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The value of a worker's work in Albania is 40% lower than in the Region

2024-01-29 10:04:00, Ekonomi CNA

The value of a worker's work in Albania is 40% lower than in the Region

Illustrative photo

The increase in wages in the economy of Albania in the last two years has not been accompanied by an increase in production, and this trend is dangerous, the International Monetary Fund notes in the last consultation on the agreement with Albania.

“In 2022, annual wage growth exceeded annual productivity growth. Production per employee remains at lower levels than in the Region (about 37 percent below the levels of Bosnia and Herzegovina, North Macedonia, Serbia and 57 percent below the level of Montenegro), the Fund calculated.

The government's plan to bring the average salary in the public sector to 900 euros by the beginning of 2025 is on its way to being realized. Public sector wage increases can be passed on throughout the economy, turning into a risk to increase core inflation.

Recent IMF research shows that wage growth is of particular concern when labor markets are tight and the economy is operating below potential.

The government's plan to raise salaries in the public sector will affect inflation by 0.5 percentage points in both years 2024-2025.

Moreover, if this increase in wages is not compensated by an increase in productivity, our country risks losing competitiveness. This is already happening as ten foreign customers who produced clothes and shoes in Albania are moving to other countries, because our country increased the minimum wage by four times within the year.

The Fund's research showed that Albania has lower salaries in both the public and private sectors compared to the Region.

As of 2022, the average gross monthly salary in the public sector in Albania was approximately 30 percent lower than in the Western Balkans economy, both in nominal value and in purchasing power.

In the private sector, the real wage increased by 0.2 percent in 2022, while in the public sector it increased by only 1.9 percent.

Albania also has the lowest wage bill in the public sector compared to its neighbors.

The wage bill represents 4.5 percent of GDP in Albania, less than half of the average in the EU and the Balkan economies (10 percent).

The salary bill of the public sector of Albania is low even compared to the budget revenues. The public sector wage bill accounts for 16.7% of budget revenues, while the average for other Balkan countries is 27 percent).

But the IMF recommended that the salary increase in the public sector be based on a better performance of the employees in order to promote work productivity./ Monitor