Acta Universitatis Danubius. Œconomica, Vol 12, No 4 (2016)

Labour Market Trends in Transition Economies

with Emphasis on Gender Inequalities

Theranda Beqiri¹

Abstract: Main purpose of this research paper is to show the recent trends of labour market issues regarding gender inequality in the countries that are still in the transition to the market oriented economy. Transition to competition has effected in increasing the level of unemployment to economically active population, with the higher consequence for females than for males, from which some females have left labour market and they became inactive in job searching. In this paper we analyze and compare gender gaps through the main components of labour market trends as level of education, active participation in labour market, occupational segregation, employment and unemployment for both genders of the countries that are still in transition like Albania, FYR of Macedonia and Kosovo in comparison with EU countries. Given that closer are these countries in joining the EU; higher are the requirements for increasing the level of employment targets and in approving and implementing social policies on gender equality in labour market according to the EU legislations. Methodology used in this paper is through case studies by using secondary data from the most recent labour force surveys (LFS) of transition countries in South East Europe and comparing them with the EU targets. Also regarding occupational segregation by gender the Duncan & Duncan Index is calculated. The study shows that depending on the stages that countries are in transition earlier or latter, the labour market components regarding gender are more comparable and closer with the targets of the EU countries, and that occupational segregation is higher in the transition countries where the unemployment level of females is in the higher range.

Keywords: Labour Market; Gender Equality; Transition; employment; unemployment

JEL Classification: J16; J7; E24

1. Introduction

Research and exploring labour market is a subject that is important for each economy in general. Gender inequality in labour market is still present in EU countries, although gender gaps are narrowing in most of the countries, but this issue is more evident in the economies that are still in transition. This research paper is mainly important, since there are just a few analyses of the gender issues in labour market in countries that are still in transition in Europe.

On an equity basis, gender equality in labour market is important for sustainable growth and appropriate use of the human capital. This is a reason why exploring gender inequalities in labour market are important, especially in transition countries where labour markets, have experienced major changes.

Labour markets with the changes and the higher competition in transition process has effected in increasing the level of unemployment to economically active population. This has had higher consequence for women than men, from which some have left the labour market. Since, gender gaps are not always a consequence of discrimination in labour market the aim of this paper is to analyze and compare the main components as level of education, active participation in labour market, occupational segregation, employment, and unemployment for both genders in some of the SEE countries that are still in transition. Albania, FYR of Macedonia and Kosovo, are the transition countries that have been selected for this research, these countries have different macroeconomic policies, but they have the same targets as policies to create new jobs and creating more sustainable labour market. Since, closer the countries are in joining the EU, higher are the requests for approving and implementing social policies and employment policies. Which also include equal opportunities for men and women, and also coordination of social security schemes and other policies. Labour market is a very dynamic issue since it is dependent on different factors that have a direct influence in it like; competition, investments, economic development, competition in human capital and the activity of labour force. Therefore we can say that labour market is very dynamic and information’s that reaches the labour market often are not available so we can say that sometimes the information’s are asymmetric. Given that labour market is not dependent only from supply and demand of the human capital but also from: legislation, employment policies, development policies, system of education and so on.

The transition to the market economy, determines changes of using human capital from both genders. From the high level of employment in the previous system, unemployment reached very high level in the early stages of transition, with women being more affected than men by employment cuts. Also women previously had high participation rates in full time employment in exclusively formal labour market in which the state was primary, and often the only employer, which has been replaced by a broader mix of more flexible employment opportunities (Casez & Nesporova, 2002). The situation at the beginning of the transition process reflected the past system unemployed prevailed men counterparts mostly because industry enterprises, where many women worked as a secondary workers were closed or transformed. In view of the fact that most of the women, before the transition were employed in the secondary sectors they had less trainings on the job therefore it was more difficult for them to find jobs when the transition started.

It is well known that care-giving and household work has been disproportionately allocated to women while men have specialized in “productive activities”. In most societies and economic systems, the rewards to the men far exceed those to women. In addition, the returns to men’s “productive activities” have historically been higher than those of women’s, worldwide (Paci, 2002).

The persistence of gender disadvantage is the evidence that females even though if they increased the level of their participation in paid job, it is not accompanied by the gender participation in the unpaid job in the caring activities of the family. (Kabeer, 2012).

Transition period puts countries in front of a lot of challenges, it imposes the need to invest in human capital, increasing the efficiency of human resources, which also sets the need for professionals, and greater level of education for labour forces, which is considered as the vital part of the economies oriented to competition and labour.

This paper will also aim to demonstrate that like every part of economy that has the influence in economic development; decrease in gender inequality in labour market will have a positive effect in the economy. Since this an important part of economy and income, and especially where formal economy is limited, and system of social protection is very low. Labour market, creating of new jobs and gender inequality should be treated with special interest during the whole time in order to have stability in the economy.

2. Literature Review

Gary Becker (1957; 1971) is given credit for being the first economist to think about labour market discrimination in a systematic way. Becker assumed that minority workers (women, blacks, etc.) and majority workers (white men) are equally productive.

He hypothesized that labour market discrimination is based on personal prejudice, or “tastes”. Therefore, the only reason that a profit-maximizing employer would treat equals unequally is if he, the other employees, or the customers dislike members of the minority group.

Human capital theory links occupations and wages to lifetime labour force participation and the division of labour within the family, thus the effect of lower lifetime labour force participation and intermittency is to lower gains from human capital investment. Hence, individuals expecting labour force intermittency will choose occupations in which penalty or depreciation or human capital is lowest (Polachek, 2004; Polachek, 1999).

Neoclassical non-competitive theories are the ones that are more used to explain discrimination in labour market By using non-competitive theories we can explain gender gaps in most of the transition economies, in which unemployment is a greater problem than gender wage gaps since the competitive theories do not explain the persistence of the minority group discrimination, non-competitive approaches have become more popular. Non-competitive models use monopsony problem in to the problem of discrimination. A monopolist is able to pay wages below the competitive level, since monopolist are not threatened by lower cost non-discriminatory firms penetrating their markets, hence they can exercise discriminatory prejudices without any constraint. The lack of alternative employment opportunities potentially also gives monopsony the ability to “wage discriminate” that is to pay each individual their reservation wage. If women have greater immobility compared to men, than they may also have higher search costs due to poorer contacts with the informal networks providing labour market information, subsequently they maybe more subject to monopsony power (Adnett, 1998). Alternative approach which explains a permanent gap in inter group outcomes, begins with weaknesses of competitive forces assuming that the firm’s labour market policies are independent of market conditions where “insiders” can resist competition of job by “outsiders”. Non-competitive group theory was advanced by W. Arthur Lewis (1979) and initially explained by Darity and Mason (2004); Lewis starts with an inter-group challenge in the positions of hierarchal occupational structure.

Early stages of transition from the centralized economy in the open economy brought also the recession and redistribution of jobs and capital; therefore there was a high level of unemployment, from their very low level before the transition in the double digits in most of the transition countries. Nevertheless what is surprising is that the level of unemployment did not decrease in later stages of transition although they had a high increase of economic development with attracting Foreign Direct Investments and higher integration of the economy (Mynih dhe Svejnar, 2007). Another explanation might be that with the lack of convergence of unemployment, is that qualified and unqualified person’s response differently when there is a very huge change in their labour market such as transition to the market oriented economy. When there are such considerable changes employers with the lower skills as there were females in transition countries, have lower possibility for mobility for job search therefore they have more chances to leave the labour market, while for the qualified persons opportunity costs for leaving the labour market is higher therefore they work or continue searching for jobs . This gives the higher consequence and disproportion on the unskilled workers and females, which also have their outcome in unemployment (Jurajda & Terrell, 2009). According to Boeri et al. (1998) regional disparities in the level of regional unemployment exist in all the countries that go through transition. While according to (Vanhala, 2009) most of the countries in Europe have low changes in unemployment rates, therefore than they provide greater increase and persistence in unemployment

3. Gender Labour Gaps in Transition Countries and Comparison with EU

Gender gaps in employment, unemployment, wages and in representation are specifics that are also aim of the countries that are in European Union, and they are part of the requirements for the countries that are planning to be part of the European Union. One important issue is the decision made at the Lisbon’s summit held in June 2000 where EU governments declared that they will aim to reach an employment rate target of 70% by the year 2010. Hence, by reaching that target maybe the gender employment gap will be narrowed even further. According to statistics from Eurostat from the labour force survey’s (LFS) the level of employment of women was 58.2% compared to 70,1% men , during this 10 years the level of employment of women increased for approximately 7 %, so the level of unemployment decreased but it did not reach the Lisbon summit target. The new Strategy for Europe 2020 regarding labour is encouraging its members to make measures for the three main targets in the EU;

• “75 % of people aged 20 to 64 to be in work”;

• “rates of early school leaving to reduce below 10 %, and for at least 40 % of 30 to 34-year-olds to have completed a tertiary education”;

• “At least 20 million fewer people to be in or at-risk-of-poverty and social exclusion”.

The European Strategy for a smart, sustainable and inclusive growth (Europe-2020) aims to reach 75 % the employment rate target for both genders for the EU as a whole².

As we can see gender inequality in labour market is still an issue also in the western economies. Even though different trends of gender inequality: employment, unemployment and pay gaps have variation between different countries in the EU, some have a higher level of equality some are still far below the targets set. Since gender gaps are not always a consequence of discrimination in labour market the aim of this research paper is to analyze and compare the main components as level of active participation, level of unemployment and occupational segregation, for both genders in countries that are still in transition in South East Europe such as; Albania, Kosovo and FYR of Macedonia.

3.1. Labour Market Participation in Transition Countries, Comparison with EU

The starting point when we want to analyze the labour market is the level of activity of the working age population in the country, and the level of participation of both genders. As part of the enlargement process in the EU all of the future candidates are trying to modify and adapt their legislation according to the EU legislation. Nevertheless there are some differences regarding gender in the indicators between the EU countries and countries that are still in transition. In most of the transition countries participation of females was very high before transition, and have declined in the early stages of transition. According to international standards, level of activity of the labour force in some countries that are still in transition and part of our research is very low, which can contribute to a lower level of employment and very high level of unemployment. As we can see form the table below activity rate of females in transition countries is very low in comparison with EU countries. According to the data for 2013 in EU the level of participation for EU countries was 65,5 percent for females and 77,9 percent for males, whereas in Albania according to the latest labour force survey (LFS) the rate of participation is 72,2 percent for males and 51,3 percent for females. Therefore it results for approximately 15 percent difference of participation for females. The difference is even higher if we compare FYRoM and especially Kosovo with EU countries , there is a difference in female participation of 20 percent for FYRoM and for more than 40 percent for female participation in Kosovo which is in the level of only 21,4 percent. Although, also the level of participation of males is low according to the EU standards for Kosovo with around 15 percent difference.

Table 1. Level of participation in labour force by gender, transition countries and EU

Source: Eurostat 2013, and LFS 2014 Kosovo, Albania, FYRoM.

The stage in which the countries are in the transition process early or late influences also the indicators of the labour market, as we can see Albania and FYRoM have considerable improvement in labour force participation in general and also divided by gender in their labour market. If we compare Kosovo, with the other two countries of the region the level of participation of females is much lower even though the transition started later in Kosovo than in the other regional countries, this results are very low and they should be the main focus of consideration from the local government and policy makers.

In FYRoM according to some recent research conducted, one of the reasons of low participation of population in labour market is the remittances inflow, this can also be one of the reasons of low participation of active population in labor market in Kosovo since the level of remittances is high here as well. One other reason is the low level of education especially in the rural areas, lack of the skills that are needed for the job search in the labour market. In Kosovo the population is the youngest in Europe, which can also be one of the reasons of low participation in labour market since they might be still participating in education. Also the evidence shows that most of the unemployed persons are unemployed for more than a year, which is very present in all of the three countries, and which leads to discouragement of labour market participants and job searching.

3.2. Unemployment Level in Transition Countries and Comparison with EU

Unemployment is usually persistent and it continues process. Possibility of keeping in control unemployment from the governments in each country is important since it reflects directly in sustainability and development of the economy. In urban areas usually the level of unemployment is lower than in rural areas. The studies that have been done until now show that the main reason is the mobility issues of the labour force, and high prices of transport.

According to the table 2, below level of unemployment differs from one country to another, but is still much higher in transition countries than the average of the EU countries for both genders. In EU countries the level of unemployment is 10,5 percent for males and 10,7 percent for males , in Albania we have higher level of unemployment for males with 19,7 percent and 15,5 percent for females , from this results we can say that Albania has been a lot of improvement regarding gender issues in unemployment . While in Kosovo the level of unemployment is much higher for females with the level of 41,6 percent and 33,6 percent for males, which is much higher than EU countries and also in comparison with Albania . In FYRoM we have similar results as in Albania with males having higher level of unemployment than females, those results we can say that are comparable with some of the EU countries.

If we refer to some earlier studies for Kosovo (Riinvest, 2003; Hoti, 2003). There are two indicators that influence in opposite sides the level of unemployment in Kosovo, a high level of young population and therefore high level of inflows in labour market, and high level of emigration. First issue has the impact on increasing the level of unemployment, the other decreases the level of unemployment. As we can see from the data of 2014 more then 10 years after the conclusion of these studies, pressure was much higher with labour inflows than it was with the level of emigration.

Table 2. Level of unemployment divided by gender, EU & Transition countries

Source: Eurostat 2014, and LFS 2014 Kosovo, Albania, FYRoM.

According to the World Bank indicators there are just a few countries in the world that have the level of unemployment higher than 25 percent, and from the table 2 above we can see that Kosovo is one of them.

Groups that are mostly influenced from unemployment in Kosovo are persons with no education which consist of approximately 60 percent of the unemployed, and the lowest level is for persons which have university degree with almost 15 percent. Education improves the chances of getting a job especially for females since the level of unemployed females with the university education was 20 percent and for females with no education is more than 68 percent. In Kosovo It is also very important to address related issues to education, since the unskilled females have the higher level of unemployment, therefore there is a need for the vocational trainings in developing skills matching the market needs (Beira, 2014). In Albania the highest level of unemployment is for persons with secondary education.

In FYRoM the highest level of unemployment is for persons who finished professional secondary education following for persons with only primary education, it is interesting that females with tertiary education have much higher levels of unemployment compared to males. (Women and Men, 2014).

3.3. Level of Employment in Transition Countries, Comparison with EU

Employment is also one of the main indicators of sustainability and growth in general which is also linked with educational system and the skills that are needed in the labour market. If we compare the level of total employment and the level of education in Eu with transition countries from the latest data we have as follows:

In EU countries employment by the level of education with university degree were 83,4 percent and with secondary education 52,1 percent.

In FYRoM the level of employment for persons with tertiary education is 71,4 percent compared to 35,4 percent for persons that have secondary or primary education .

In Kosovo the highest level of the people employed is with secondary professional education with 42,5 percent and with tertiary education approximately 25 percent.

In Albania we have only cumulative data which might not be comparable, but if we use those data the highest level of employed persons is with secondary education.

If we compare the EU countries with transition countries in South East Europe, from the table 3 below, Albania is most comparable with the average of the EU countries with the difference in the level of employment of females of 15 percent, followed by FYRoM with the difference of 25 percent, while Kosovo has the lowest level of employment for females of only 12,5 percent. Some of the reasons are very low participation rate which than might have a consequence on a very low employment especially for Kosovo.

Table 3. Level of employment divided by gender, transition countries and EU 1

Source: Eurostat 2014, and LFS 2014 Kosovo, Albania, FYRoM

In Albania employees with paid wages are 42 percent of the employees, the others are self employed and also employees without a pay that work for family are around 35 percent from which the higher percentage is those of females, by having 1.8 higher chances to be employed in the family without a pay compared to males. This indicates that it is a high level of informal employment in Albania. Also in FYRoM from the study of the World Bank (2008) there is a higher level of informal economy, and there are a lot of workers which work without any contractual agreement. From those there is a higher possibility for males to work in their own unregistered firms and females are mostly employed in agriculture without a payment.

In Kosovo there is a similar level of informal economy where females are mostly employed in the microbusineses as sales personnel without contracts and with minimal wage.

4. Occupational Segregation in Transition Countries

Occupational segregation is also an important indicator that reflects the gender gaps in labour market. Also in the transition countries as in the western economies females are more concentrated in the professions that have the lower payment. Mainly its role is regarding gender inequality in wages, because it reduces chances for female workers to aspire for the jobs that are in the higher range in labor market (Beqiri & Selimi, 2015). In Albania females are more concentrated agriculture and trade services, public administration and health workers are mostly occupied by females. In FYRoM females are concentrated in agriculture health and caring activities but In Albania employees with paid wages are 42 percent of the employees, the others are self employed and also employees without a pay that work for family are around 35 percent from which the higher percentage is those of females, by having 1.8 higher chances to be employed in the family without a pay compared to males. This indicates that it is a high level of informal employment in Albania. Also in FYRoM from the study of World Bank (2008) there is a higher level of informal economy, and there are a lot of workers which work without any contractual agreement. From those there is a higher possibility for males to work in their own unregistered firms and females are mostly employed in agriculture without a payment.

In Kosovo also informal economy is present, where females are mostly employed in the microbusineses as sales personnel without contracts and with minimal wage.

4.1. Duncun & Duncun Index of Gender Occupational Segregation

Occupational segregation is also an important indicator that reflects gender gaps in labour market. Also in the transition countries as in the western economies females are more concentrated in the professions that have the lower payment. In Albania females are more concentrated agriculture and trade services, public administration and health workers are mostly occupied by females.

In FYRoM females are concentrated in agriculture health and caring activities

Duncan and Duncan index of segregation (St) is defined as:

, where;

Where M i and Fi is the proportion of males or females employed in profession I.

When i = 0, There is no segregation in that job category M_i =F_i when i = 1 means that there is a total segregation in each professions, and when M_i >0, and F_i = 0 and there are segregations in those professions and vice versa. M_i and F_i are the percentages of persons in a group Males or Females that are working in that job category i.

Table 4. Duncun & Duncun Index of occupational segregation FYRoM, Kosovo and Albania

Source: Calculations by Author³

From the table 4, above we can see that occupational segregation by gender is highest in Kosovo, where 49 percent of the females should change their professions in order to have the equally distributed professions among males and females followed by FYRoM where 37 percent of females should change their professions and in Albania approximately 30 percent of females should change their professions to have equally distributed professions among males and females.

5. Conclusions

Research and exploring gender inequalities in labour market in transition economies is the main subject of this research paper. Transition to market economy, has influenced the labour market outcomes with the high unemployment and increase of informal market which has had their influence in the gender inequality. We find that the level of participation of females in the labour market in the transition countries is very low according to international standards and especially if we compare them with the average in EU countries. The lowest participation rate of females in labour market is in Kosovo with only 21, 4 percent participation rate followed by FYRoM with 45 percent participation rate and Albania with 51 percent participation rate compared with an EU average of 65 percent. The reasons for low participation might be the discouragement from job searching since most of the unemployed is long-term unemployed, employment in informal economy or attending the education which might especially be true for Kosovo since it has the youngest population in Europe as well as the gender discrimination in existing labour market. Another reason for high level of unemployment of females might be due to the caring activities for families that are usually carried out by females for children and family, also might be a subject of prejudice and traditional families although the recent education data show that the participation rate of females in Kosovo is increasing, as well one important issue is lack of social security benefits. The low level of participation rate has the direct influence in high level of unemployment for females which is in the highest level for females in Kosovo with the level of unemployment of 41, 6 percent, the other two transition countries are comparable with the EU countries. In EU countries the Labour Laws, Laws against discrimination are implemented therefore there is a higher stability in the labour market. In transition countries these Law’s and policies are set with main basic rules, or they are in the process of updating with the EU legislation and policies. From our research we find also that the gender segregation in professions is also present in transition countries, with the highest level of segregation in Kosovo where 49 percent of the females should change their professions in order to have the equally distributed professions among males and females followed by FYRoM where 37 percent of females should change their professions and in Albania approximately 30 percent of females should change their professions to have equally distributed professions among males and females. Since, the highest consequence of gender segregation is that it also contributes in gender wage gaps. Segregation in professions is also important for the efficient allocations of human resources.

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