Businesses are in trouble/ There are no employees, foreigners are not coming, salaries must be increased, profits are falling, consumption is decreasing

2024-03-17 08:26:00, Ekonomi CNA

Businesses are in trouble/ There are no employees, foreigners are not coming,

Illustrative photo

In the commodity price crisis of 2022 following Russia's attack on Ukraine, both manufacturers and service providers maintained profit margins through price increases.

With the deepening of the labor shortage phenomenon, which in the case of Albania, is more influenced by immigration, internal demographic movements and the aging of the population in years, businesses are not expected to increase prices, but claim that they will amortize it the cost of increasing wages to retain workers with reduced profits and investment.

Manufacturers remain the most cost affected by labor market changes. The fish processors of the "Coral Fish" company, in addition to the blows from the fall of the euro, are unable to find employees to cope with the high demand for export to Spain and Italy. For this reason, they have started to reduce production.

"The company is present by exporting products to the largest supermarket chains in Spain and Italy. External demand favors further growth in export volume, but the labor force makes this impossible.

For this reason, we have reduced the production", said Helidon Rruga, the head of "Coral Fish", for the "Business Plus" podcast.

About 45% of the fish products produced by the company are exported, 55% of the produced amount is sold in the domestic market. Mr. Rruga said that he tried to solve the labor shortage by hiring foreigners, which was partially effective.

"We currently employ 80 citizens from Egypt for the fleet of 13 fishing vessels, as well as Italians and Turks in various sectors.

We also tried to employ Bangladeshi workers in the production lines of the factory, but despite monitoring up to holding passports, everything was unsuccessful, as they all left. For some of them, Albania is a springboard to leave for EU countries.

Finding local employees is increasingly difficult. In 2008, when we inaugurated the factory in Durrës, there was a high flow of people looking for work. Now this flow no longer exists.

Even in the factory set up in my hometown, Kavaje, with the aim of alleviating unemployment and social problems, we are facing difficulties in finding employees. We have made available means of transport to collect the employees at their homes, since they are not found".

He said occasional wage increases to retain the workforce have been affordable, but the fall of the euro has added to the problems.

"The level of wages in the country is not like in previous years. The cost of adding them is affordable, but it should be noted that currently, the effects of the loss from the devaluation of the euro are high. For exporters, the biggest problem is the fall of the European currency".

Businesses are in trouble/ There are no employees, foreigners are not coming,

Damage from reduced consumption

For three months, the small producers of fruit juices and soft drinks have been forced to temporarily suspend production in the factory in the Dropulli area, as the high depopulation of rural areas has significantly reduced consumption.

If there was no decrease in purchasing power, Kosta Bezhani, from the company "Fresh Co", said that he would be able to afford salaries from 700 to 1,000 euros/month.

"From December until now, the production lines in the factory have been put on only three times, as there is no sales market. We have no one to sell the production to. The main problem is the drastic drop in consumption. "Compared to years ago, consumption is almost zero since emigration."

The manager of the company "Fresh Co" said that he is spending the savings to pay the employees.

"We are paying the employees twice the salaries they receive in Greece, but most of them do not want to live and work in Albania.

Every day more and more leave. As for foreigners, we as a company have experimented many years ago, after hiring citizens from China.

Recruiting foreigners is difficult, since none of them wants to stay for a long time in Albania. But if there were consumer movements, if there were people, the situation could improve.

In these conditions, where we are spending the savings, we do not expect the activity to recover, except for a slight increase that will come during the tourist season".

Mr. Bezhani added that local products are losing competitiveness compared to the import production that is being sold cheaper.

The increase in wages, accompanied by a decrease in consumption, is also negatively affecting egg producers. Lilo Seraj, from the "Ovvital" poultry breeding facility, estimates that this situation will reduce investment costs very quickly.

"Our company raised wages twice last year. The improvement of the conditions and the increase in the salaries of the employees has negatively affected the operating costs of the egg production companies.

To begin with, the aim will be to maintain profit margins, but it has become very difficult, as purchasing power is at its lowest levels in years.

Under these conditions, it becomes difficult to increase prices and this will automatically lead to a decrease in the profits of enterprises. And this then leads to a lack of investment in technological innovation to improve production standards".

In the country, a good part of the skilled workforce has emigrated. In the last 20 years, namely for the years 2002 to 2022, according to Eurostat data, there are 604 thousand Albanians equipped with a passport of a European Union country.

The highest number of citizenships granted was in 2016, with 67 thousand, followed by 2017, with 59 thousand.

Businesses are in trouble/ There are no employees, foreigners are not coming,

Many of the businesses experimented with getting foreign labor from Asian countries, but the scheme proved unsuccessful, as they left, even though they were offered a salary of 600 to 800 euros/month, accommodation and food, in order to retain the most qualified workers. .

While the replacement of the professional labor force left with those coming from the districts and rural areas is impossible to guarantee without qualifications. This category also tends to target the foreign market and job positions remain vacant again after a few months according to recruitment agency experts.

From rising costs and falling purchasing power, producers risk reduced profits and investments

The head of the Center of Albanian Exporters, Alban Zusi, raises the concern that this situation is reducing the investment profits of the companies for the renewal of technology and the addition of production lines, since the expenditure of savings for salary increases, in a period of decreased consumption and devaluation of the exchange rate , only adds to the agony of agro-processors and exporters to survive.

Mr. Zusi said that there are many Albanian companies that cannot afford the increase in wages to maintain the workforce, as exporters have been hit in costs by the 15% devaluation of the euro, while processors have reduced production due to the drop in sales, as the goods of consumption are being imported at a cheaper cost.

"Decreasing production means shrinking profits, not for the profits that producers put in their pockets, but the profits that are invested. Businesses do not have the financial means to increase investment profits. Exporters have been hit in their investment profits by the fall of the euro.

The devaluation of currencies has also affected processors. Many of them have reduced sales, as consumer products are entering the country more cheaply with the fall of the euro, so they are losing competitiveness".

Mr. Zusi predicts that with the higher costs from the salary increase in this situation, Albanian enterprises will only have an extended period of agony to survive, where within two years it will be clear which of them will survive and go bankrupt. Bankruptcies, according to them, will come, as many businesses will be stripped of their investment funds from falling profits.

Government support with another sovereign guarantee for exporting businesses is not seen as a real possibility for recovery by Mr. Zusi, since this situation cannot be resolved without direct support to businesses.

In the tourism season, the cost of wages will be met by increased prices in bars and restaurants and reduced profits from the hotel industry.

In the tourist areas, it is expected that with the beginning of the tourist season, job offers from the HoReCa (Hotel-Restaurant and Catering) sector will increase to the extent that it becomes impossible to be filled by the workforce living in these areas.

This will lead to the temporary transfer of workers from Tirana or other cities. In this period of crisis for finding the labor force, the expectations for many employees are for a high increase in wages, which will be accompanied by an increase in prices or a decrease in the profits of businesses.

Henri Jahja, the representative of the Association of Bars and Restaurants, said that during the summer period for the profession of a cook, the salary reaches up to 3,500 euros/month and for an assistant cook, up to 2,000 euros/month. According to him, the cost of raising wages without meritocracy will be borne by rising prices.

As a necessity for keeping employees during the tourist season, Mr. Jahja says that bars and restaurants will continue to increase wages without efficiency, but this is expected to bring higher costs for businesses, which will be accompanied by price increases.

"The scheme with foreign workers will continue to be tested because of the dramatic situation rather than its efficiency.

The situation is more serious this year than last year and this difficulty will continue in the coming years. This year, the salaries being demanded by the internal staff are twice as high as last year. At the managerial level and at the chef level, we are currently higher in salaries than Italy, Montenegro, Croatia, etc.

A seasonal chef in Albania is paid 3,000 to 3,500 euros at the same levels as a chef in Rome, while an assistant cook 1,500 to 2,000 euros/month.

This year, the recruitments have already started for the month of May when the season is expected to start. And at this moment we are facing difficulties to find personnel in any job position. Today in Tirana there is a need for any personnel, imagine how the situation will be in May.

No matter where you turn and think about the scheme, there is no correct and efficient solution, except that competition between the type will increase and wages will increase without reason and merit, lowering the standard and hiring substandard employees and in reflection with the salary received .

The whole scheme will create a mess that, apart from increasing prices and reducing service, will not bring anything good to this industry," he asserts.

In 2023, bars and restaurants led for the highest number of foreigners employed, with about 2,000 of them, and 12% of the total. Henri Jahja, from the Association of Bars and Restaurants, raised several times the concern that the employment of foreigners is resulting in a waste of time, both in terms of work efficiency and their massive departures.

Even the hotel sector is facing difficulties in finding employees. The manager of "FAFA Hotels & Resorts", one of the largest hotel structures on the coast of Durrës, Mr. Fatos Çerinishti, earlier claimed that the employees from Bangladesh have turned out to be unstable, as they left for the Greek islands.

For this reason, the hotel industry will also continue to increase the wages of locals and the costs for the qualification of young people. For the largest accommodation structures, where 80% of the offered tourist packages are booked by foreigners, according to Fatos Çerenishti, the expenses for the salary increase fund will be faced with a decrease in profits.

"80% of our customers are foreign tourists. If we changed the prices, they would leave. Regardless of any cost, including the increase in wages and training of new employees, we will bear it ourselves with a reduction in profit".

Due to the specificity of the sector, where employment is mainly seasonal, hotel structures are always forced to increase the costs for the qualifications of employees, especially young people according to Mr. Cherenishti.

"Our employment advantage is the locals, but the labor market is making it difficult for them to be recruited. Even this season, as has happened in previous years, we will continue to employ young Albanians, investing in their qualification through training."

Businesses are in trouble/ There are no employees, foreigners are not coming,

Will other prices go up?

Difficulties from the increase in expenses are expected to start for bottled water producers as well. After the high fluctuations in the prices of raw materials during the pandemic and after the beginning of the Russia-Ukraine war, in foreign markets, the tariffs of raw materials are becoming more expensive again.

The highest growth has started for the plastic raw material.

The administrator of the "Lajthiza" water factory, Mr. Thanas Siveri claims that another increase in the price of raw materials will increase the production cost. Mr. Siveri underlines that there is no expected price increase for the consumer and the increase in costs will be amortized by the decrease in the company's profits.

"In recent years, a high increase in the prices of raw materials, such as plastic, energy, oil, has been recorded. Even this year, the prices of raw materials in foreign markets have an upward trend.

Regardless of any additional costs we incur, selling prices to consumers will not increase. The additional cost will be met by reducing profits", said Mr. Thank you for the "Business Plus" podcast.

The builders claimed earlier that in order to prevent the departure of local employees, they have increased daily payments to levels of 6,000 to 7,000 ALL/worker. It is expected that in the next two years, their salary will reach 8,500 ALL per day (increase of daily payments/worker 20%).

For builders, the increase in wages for workers cannot avoid further increases in the selling prices of apartments, including the increase in costs that started last summer for the infrastructure impact tax, after the reference price changes.

The builders claimed that this year fixed costs have also been affected, since the increase in the prices of construction materials compared to years is 5%. For the period after the Covid-19 pandemic, until now, the cost of materials reaches up to 40% according to builders.

Why the scheme for hiring foreign workers did not work

For the year 2023, according to the data of the National Employment and Skills Agency (AKPA), there were 9,825 foreign nationals equipped with work permits and work certificates. The highest number of foreign employees was in bars and restaurants. 1,094 foreign nationals were employed in the accommodation and food service sector.

In construction there were 999 employment permits approved, in other service activities 985 foreigners were employed, in the wholesale and retail trade sector 848 employments and in other processing industries 788 foreigners were employed.

According to the AKPA, in years the arrivals from Turkey led, the second were citizens from Bangladesh, Nepal, India and Italy. Experts estimated that the number of foreigners employed is negligible compared to the demands of local businesses for labor force.

The trend is expected to continue in 2024.

Many managers of manufacturing and service companies claimed that they were reluctant to hire foreigners for fear of their departure, as in many cases, Albania is used as a transit country for employment to EU countries.

Erald Pashaj, Executive Director at "EPPC Albania & Kosova", one of the largest consulting companies for human resources, claimed earlier for "Monitor" that the dysfunction of the scheme came from the irregularities encountered in the implementation by both parties, as by the agencies of countries that offer foreign employees, but also Albanian recruiters.

He also highlighted the problem with the productivity of employees from Asian countries that may be acceptable in cases where companies employ hundreds of employees.

In Albanian businesses, which employ 10 or 20 employees with a net salary of 400 USD per month, according to him, this shows that the productivity and qualification of foreigners is low./ Monitor.al