13. Fostering social cohesion in Serbia
This chapter provides key policy priorities and suggestions for actions to foster social cohesion in Serbia. The labour market has recovered from the crises of the past decade, which presents opportunities for inclusive growth. Labour market and social protection policies, together, are key tools to address the remaining challenges of high long-term unemployment, low labour market participation among citizens from vulnerable groups and low coverage of social safety nets. Active labour market policies (ALMPs) should play a greater role in supporting youth and persons from vulnerable backgrounds. To that end, ALMPs require adequate funding, increased capacities in the National Employment Service, and greater co-ordination across public and private actors. Fostering integration of citizens from vulnerable groups is a priority objective for Serbia and can be pursued through well-targeted and accessible social assistance support and mechanisms to improve children’s education outcomes in a targeted manner. Ongoing efforts to sustain the integration and coherence of social services are an important step towards more effective provision of the services citizens need to thrive.
Key elements of social cohesion ranked very high in Serbia in the Initial Assessment of this Multi-dimensional Review of the Western Balkans – decentralisation, improved health services, quality free time and leisure, countering demographic decline and decent jobs. A socially cohesive society is a society that creates the ability and willingness of its members to undertake collective action for the improvement of societal well-being of all its members. Building on the Initial Assessment, the “From Analysis to Action” phase of the project provides suggestions to foster social cohesion in Serbia and in other economies of the Western Balkans. The peer-learning workshops on social cohesion (Box 8.1 of Chapter 8) were an integral part of the project’s second phase, serving three complementary processes: identification of problems hampering social cohesion, identification of policy key policy challenges, and putting for forward key policy priorities for Serbia and for the region (Figure 13.1).
Serbia has achieved significant success across various dimensions of social cohesion over the last decades. In past decades, Serbia managed to ensure more jobs for its population. Since the global financial crisis of 2008/09, labour market performance has improved constantly, with employement-to-population rates rising from 35.5% in 2012 to 49.1% in 2020 (World Bank, 2021[1]). Employment rates in 2020 were close to OECD and EU averages. In turn, positive labour market developments led to improved employment outcomes for women, which is evident in their increased labour market participation. Since 2014, poverty has been steadily decreasing. Serbia has also been performing well on various well-being indicators. Its citizens feel comparatively safe and are exposed to comparatively few homicides in relation to the level of gross domestic product (GDP) (OECD, 2021[2]).
To sustain the pace of building a socially cohesive society, Serbia must now tackle a set of important challenge that remain. While the pattern of growth since 2012 has created good-quality jobs in numbers, some gaps must be addressed: women, the young, some ethnic minorities and those living in lagging regions face significant – and often overlapping – deprivations. Also, a relatively high share of people who have been long-term unemployed (59.7% in 2019) risk exiting the labour market altogether, making future work less likely (Vidovic et al., 2020[3]; World Bank/WIIW, 2021[4]). Family socio-economic background plays a strong role in whether students go to general or vocational programmes; those from more favourable backgrounds are more likely to attend general schools and continue their studies later. Inequalities among Serbia’s four major regions persist along various aspects of well-being. The southern regions have significant municipal pockets of poverty: differences range from 4.8% in Novi Beograd in Belgrade Region to 66.1% in Tutin in Šumadija and Western Serbia (SORS/World Bank, 2016[5]). Pension coverage is high: 95.9% of men and 85.6% of women aged 65 and over received a pension payment in 2019. The adequacy of pensions, however, is low (ESPN, 2017[6]; Pension and Disability Insurance Fund for the Republic of Serbia, 2019[7]), hampering social cohesion among the elderly.
Seven priority actions have a great potential to foster social cohesion in Serbia, with fostering the integration of children from vulnerable groups being the key priority:
Make active labour market policies more effective, particularly for vulnerable groups
Create equal opportunities for vulnerable groups to participate in the labour market
Strengthen women’s role in society by further supporting their integration into the labour market
Strengthen targeting, equity and adequacy of social assistance for those most in need
Foster integration of children from vulnerable groups (peer-learning priority)
This chapter is divided into three sections. Sections 13.1 and 13.1 provide policy implications across the seven policy actions through a prism of challenges specific to Serbia. Section 13.3 provides indicators against which policy progress in implementing all the policy priorities can be measured. This chapter is complemented by the regional chapter on social cohesion (Chapter 8), which provides more specific policy options based on international practices that may be applied, albeit to different degrees, for policy priorities in Serbia.
13.1.1. Make active labour market policies more effective, especially for vulnerable groups
To increase the impact of active labour market policies (ALMPs) in Serbia, it would be imperative to increase their coverage, especially for the long-term unemployed, youth, and Roma. In 2018, only 5.3% of registered unemployed participated in ALMPs (Table 8.3 of Chapter 8). The long-term unemployed, who have lost their unemployed benefits, have little incentive to participate in ALMPs; in fact, their participation in ALMPs stood at only about 1%.1 The share of unemployed youth participating in ALMPs was higher (9.7%) (Table 8.3 of Chapter 8), although it has been decreasing in recent years (Aleksić, Arandarenko and Ognjanov, 2020[8]). Considering the high share of young not participating in employment, education or training (Figure 8.3 of Chapter 8), scope exists to increase their ALMP participation. The school-to-work transition is reported to take about two years on average, and even longer for persons with low and medium educational attainment (ETF, 2021[9]).2 Participation in ALMPs is also low among Roma, although it has been increasing – from 18.7% 2011 to in 25.9% in 2019 (Aleksić, Arandarenko and Ognjanov, 2020[8]). For the most part, they engaged in programmes for active job-search training and three-year functional adult primary education (Government of the Republic of Serbia, 2020[10]). Poor labour market integration of these groups can lead to loss of skills, long-term reliance on welfare assistance and emigration, further fostering dynamics of social exclusion.
Serbia should continue building on its efforts to integrate young people in the labour market. The Youth Service Package, launched in 2013, has become a key ALMP: it aims to intensify co-operation between the National Employment Service (NES) counsellors and unemployed youth. Despite the emergence of certain positive aspects,3 subsequent evaluation showed declining participation of youth in ALMPs even after the programme was introduced. Notably, interviews are lacking that would ensure collection of all relevant information needed for a realistic employability assessment (Sekulović et al., 2017[11]). Another initiative, the My First Salary programme, aims to provide opportunities for the young to gain practical experience through 9-month apprenticeships in which the state subsidises wages. Beneficiaries are graduates with secondary and higher education degrees. In 2020, the programme had 8 000 participants (Government of the Republic of Serbia, 2021[12]). To further promote youth employment, Serbia is planning a Youth Guarantee scheme, with a pilot currently under preparation (European Commision, 2021[13]).
Scope exists to increase participation of recipients of financial social assistance (FSA) especially by intensifying collaboration between the NES and Centres for Social Work at the local level. A mutual obligation framework for recipients of unemployment benefits, and recently also for FSA beneficiaries, is in place. Based on the mutual obligation framework beneficiaries able to work are referred to the NES by an electronic exchange system of information on jobseekers, and an obligation for an interview within ten days and for participation in ALMPs, as well as other services offered by the NES (OECD, 2021[14]). To date, implementation of the framework seems weak: in 2019, 11 565 FSA beneficiaries participated in ALMPs or NES services, only about 4.5% of total recipients (OECD, 2021[14]). Serbia has established formal agreements between the NES and the Centres for Social Work at the central level; at the local level, only some municipalities have such agreements in place (Scoppetta, Danaj and Reitzer, 2017[15]).
Effective implementation of ALMPs requires adequate capacities at the NES. With 436 job seekers per counsellor, the workload of the NES limits the effectiveness of ALMPs. While this is among the lowest client-to-staff ratio in the region (Table 8.4 of Chapter 8), it remains high in comparison to international benchmarks such as Slovenia with a ratio of 137:1. Ultimately, it affects the ability of the NES to connect people with jobs. Some recent estimates show that despite about 2.7 formal jobs available locally per unemployed person, the effectiveness gap between the average of NES offices and the best performing one, in terms of connecting people with jobs, stood at 22% in 2016, hampering NES ability to connect people effectively with jobs. Closing this gap through improvements could increase job placements by 20% (Table 8.5. of Chapter 8) (World Bank, 2018[16]).
Strengthening implementation of ALMPs and other strategic priorities will require more funding. In early 2021, Serbia adopted a new National Employment Strategy for 2021-2026, and an accompanying action plan 2021-2023 (European Commision, 2021[13]). During the period of the previous strategy (2011-2020), the budget goal of 0.5% of GDP in 2020 for ALMPs was not reached. In fact, spending remained at just 0.1% of GDP, one of the lowest levels in the region. Serbia aims to increase its budget for ALMPs by 40% in 2021, compared with 2020 (European Commission, 2020[17]).
13.1.2. Create equal opportunities for vulnerable groups to participate in the labour market
To boost social cohesion, Serbia needs to create equal conditions for all for labour market participation, especially for minorities such as Roma and people with disabilities. Based on the 2011 census, Roma account for about 2.05% of Serbia’s population (CRD, 2017[18]). Due to possible underreporting, some unofficial estimates indicate it could be up to 8.2%4 (European Commission, 2014[19]). Roma still participate only marginally in the labour market and their labour market outcomes are significantly worse than those of other populations. In 2017, only 34% of Roma participated in the labour market compared with 52% of their non-Roma neighbours and 66% of the general population (Robayo-Abril and Millan, 2019[20]). Similarly, people with disabilities also face weak employment prospects in Serbia. While it is estimated that 10-15% of the population are people with disabilities (Regional Cooperation Council, 2018[21]), only 9% of persons with disabilities are employed (Government of the Republic of Serbia, 2021[22]). The employment rate for women with disabilities is even lower, at only 4% (UN Women, 2019[23]). One-third of people with disabilities who are formally employed report a workplace adjusted to their needs (Regional Cooperation Council, 2018[21]).
Ensuring better opportunities to obtain high quality education is one of the key levers for creating employment opportunities for Roma and people with disabilities. Roma communities lag behind the rest of the Serbian population when it comes to access to education (World Bank, 2016[24]). Based on some recent estimates, only 37% of Roma had completed compulsory education (UNICEF, 2015[25]). Beyond compulsory education, the gap is even bigger: completion of upper secondary school is about 19%, compared with 93% of non-Roma children (Robayo-Abril and Millan, 2019[20]). Key barriers include distance to schools and low interest among Roma parents to enrol their children in school (see the Education and Competencies chapter on Serbia – Chapter 7). Likewise, poor labour market outcomes for people with disabilities can be linked to limited access to education and attainment: about 50% of this group have attended only primary education (Regional Cooperation Council, 2018[21]).
Addressing discrimination and stereotypes, especially against Roma, is another important lever for improving participation of vulnerable groups. Both Roma and people with disabilities suffer from stereotypes and other forms of marginalisation. Roma, in particular, are subject to discrimination and exclusion from public life. In 2014, 40% of 124 discrimination complaints submitted to the Commissioner for Equality were against Roma. Roma are also disproportionally underrepresented in public administration. Based on the official estimate Roma constitute about 2% of the population, but within the state institutions Roma employees account for only 0.05% of staff (8 persons) (CRD, 2017[18]). Discrimination is also evident in the private sector, where Roma face difficulties finding employment. Although Roma were an explicit target group of the subsidised employment scheme, only 2.8% of job placements were concluded with Roma (50 persons in total) (CRD, 2017[18]). Raising awareness and showcasing - in both public institutions and among the general public – how integrating Roma and people with disabilities can boost social cohesion should be an integral part of policy efforts in Serbia.
Serbia is making efforts to improve educational outcomes for the Roma and people with disabilities. Serbia’s Strategy of Social Inclusion of Roma Men and Women in Republic of Serbia 2016-2020 aims to combat discrimination and poverty of Roma (Tulumovic, 2018[26]). In parallel, the National Employment Strategy 2011-2020 recognises Roma as a vulnerable group for labour market integration. The employment strategy set out the objectives of integrating more Roma men and women in private and public employment, combatting the discrimination they face on the labour market, and formalising the work of those Roma currently working in the informal economy (Ministry of Labour, Employment, Veteran and Social Affairs, 2020[27]). The corresponding action plan expired in 2018, without being fully implemented. It included measures such as formalising work by integrating Roma as individual collectors of secondary raw materials in the waste management system at the local government level. To date, however, specific measures have not delivered any significant results. Preparation of a new action plan has been delayed (OECD, 2021[14]).
Better inclusion of people with disabilities is an integral part of Serbia’s key strategic frameworks. Key actions in Serbia’s new National Employment Strategy 2021-2026 include targeted ALMPs, establishing a new database to support closer monitoring of employment outcomes, more personalised counselling by NES, and offering incentives and advisory measures for employers to facilitate placement. Likewise, the Strategy for the Development of Education 2021-2030 mentions (among other priorities) aligning inclusive education to international standards and closer monitoring of outcomes, as well as improving teacher competencies to work with people with disabilities. The same strategy aims to ensure equal opportunities for Roma (Government of the Republic of Serbia, 2021[22]).
13.1.3. Further strengthen women’s role in society by supporting their integration into the labour market
Ensuring greater labour market participation of women can contribute toward higher economic growth in Serbia and greater social cohesion. Although women’s employment outcomes in Serbia do not lag significantly behind international benchmarks (Figure 8.4 of Chapter 8), women are still less likely than men to be engaged in paid work – with a gender employment gap of 15 percentage points (World Bank/WIIW, 2021[4]). On average, men also earn about 11% higher wages than women. The gender pay gap (in monthly average gross earnings) is wider for persons with university degree (about 20%) (SORS, 2018[28]). Reducing potential for discrimination would an important first step. The approval – in May 2021 – of the new Law on Gender Equality, has endowed Serbian law with more explicit mandates for equal remuneration for work of equal value, and specifically defined and prohibited discrimination based on sex, sexual characteristics, and gender (World Bank, 2019[29]; Krstic, 2021[30]).
Increasing the limited supply of childcare facilities and improving options for paternity leave would be important steps in creating conditions for equal labour market participation of men and women. Family care responsibilities was reported as a primary reason for labour market inactivity for about 7% of women in Serbia (UNECE, 2021[31]). On average, it takes 4.6 years for a child to have a guaranteed place in early childhood education and care (ECEC) (before compulsory primary education), which is relatively high against the EU average of 2.8 years (Figure 8.8 of Chapter 8). In 2020 childcare coverage stood at 42.2% (6 months to 3 years) and 65.3% (3 to 5 years old). However, it is substantially lower for vulnerable groups such as Roma children (UNECE, 2021[31]). To date, fathers do not have an equal right to take parental leave (World Bank, 2019[29]).
Addressing institutional barriers to flexible options and part-time work also matters for women’s labour force participation. Women’s participation in the labour market is often affected by the lack of flexible work arrangements, such as part time-work. In Serbia, only about 13% of women work part-time, which is higher than in most economies in the Western Balkans but very low compared to averages in the EU (33.9%) and the OECD (36.1%). The relatively high minimum base for social security contributions can also discourage low-paid, part-time employment (Table 8.6 of Chapter 8).
Cultural norms continue to play a role in the gender gap in labour market participation and should be addressed through awareness raising. Serbian women spend more than twice as much time as men on unpaid household chores (UNECE, 2021[31]), which is close to the OECD average (OECD, 2019[32]). In a survey in 2017, 40% of Serbian women reported believing that women should be responsible for household chores, even if the husband is not working. More than half (57%) of Serbians favoured a traditional family arrangement in which the man works and the woman takes care of the family (EBRD, 2017[33]).
13.2.1. Strengthen targeting, equity and adequacy of social assistance for those most in need
To ensure social cohesion, Serbia could strengthen coverage of its social main assistance schemes, especially by improving targeting. The two main programmes of social assistance in Serbia are the FSA and child allowance (Table 8.A.5 of Chapter 8). The FSA covers about 3.7% of population, which is low given that the rate of people in the at-risk-of-poverty threshold was 25.7% in 2017. In 2016, the FSA reached only 10.5% of the poorest income quintile. Recent estimates suggest that under conditions of perfect targeting, FSA coverage could almost double – from the current 261 614 recipients to 492 306 of the current poor (Government of the Republic of Serbia, 2018[34]). Similarly, child allowances do not reach the full cohort of poor children: only about 45% of children in the at-risk-of-poverty threshold, received child allowance (UNICEF, 2019[35]). Income ceilings, a land ownership ceiling5 and documentation requirements6 are identified as criteria that are exclusionary and leave a large proportion of persons unsupported by FSA (Government of the Republic of Serbia, 2018[34]).
Serbia should also reassess the adequacy of its FSA and child allowance. Compared with other economies in the region, Serbia spends more on means-tested benefits, even though these remain limited in relation to the EU average (Figure 8.9 of Chapter 8). The FSA payment varies depending on household size. For a four-person household, it stands 52.3% of the at-risk-of-poverty threshold. The child allowance is awarded in equal amounts to the first four children (not older than 19 years and conditional on regular school attendance). The monthly payment was EUR 23 in 2017, with higher amounts for children in single-parent families (30% more) and children with disabilities (50% more). Even though child allowances are intended to alleviate poverty, the amount of the benefit makes up only 14% of the at-risk-of-poverty threshold (Table 8.A.5 of Chapter 8). Persons that take part in public works, which is one of the ALMPs, normally lose their entitlements to FSA. For the cases where remuneration from public works does not suffice, such an administrative barrier should be reconsidered, which could also encourage participation.
13.2.2. Foster the integration of children from vulnerable groups (peer-learning priority)
Fostering the integration of children from vulnerable groups, especially by introducing scholarship for vulnerable children, was selected as the key peer-learning priority by peer-learning participants in Serbia (Box 13.1). While participation in compulsory education is universal in Serbia, disadvantaged children are less likely to participate at the pre-primary and upper secondary levels (Maghnouj et al., 2019[36]). At the pre-primary level in 2014, a difference of 73 percentage points was reported in enrolment rates between children from the poorest families and the wealthier families. In upper secondary education, almost all students (97%) from the richest quintile enrol while the share among disadvantaged students drops to 74% (SORS/UNICEF, 2014[37]). A difference of 73 percentage points in PISA reading scores between students from disadvantaged and wealthier families shows much lower learning outcomes of disadvantaged students. While this is lower than the OECD average, it is higher than some of the regional benchmarks, such as Croatia (63) and Montenegro (55) (Maghnouj et al., 2019[36]).
Supporting vulnerable students at the early stages of education (primary and lower secondary), could improve education outcomes and increase possibilities for labour market integration. Lack of funding for poor students can affect their performance at the primary and lower secondary level, decrease their chances to obtain merit-based scholarships at the upper-secondary level and affect their decisions to pursue further studies. Most scholarships at the upper-secondary level are awarded primarily based on performance, often supporting students who would be able to attend higher education even in the absence of such scholarships (Živadinović, 2017[38]). In the absence of support at early education levels, and facing relatively high costs at higher education levels,7 poorer students at the end of lower-secondary level tend to enrol into VET, aiming to join the labour market more quickly (Maghnouj et al., 2020[39]). This also can lower education outcomes at the VET level as it reduces the motivation of those students who would have preferred to attend general schools. The peer-learning participants mentioned that scholarships could be awarded as financial transfers or vouchers to be used for educational materials.
International evidence highlights the importance of solid design of scholarships to avoid excluding students who are likely to drop out before obtaining a scholarship, and to ensure good education outcomes by linking scholarships to performance. Evaluation of scholarships for vulnerable children in various countries shows that scholarships or grants at primary and lower-secondary levels can improve school enrolment and attendance, although the impact on performance was not significant8 (Filmer and Shady, 2009[40]; Behrman, Parker and Todd, 2005[41]). A seven-year randomised evaluation from Kenya suggests education subsidies reduce dropout, pregnancy and marriage of adolescent girls (Duflo, Dupas and Kremer, 2015[42]). In Cambodia (Filmer and Shady, 2009[40]), as some scholarships were awarded at the lower-secondary level, some children were likely to have dropped out of school before getting an opportunity to obtain them.
To introduce scholarship for early levels of education for children from vulnerable groups in Serbia, participants of the peer-learning workshop suggested several actions to complement current policy efforts. Seven suggested actions reflect the diverse expertise of the participants and their engagement to collaborate to find solutions. Participants represented the following entities: the Ministry of Education, Science and Technological Development; the Ministry of European Integration; the Ministry of Labour, Employment, Veterans and Social Affairs; the Centre for Democracy Foundation; the Standing Conference of Towns and Municipalities; and the University of Belgrade. The seven actions suggested are as follows:
Establish a platform for exchange of information with teachers, school staff, parents, psycho-social development experts, non-governmental organisations (NGOs) and private sector representatives to deliberate the design of measures concerning scholarships for vulnerable groups.
Complete the work by gathering information on health, living standards and academic outcomes across all students. This would require linking the social card system, digital education record-keeping and data from the Statistical Office of the Republic of Serbia.
Revise the Law on Social Protection to allow the expansion of direct cash benefits.
Assess funding based on available data and organise high-level meetings (including with the Ministry of Finance) to ensure adequate support and political buy-in.
Consult and involve local NGOs to ensure adequate visibility of the measure for all vulnerable groups.
Involve resource centres for disabled and vulnerable students at the local level in the process.
Plan and potentially engage with local self-governments to develop their own schemes.
Source: OECD peer-learning workshops.
13.2.3. Create a more inclusive and fairer social security system in Serbia
An inclusive and fair social security system calls for a combination of policies that encourage people to participate in formal employment and that bring the unemployed back to work. Only 6.6% of those registered as unemployed in Serbia received unemployment benefits in 2020, indicating that such benefits do not act as a safety net for previously employed people (Figure 8.10 of Chapter 8 – Panel A). High unemployment among youth implies that many lack the opportunity to contribute to unemployment insurance over a long enough period to qualify for the benefits. Likewise, the relatively high shares of people who are long-term unemployed and who work informally, have often either exhausted their benefits and/or do not contribute to social security. Encouraging formal employment and bringing people back to work through a combination of policies would be important to increase social security coverage and to strengthen the inclusiveness and effectiveness of the social security system. Possible policy actions include ALMPs, incentives to encourage formal employment and other job-creating policies (e.g. fostering entrepreneurship). Social security contributions financed more than 60% of social protection spending in 2015 (Stokić and Bajec, 2019[43]); as such, low coverage also jeopardises the financial sustainability of the system.
Further reduction of high social security contributions in combination with other policy instruments to support low wage earners, was also one of the peer-learning priorities. Serbia has one of the highest labour tax wedges9 in the region (Figure 8.11 of Chapter 8 – Panel A), reflecting high social security contributions in total labour taxes,10 High tax wedges tend to discourage employers from formalising employment relationships with workers. Progressivity of personal income tax11 is very modest in Serbia, with personal income tax being subject to three flat-rate bands (a tax-free threshold, a 10% band and a 15% band). This means low wage earners face a high relative tax wage in comparison to those earning average wages. At 35% of the average wage, Serbia’s relatively high floor for social security contributions also penalises part-time workers; in fact, the minimum social security contribution base is close in magnitude to the level of the minimum wage. For someone working part-time, earning a salary equivalent to half the minimum wage, the tax wedge is 44.1% compared with a tax wedge of 36.7% for someone earning minimum wage (World Bank, 2019[29]). Recently, Serbia made efforts to reduce the tax burden. In 2020, the Law on Personal Income Tax increased the non-taxable salary from RSD 16 300 to RSD 18 300 per month; the figure was raised again in 2021 to RSD 19 300 (Government of the Republic of Serbia, 2021[12]; Government of the Republic of Serbia, 2021[44]). In 2019, social security contributions were reduced by abolishing the employers’ contribution to unemployment insurance, thereby reducing the employer contribution to total social contributions from 37.8% to 37.05% of gross wage (World Bank, 2019[29]). The Law on Compulsory Social Security Contributions (effective in 2020) further reduced contribution rates for pension and disability insurance, from 26% to 25.5% (Government of the Republic of Serbia, 2021[12]). Such efforts to reduce social security contributions and to increase the progressivity of personal income tax should be accompanied by complementary policies, including introducing contribution subsidies for new low-income workers and new labour market entrants (World Bank, 2019[29]).
Considering rapid ageing in Serbia, addressing social security coverage can further improve the financing of old-age pensions, an integral part of any social security system. Population ageing is reducing the social security coverage rate, with potential negative impact on future pensions, which are largely reliant on social contributions. Pensions, the majority of which are old-age benefits, make up the largest social protection function (46.2% of total expenditure in 2015). At 10.3% of GDP in 2018, Serbia’s expenditures for old-age benefits are in line with the EU average (Eurostat, 2018[45]; SORS/Ministry of Finance, 2020[46]). Serbia has a public statutory pension system that is compulsory for all persons engaged in standard or non-standard forms of employment and is based on a pay-as-you-go scheme. The number of individuals enrolled in voluntary private pension funds is very low, around 2.9% in 2019 (National Bank of Serbia, 2020[47]). Each contributor currently supports more than 1.26 pensioners in Serbia, one of the highest support ratios in Europe (Figure 8.12 of Chapter 8). Various reforms to address pension fund deficits have been implemented in Serbia (see Chapter 8). While the last in-depth projection and simulation exercise was done in 2014, decreasing trends in both expenditure and adequacy are expected to continue, indicating that the financial health of the system has improved (World Bank, 2020[48]). Since 2020, Serbia introduced the so-called “Swiss formula” indexation of pensions, which ties pension increases to the growth rate of the average salary and consumer prices (Government of the Republic of Serbia, 2021[12]).
While Serbia has good pension coverage, it could consider improving the adequacy of its pensions system. Although there is no official data on pension coverage ratios, it is estimated that around 10% of persons over pensionable age do not have the right to an old-age disability or survivor pension (European Centre for Social Welfare Policy and Research, 2021[49]). Moreover, the number of pensioners has been falling since 2014 while the population over 65 increased. This reflects the gradual implementation of pensionable age reform and falling use of early pension provisions, which have been made less attractive. However, non-coverage should be monitored directly because in the absence of social pension provisions, lack of coverage may generate situations of vulnerability. Appropriately designed social pensions would be a key tool to prevent old-age poverty in that case. Adequacy of pensions, however, is low. The latest available data (June 2020) show about one-quarter of pensioners received less than EUR 128.50 per month, approximately one-third the cost of the average minimum consumer basket for a three-person household (ESPN, 2017[6]; Pension and Disability Insurance Fund for the Republic of Serbia, 2019[7]).12 In 2019, the at-risk-of-poverty rate for a household with two adults and at least one person over the age of 65 was 18.4%, compared to the EU average of 11.9% (Eurostat, 2018[50]). Given the difference in the retirement age for men (65) and women (61.5)13, as well as the lower overall contribution periods, the gender gap in pension income for those aged 65-79 is sizeable, at about 25.5%. Moreover, despite the relatively high coverage rate, it exhibits a large gender gap (15% in 2016) (ESPN, 2017[6]).
13.2.4. Deliver community integrated social services
Establishing community-integrated social services emerged as one of the key policy priorities during the peer-learning workshops. As indicated in the regional chapter on social cohesion (Chapter 8), community-integrated social services encompasses a range of approaches and methods for achieving greater co-ordination and effectiveness among different services, such as elderly care, healthcare, education and others, with the objective to achieve improved outcomes for services users.14 During the workshops, participants stressed the importance of community-integrated services as a key lever to strengthen social protection, deliver social care services and reduce long-term dependency on social welfare through better labour market integration.
To create an integrated approach, it would be important to build adequate capacities within local governments, which should be on the frontline of delivering community-integrated social services. Local governments generally have good knowledge of challenges and needs of vulnerable groups. The Law on Social Protection (2011) established the principle of decentralising the provision of social assistance (Table 8.7 of Chapter 8); however, municipalities in Serbia still lack adequate capacities to deliver quality social services. The majority of social services in recent years were homecare for the elderly and day-care centres for children with disabilities; other types of services are present only in bigger cities. Eight municipalities (of 145) did not provide any social care services in 2018 (Matković, 2018[51]). Local government revenues amounted to 14.3% of total public revenues in 2019, which is relatively low compared with the OECD average of 42.4% (Figure 8.14 of Chapter 8). Most (76.5%) of the funding dedicated to social services at the local level comes of the local government budgets; 17% is earmarked transfers15 for social care services from the central level and the remainder comes from other sources, such as donations (Matković and Stranjaković, 2020[52]). The regulation on earmarked transfers is currently under revision and should build on a revised and updated mapping of social services.
High regional variations in spending on social care services show the necessity to reassess the actual needs and to reconsider the Regulation on Earmarked Transfers in Social Protection. A recent mapping of 145 municipalities shows that 816 did not establish social care services and 91 dedicated only very small amounts to such services – less than RSD 454 per capita, per year (Figure 13.2). Among the eight that provided no services, five are among the most deprived and least-developed municipalities (Matković and Stranjaković, 2020[52]). Among municipalities that showed no or below average per-capita spending on social care service, the majority (19 of 24) have at-risk-of-poverty rates ranging from 45.4% to 66.1%17 (SORS/World Bank, 2016[5]). About 34.5% of all expenditure (RSD 1.26 billion of RSD 3.65 billion) was spent in the City of Belgrade, which was proportionally larger than its share (24%) of Serbia’s total population. Despite the existence of earmarked transfers for social care services, these were not allocated to about 40 municipalities, including the 8 without social services and 6 that were categorised as least developed (Matković and Stranjaković, 2020[52]).
Source: Matković and Stranjaković (2020[52]), Mapping Social Care Services within the Mandate of Local Governments in the Republic of Serbia, http://socijalnoukljucivanje.gov.rs/wp-content/uploads/2020/09/Mapping_social_care_services_and_material_support_within_the_mandate_of_LSG_in_RS.pdf#page=16&zoom=100,66,818.
Assess the needs of people and introduce services as needed. Most (81%) spending on local social care services went to community-based daycare services, of which about 75% was dedicated to homecare for adults and the elderly, daycare for children with disabilities, and personal child attendants (Matković and Stranjaković, 2020[52]). Some services, such as respite care, drop-in centres, daycare for children in conflict with the law, elderly daycare and family outreach workers, exist in very few LSGs. Services for independent living for persons with disabilities were especially undeveloped. Protected housing for people with disabilities, which is critical for the deinstitutionalisation process and is entirely funded from the national budget in less-developed municipalities, is available in only six municipalities and cities, for 107 beneficiaries. Across all types of social care services, most beneficiaries were from urban areas (Table 13.1). In January 2020, the Government adopted the Strategy for Deinstitutionalization (2022-2026) to support the development of social protection services in local communities. As part of the new strategy, various additional social services are planned to be gradually developed in local communities and interconnected with services such as employment, health care, education and housing, in collaboration with civil society organisations and other service providers. This is an important step in supporting delivery of community-integrated social services.
The growing role of civil society organisations (CSOs) as providers of care services has been very important in providing social care services at the local level and creating a broader, community-based ecosystem of actors. Further efforts should be made to increase their quality. CSOs have been engaged in providing a variety of social services, including one-third of services for children with disabilities, beneficiaries of daycare centres and elderly homecare. They have also been setting up enterprises for professional rehabilitation and employment for people with disabilities, in line with the type of employment prescribed in the Law on Professional Rehabilitation and Employment of Persons with Disabilities. Engagement of CSOs to provide care services has been fostered through the Social Protection Law of 2011, which stipulates the use of public procurement in the absence of established public institutions. For this purpose, the state set up functional and structural standards for social care services, licensing processes and control mechanisms (Matković, 2018[51]). Despite the efforts, lack of full licensing negatively affects the quality of services (Figure 13.3).
Source: Matković and Stranjaković (2020[52]), Mapping Social Care Services within the Mandate of Local Governments in the Republic of Serbia, http://socijalnoukljucivanje.gov.rs/wp-content/uploads/2020/09/Mapping_social_care_services_and_material_support_within_the_mandate_of_LSG_in_RS.pdf#page=16&zoom=100,66,818
To monitor policy progress in improving labour market integration of vulnerable groups and addressing other policy priorities in Serbia, this report suggests a set of key indicators. These are set out in Table 13.2, which includes values for Serbia and benchmark countries (either the OECD or the EU average, based on data availability).
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Notes
← 1. Calculation based on data from the 2020 Annual Report of the National Employment Service (NSZ, 2020[64]) and SEE Jobs Gateway (World Bank/WIIW, 2021[4]).
← 2. Young people often face poor employment prospects due to lack of work experience and tend to work mostly under temporary and part-time contracts, leading to a slow transition to permanent employment. Lack of formal recognition of work experience gained during their studies further affects the issue (ETF, 2021[9]).
← 3. Including reducing the number of days needed to conclude an individual employment plan with a young person after initial registration with the NES as unemployed.
← 4. It is likely that many Roma do not identify as such in censuses for fear of discrimination (Minority Rights Group, 2021[61]).
← 5. Individuals who own more than a basic living area (defined as a one room per family member) and agriculture land of 0.5 hectares are not entitled to FSA, unless this property is mortgaged for valorisation of cash benefits (Vuković, 2014[58]).
← 6. Many applicants are required to submit substantial documentation, which might be a high burden for some segments of population, including Roma, many of whom do not have birth certificates (Vuković, 2014[58])
← 7. Yearly tuition fees vary between EUR 285 and EUR 2 280 in public institutions, and between EUR 1 000 and EUR 4 500 in private institutions (Živadinović, 2017[38]). The latter is relatively high, considering an average GDP per capita of about EUR 4 950 in 2017 (Eurostat, 2021[59]). About 59% of students had to self-finance their participation in higher education in 2017 (SORS, 2019[63]).
← 8. This likely reflects that the scholarships were conditional only on enrolment, rather than on both enrolment and performance.
← 9. The tax wedge is defined as the ratio between the amount of taxes paid by an average single worker (a single person at 100% of average earnings) without children and the corresponding total labour cost for the employer. This indicator is measured in percentage of labour cost. (OECD, 2021[62]).
← 10. At 37.8% in Serbia, the contribution rates significantly exceed the Western Balkan 6 average of 29.7% (World Bank/WIIW, 2019[65]).
← 11. Progressivity of personal income tax is calculated as a percentage point increase of tax wedge between workers earning 67% of the average wage to workers earning 167% of the average wage (World Bank/WIIW, 2019[65]).
← 12. The monthly cost of the average minimum consumer basket (for a three-person household) varies significantly among municipalities, ranging from EUR 268 in Leskovac to EUR 541 in the City of Belgrade in 2017.
← 13. Following the 2014 pension reforms, retirement age for women is to increase gradually until it reaches 65 years of age in 2032 (in parity with retirement age for men).
← 14. Definition from the Council of Europe (CoE, 2007[60]).
← 15. Earmarked transfers for social services were first introduced in 2016 and were an essential contribution to improving social care services in Serbia (Matković and Stranjaković, 2020[52]).
← 16. Odžaci, Ub, Požega, Svrljig, Gadžin Han, Žitorađa, Trgovište and Bosilegrad.
← 17. Such municipalities include: Osečina, Koceljevo, Vladimirci, Nova Crnja, Rekovac, Tutin, Sjenica, Novi Pazar, Preševo, Bujanovac, Trgovište, Bosilegrad, Surdulica, Vladičin Han, Lebane, Žitorađa, Merosina, Doljevac, and Gadžin Han. Municipalities in the same range of at-risk-of-poverty rates that spend above average on social services include Bojnik, Krupanj, Medveđa, Babušnica and Crna Trava.