World Bank report.
The report examining labor market trends in the Western Balkans shows that the Albania’s informal employment dropped to 40 percent at the end of 2016, down from 51.3 percent in 2014, but yet remaining the region’s highest with an estimated 464,000 informal workers in 2016, the overwhelming majority of whom self-employed in the agriculture sector, but not paying voluntary social security and health insurance contributions.Informal rates among other regional competitors ranged from 18.5 percent in Macedonia which has the region’s lowest tax burden, to 22 percent in Serbia, the region’s largest economy where the total tax rate is slightly higher than Albania’s . Estimates put the share of workers in the informal sector at close to 30 percent in Bosnia and Herzegovina and about 23 percent in Kosovo and Montenegro.
The higher informality rate in Albania’s labor market is mainly a result of the agriculture which in Albania employs about half of the country’s population, more than in any regional country, but provides only a fifth of the country’s GDP, unveiling its poor productivity hampered by land being fragmented into small plots, poor credit and insufficient government support through subsidies.
Data published by INSTAT, the state-run statistical institute, shows Albania had about 464,000 people employed in the agriculture in 2016 sector where each person possessing land is considered self-employed in the sector, no matter what their income is.
However, only about 31,000 farmers were registered with tax authorities at the end of 2016, compared to about 20,000 at the end of 2015, making them eligible to retirement benefits and subsidies the Albanian government offers.
An earlier 2015 World Bank report found Albania’s informality rate in non-agricultural sectors was estimated at 48 percent, ranging from 35 percent in industry to 46 percent in services and 70 percent in the construction sector.
At 15.2 percent, Albania had the lowest unemployment among regional Western Balkan countries in 2016, but the highest stock of migrants outside the Western Balkan region at 1 million, or 36 percent of the resident population.
The report also shows Albania’s minimum wage at €160 and average monthly wages at €333 is the region’s lowest, apparently affected by the tax burden for doing business being the region’s second largest.
Albania’s total tax and contribution rate measured as a percentage of profit slightly rose by 0.4 percent to 37.3 percent in 2017, lower only compared to Serbia’s 39.7 percent but almost three times higher compared to Macedonia’s 13 percent, according to the latest World Bank Doing Business report.
An earlier study by Tirana-based Institute for Democracy and Mediation found high unemployment rates, especially among youngsters, is the key reason behind alarming levels of the shadow economy in Albania, Kosovo and Macedonia.
Whether it is a factory worker who also works as an unlicensed plumber, an electrician being paid in cash, an IT professional receiving an envelope wage, hidden salaries are the most acute concern in the three Western Balkan countries aspiring to join the EU, affecting about half of workers.
“Hidden salaries remain the most acute concern with the employment income being partially or completely undeclared for 36 percent of workers in Albania, 37 percent in Kosovo and 40 percent in Macedonia,” the study has unveiled.
Youth unemployment levels in the region range from about 30 percent in Albania, Serbia and Montenegro to about 50 percent in Bosnia and Herzegovina, Macedonia and Kosovo, leading to high levels of migration and brain drain.