REDUCING INEQUALITY FOR GREATER SOCIAL COHESION IN THE WESTERN BALKANS Mirna Jusić, Center for Social Research Analitika, Sarajevo High Level Conference on Economic and social cohesion in the Western Balkans TAIEX / European Economic and Social Committee 15 May 2018

INCOME INEQUALITY IS HIGH IN THE WESTERN BALKANS AND MAY UNDERMINE THE REGION'S PROSPERITY  Serbia and Macedonia have among the highest levels of income inequality in Europe, while Croatia has had moderate to low income inequality (EU-SILC) Limited sources of income data for BiH, Albania and Kosovo for different years also suggest high income inequality 

INCOME INEQUALITY in WESTERN BALKANS Figure 1. Gini coefficients of equivalized disposable income, 2010-2016 Estimates of income inequality for other countries: Albania (2012): 38.1 BiH (2015): 41.4 Kosovo (2010): 39.5 Sources: UNDP Kosovo Remittance Study; Extended HBS for BiH; LSMS for Albania Source: EU-SILC data, Eurostat

LABOR MARKETS ARE A MAJOR CULPRIT OF INEQUALITY Weak labor market performance: high unemployment, low activity and employment;.   Unequal chances for quality employment for youth, women, Roma and persons with disabilities   Vulnerable and informal employment contribute to income inequality.

Unemployment Rates Figure 2. General (15+ SEE, 15-74 EU), youth (15-24) unemployment rates, 2016, % of labor force Source: SEE Jobs Gateway/Eurostat

TAX AND TRANSFER SYSTEMS DO LITTLE TO REDUCE INEQUALITY Tax systems in the SEE region are insufficiently progressive and redistributive as to lower inequality.  Social transfers in the region tend to be meagre and cover only a small segment of the population. 

Impacts of social protection Figure 3. Impact of social protection on poverty and inequality reduction, poorest quintile Source: World Bank ASPIRE database

LACK OF ACCESS TO QUALITY EDUCATION INCREASES INEQUALITY OF OPPORTUNITY AND OUTCOME Pupils and students do not have access to education on an equal basis in SEE: Lack of access for students with disabilities, of Roma background, students from poor households, and those residing in rural areas.  Students’ low proficiency on OECD’s PISA exam results (2012, 2015) suggest subpar quality of education in a number of countries in the region. Young people’s inability to access quality education may lead to social exclusion. 

Tertiary education completion rates by level of wealth Figure 4. Tertiary education completion rates by level of student wealth, at least 2 years of education Source: World Inequality Database on Education

SOCIOECONOMIC REFORMS IN THE REGION FAIL TO TACKLE INEQUALITY Despite inequality’s great repercussions, governments in the Western Balkans region have neglected economic inequality in their socioeconomic reforms. Labor market policies of deregulation and flexibility have increased precarious work and done little to lower unemployment. Social safety nets have continuously been eroded through fiscal consolidation efforts.

CURBING INEQUALITY FOR SOCIAL COHESION: WAYS FORWARD A truly ‘reinforced social dimension’ needs to be promoted, along with principles inherent to recent­ly proclaimed European Pillar of Social Rights Given inequality’s multidimensional nature, piecemeal reforms or interventions will not suffice; rather, combined responses in the realms of education, employment, taxation and social policy are needed

FRAMEWORK RECOMMENDATIONS In the labor market realm: strengthening so­cial dialogue and collective bargaining mecha­nisms for better working conditions and qual­ity jobs; extending the coverage and generosity of income security schemes; improving active labor market policy design, coverage, and tar­geting towards hard-to-employ groups; and strengthening capacities of public employ­ment services. In the taxation realm: increasing the progres­sivity of personal income tax and lowering the tax burden on low-wage earners to encourage their transition from inactivity or informal to formal employment; introducing various ‘make work pay’ schemes; and stepping up efforts to curb tax avoidance and evasion to improve governments’ ability to fund important public services.

FRAMEWORK RECOMMENDATIONS In the social protection realm: move towards more universal entitlements, with greater cov­erage and more generous social transfers to protect individuals against social risks; dein­stitutionalization and the expansion of social services; better family and work reconcili­ation policies. In the education realm: greater investment in early childhood education; comprehensive measures to increase access to all levels of education for disadvantaged students; in­creasing the quality of education systems for easier education-to-work transitions and bet­ter integration in society.