Economists: New employment measures will not keep young people in the country

The new employment measures are welcome, as well as tax breaks for hiring unemployed workers, or tax incentives for people who want to return from abroad to work in Serbia, but economists do not expect these measures to have a strong impact – writes the Danas daily.

Premier Ana Brnabic and Finance Minister Sinisa Mali announced on Monday a series of measures that should come into force at the beginning of next year. First, came an increase in minimum wage, then from next year, the non-taxable part of the monthly wage will be increased from 15,300 to 16,300 dinars and pension and social security contributions are expected to be reduced from 12% to 11.5%, which should reduce the total salary contributions from 62% to 61%.

Then Finance Minister Sinisa Mali announced incentives for Serbian expats aimed at motivating them to return to Serbia. He said the measure applied to Serbian citizens who had lived abroad over the past two years and that they would be given a five-year 70 pct reduction of the tax base and social security contributions if they returned to Serbia to work.

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Brnabic also said that the government had been working on a set of measures for returning expats as there was a strong political will to get young people to return to the country.

Mikhail Arandarenko, a professor at the Faculty of Economics in Belgrade, says that at first glance, these measures seem to be the same as those from previous years:

“Much depends on how exactly the measures have been devised. In any case, these are only palliative solutions. The best solution is a complete change in the taxation of labour, since our system is quite regressive and is the cause of unemployment and the shadow economy. The general investment environment, which usually requires very labour-intensive activities, is hostile and that is why such subsidies are given to foreign investors”.

According to Jurij Bajec, also a professor at the Faculty of Economics, any measure to stimulate employers is welcome, but the changes are negligible also for fear of compromising budget stability.

“Whether employers will benefit from these incentives is another matter. However, policymakers need to be sure that a measure will achieve its objective. Otherwise, if the target is not met, we will experience only negative effects of the measure, namely a reduction in budget revenue, and the measure will, therefore, be ineffective. I believe that measures alone cannot contribute much, especially in preventing people from going abroad, because their reasons (for leaving the country) are much more profound than the high taxes. In addition to short-term and individual measures, I would be more interested to see the government creating fair business conditions, fair competition environment and implement the rule of law. Only if the government takes these measures more seriously they will produce serious results”, concluded Bajec.

Perhaps for the first time ever the authorities will try to do something concrete to limit the Serbian citizens moving abroad to live and work and facilitate their return to Serbia, especially given the worrying estimates that Serbian population will decline by a million by 2050.

Arandarenko points out that the problem with these measures is that they are temporary and that in the end, we usually revert to an unfavourable baseline scenario for employment.

(, 26.09.2019)


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