The challenge

The Covid-19 pandemic hit the CEE economies after a few years when employment rates had been slowly improving across the region, albeit with significant national differences. The ensuing crisis exacerbated underlying vulnerabilities. In 2020 many jobs were lost (the equivalent of 200,000 full time jobs were lost, for instance, in the six economies comprising the Western Balkans). During the crisis workers suffered considerable income losses: in 2021, three out of five workers lived in countries where labour incomes had not yet recovered to their level of the fourth quarter of 2019. Firms have seen their assets depreciate; many small and medium-size enterprises, particularly in hard-hit sectors, have struggled to remain competitive.

In countries where unemployment levels had been gradually falling over more than a decade, the low labour force participation currently represents the biggest challenge to policy-makers (only 3 out of 10 women older than 25 years of age were active in Bosnia and Herzegovina before the crisis; in Montenegro, over €100 million in wages and tax payments are foregone every year due to the thousands of women in their prime who are willing to work but inactive due to family responsibilities). Young people have taken the brunt of the crisis, with significant increases in inactivity among young women and discouragement among young men. In Moldova, young people aged 15-29 are twice as much at risk of becoming NEET (neither in employment, nor in education or training), compared to the EU-27.

The ILO offers four main interventions to overcome these challenges:

• Tested roadmaps for the modernization of public employment services, including through digitalization;
• Technical guidance and practical tools to improve the efficiency of labour market policies, with a focus on activation policies for women and young people (including through youth guarantee schemes);
• Local employment partnerships as a policy innovation for local-level job creation and transition to formality;
• State-of-the-art solutions for labour market information systems and diagnostics providing the evidence needed for policy-making.