Work Incentives for Jobs for Women in Serbia Johannes Koettl and Olga Kupets Belgrade November 16, 2015

How to Increase Female Employment in Serbia? Women prefer jobs with protection –Wage employment –Formal jobs –Public sector jobs Women in Serbia are missing out on part-time work –Relatively low compared to European countries, but women might prefer to some extent part-time work, because of care duties Few formal jobs that give protection and flexibility exist in Serbia –Unpaid family work, some own-account work: gives protection (family) and flexibility (own-account work), but not good jobs Lack of formal part-time jobs in Serbia –Role of labor taxation

In what kind of jobs are women employed? 3 Women prefer wage employment, in public sector and with contract Source: SORS on-line databank, based on LFS in Q2 2015

In what kind of jobs are women employed? 4 Women are overrepresented in health and social work activities, education, financial and insurance activities, trade and other service activities Source: SORS on-line databank, based on LFS in Q2 2015

Women in Serbia missing out on part-time work Title of Presentation5 Source: Eurostat and SORS

Few formal part-time jobs exist in Serbia 6 There is a lack of formal part-time jobs. Unpaid family work and own-account work are currently the most viable options for many women in Serbia Source: Authors’ calculations, based on LFS in April 2013

Majority of unemployed would take any job regardless of working hours, but women are more likely than men to accept part-time work 7 Source: Authors’ calculations, based on LFS in April 2013

Barriers to formal part-time jobs Title of Presentation8 Labor taxation Relatively high on low-wage earners (including part-time) Minimum social security contribution Design of social benefits Does not encourage accepting formal work (Other potential barriers) Minimum wage Labor code Business start-up regulations Capital and services for business start-ups Childcare services for mothers

Source: World Bank based on OECD Tax and Benefit Models. Labor taxes are less progressive than elsewhere, penalizing low wage earners (incl part-time)

Serbia: Part-time work at minimum wage is unviable 10 Negative net income Half-time job at minimum wage

Labor taxation reform Title of Presentation11 Issue is that social security contributions are not adjusted by actual hours worked  Effectively closes a whole segment of the formal labor market, for low-paying (that is, part-time) jobs  All other countries in the region have reformed this, with little fiscal consequences, but fiscal impact needs to be carefully assessed

Social financial assistance reform Title of Presentation12 Not only taxes provide work disincentives, also social financial assistance Right now, about 8 to 10 percent of population is on social assistance The problem: for every dinar earned you lose a dinar in social assistance  Why work?  Why declare work?

Having a job is not increasing income—even for a full time job at minimum wage! Title of Presentation13

Social financial assistance reform Title of Presentation14 Option 1: Phased withdrawal of benefit For every dinar earned, beneficiaries lose only 50 to 80 percent of benefit  Relatively low fiscal risk Option 2: Conditional cash transfer for formal work Conditional on having a formal job, existing beneficiaries get an additional benefit to reward work  No fiscal risk, can be financed from reduced social assistance benefits and additional revenues from social security Option 3: In-work benefit for all low-wage earners Like earned income tax credit in the US or universal credit in UK; applicable to all low-wage earners with formal jobs  Considerable fiscal risk  Again, a more detailed fiscal analysis is necessary

Conclusion Title of Presentation15 Serbia needs to unlock the potential of part-time jobs in the formal sector Especially for female employment it is a missed opportunity A reform of the minimum social security contribution is a necessary pre- condition Adjust minimum social security contribution by hours worked Also reforms of social financial assistance would help German labor market reforms in early 2000s created 2 million jobs in two years, mostly in the low-wage segment The most successful job creation program in Europe in a long time…and Germany is (partially) a transition country like Serbia!

Thank you! Johannes Koettl Senior Economist Social Protection and Labor Global Practice