A policy agenda for the sustainable growth of platform work in the Western Balkans

On average 20% of young people are not in employment, education or training (NEET) in the countries of the Western Balkans. The school-to-job transition is particularly thorny. Counterintuitively, and in contrast with the European Union, NEET rates rise as people attain higher educational levels in some countries, as presented by Amira Ramhorst, Team Leader, Regional Cooperation Council (RCC), at a recent ETF event on 7 June 2022 based on a study of youth unemployment in the Western Balkans completed last year.

Watch an overview of the event on the ETF's Youtube channel and continue reading for highlights of the event and the ETF's forthcoming report and summary: Flexibilisation of the Labour Markets in the Western Balkan countries.

Employers in the region complain of skills mismatches, blaming what they call flawed education systems that fail to provide workplace-relevant skills, especially for “non-routine” tasks, typically managerial, professional and high-level technological jobs.

Western Balkan policymakers are responding by overhauling vocational education and training (VET) systems, notably through curriculum reform and working more closely with the private sector. As part of this drive, governments of the region agreed last year to introduce a Youth Guarantee Scheme to address the NEET problem. A partnership with the EU, it focuses on digital, green, language, entrepreneurial and career management skills.

Labour market volatility

In parallel, labour markets are shaken by social, economic and technological changes. They are becoming more flexible. This translates into growth in novel employment relationships. These differ from “traditional work” in terms of working conditions, content, and regulatory and legal ramifications.

Reflecting global trends, young adults under 35-40 have flocked to online platforms in the Western Balkans. Platforms act as intermediaries between freelancers and clients or customers. This kind of work can offer new opportunities, flexibility, higher than average incomes, and reduce brain drain. The flexibility helps people juggle professional and family obligations and other pursuits. They are particularly attractive to students and family caregivers.

Yet they also present risks not yet adequately addressed by public policy. Few of these relationships are covered by existing regulations. They can raise questions about working conditions, social benefits, job stability and more. Some new forms of work, especially those associated with digitalisation, are not tracked by official statistics.

To better understand the platform phenomenon and its policy implications, especially in light of the Youth Guarantee effort, the European Commission called for support from the ETF, which compiled its report, 'Flexibilisation of the Labour Markets in the Western Balkan', to address the needs of young people not in employment, education or training (NEET) in the region. It explored these new forms of employment, including platform work, and the implications for youth employment policies and skills development in the six countries of the Western Balkans: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.

Platform worker profile

Platform work exists in mostly two forms: remote work, performed online; and on-location work, where goods and services are provided in a particular place (e.g., ride hailing or cleaning services).

Western Balkan freelancers have gained prominence on international online platforms. Five nations (all but Kosovo) ranked among the global top 10 for the number of freelancers per 1,000 people in 2018 with a lion's share of the growth taking place in Serbia. Workers from the region often specialise in creative, multimedia and technical services, including software development. Remote workers tend to be urban men between the ages of 25 and 35. They are generally equipped with digital and soft skills, including languages. They often get started as students without prior experience in the traditional economy. The pandemic, with its lockdowns and social distancing, further accentuated this trend. The number of Western Balkan residents on international platforms has increased by more than 3.5 times since 2017.

Western Balkan firms dominate the on-location market, with international competitors held at bay by regulatory restrictions, concerns over potential political instability, and other barriers to entry. The region's 33 leading on-location platforms fall into four main categories: delivery, ride-hailing, domestic services (e.g., plumbing, cleaning, and personal training), and care services (e.g. babysitting and nursing for the elderly). People tend to find this kind of work through social media and digital marketing campaigns.

Policy issues

The ETF study and related event in June 2022 revealed a series of policy issues and ideas that deserve attention. Here are some of the main ones:

Digital infrastructure - Despite growing broadband coverage, the regional average of households with Internet in 2020 lagged behind that of the EU: 82% vs. 91%. Digital skill levels are uneven, with Serbia and Montenegro in the lead. On average, 20% of individuals in the region possessed above average digital skills compared to 25% in the EU in 2019.
Digital and soft skills – Digital skill levels are uneven. On average, 20% of individuals in the region possessed above average digital skills compared to 25% in the EU in 2019. Policymakers should strive to identify and promote key sectors and occupations, notably in areas related to digital skills. Soft skills also deserve attention.
Statistics and information gathering – Policymakers in the Western Balkans should start by trying “to map the labour markets” to better understand who is working through the platforms and discover “the actors who could support the sustainable growth of the platforms,” suggested Anna Banczyk, Deputy Head of Unit “Future of Work, Youth Employment” in the European Commission’s Directorate-General for Employment, Social Affairs and Inclusion, during the online event. A systematic approach to monitoring can promote better skills matching.
Taxes – There are efforts to find ways to bring freelancers, including platform workers, into the tax system. But proposals for specific levies on freelancers were squashed after protests in both Montenegro and Serbia. In 2021, the Serbian government created a working group to examine the regulation of platform work. In some countries, such as North Macedonia, self-employed people cannot legally operate as platform workers. This forces them into informality. A more sensible approach would help individuals and increase tax compliance.
Misclassification – Misclassification occurs when an individual is essentially an employee but is categorised as an independent contractor. This is sometimes done to avoid and reduce taxes and/or social charges. This has become a major issue in the EU, but policymakers in the Western Balkans have been slower to act.
Social Benefits and Labour Rights – Even with greater flexibility, the rights of individual workers must be ensured. This includes social and health benefits.
Digital Nomads – Albania wants to attract location independent professionals to live temporarily in the country. Montenegro is considering following suit. Digital nomads are freelancers, entrepreneurs and even employees of diverse nationalities who work remotely. They tend be relatively young and highly educated. Their presence would help locals “get training much faster than through the traditional education system,” said Klajdi Priska, Policy Officer & Project Coordinator, National Youth Congress of Albania, during the online event.