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Equity and efficiency trade-off in social and employment policy and education, case of South East Europe Countries cases and experiences Regional seminar


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Title: Equity and efficiency trade-off in social and employment policy and education, case of South East Europe Countries cases and experiences Regional seminar

Equity and efficiency trade-off in social and
employment policy and education, case of South
East EuropeCountries cases and experiences
Regional seminar Zagreb, April 2011
  • Editors
  • Predrag Bejakovic - Institute of Public Finance,
  • Marc Meinardus - Friedrich Ebert Stiftung, Sofia,

Content of presentation
  • Introduction
  • The aim of the publication
  • Country cases Albania, Bulgaria, Croatia,
    Kosovo, Macedonia, Moldova, Montenegro, Romania
    and Serbia
  • Conclusion and recommendation

Introduction (I)
  • Although we are preoccupied or more accurately
    obsessed with our past, we lack a clear idea of
    who we have been. What is more serious, we have
    no desire to know. We live between myth and
    negations we enshrine certain periods, we forget
    others. These exclusions are significant

Introduction (II)
  • South East Europe?
  • No, New Spain and Mexico in Octavio Paz For Juana
  • (Harvard University Press, 1988)

Introduction (III)
  • While it is straightforwardly apparent what
    equity and what efficiency is, the relation
    between those two phenomena is not so obvious.
  • The efficiency and equity trade-off is that
    adequate equity enhances the poverty reduction
    agenda and thus, socio-economic efficiency.
  • The poor have less influence, less income, and
    less access to services than other better-off
    social groups.

The aim of the publication
  • To analyse and propose measures for alleviating
    the widespread existing conflict between equity
    and efficiency in social policy in the broader
    sense including social welfare, education and
  • Education, social welfare and the labour market
    are closely intertwined and mutually reinforcing.

Country case Albania
  • Even from its first days of independence in 1912,
    the country was plagued by a host of ills, among
    others, overwhelming illiteracy and epidemics of
  • Albania was kept Europe's most isolated and
    deprived country overwhelmed by instability and
  • It entered a turbulent period of political and
    economic change.

Erisa Çela about Albania (I)
  • Although in the last decade Albania has made
    progress in its social, economic and political
    development, it still faces a number of
    challenges, like
  • widespread informal economy,
  • various distortions of the labour market,
  • inefficient educational system
  • huge regional disparities

Erisa Çela about Albania (II)
  • Measures for improvement include
  • increase employment particularly women
    participation in the labour market
  • a growth of the employment capability of the
    economy, harmonized with a skilled and educated
    human capital
  • improve education efficiency and output
    especially secondary education

Country case Bosnia and Herzegovina
  • 15 years after the war, the country is still not
    prosperous and united, but it is poor and divided
    into two entities.
  • Welfare system is highly fragmented and comprises
    various almost independent subsystems, with a low
    level of coordination and cooperation between
  • Furthermore, functions are overlapped and
    division of responsibilities is unclear.

Cenic on Bosnia and Herzegovina (I)
  • Analyses relationship between poverty and
    development and underlines
  • poverty applies to individuals and households,
  • development refers to large-scale processes of
    change at societal level.
  • Absence of a legal framework at various levels
    results in the exclusion of certain vulnerable
    categories of the population.

Cenic on Bosnia and Herzegovina (II)
  • Improvement could be obtained through
  • need that country should finds itself at decisive
    stage in transformation of its socio-political
    and economic structure
  • development of more effective system that would
    reduce poverty, inequality and social exclusion
  • better coverage of social security and welfare
    particularly among workers employed in the
    informal economy

Country case Bulgaria
  • Supported by more than a decade of consistent
    macroeconomic policies and deep structural
    reforms, joined the EU
  • However, country still has to overcome many
    obstacles, including harsh social situation, low
    technological level of economy, significant
    productivity gap and low labour remuneration in
    comparison with the rest of the EU and deeply
    rooted unofficial economy

Petkov and Vladikov on Bulgaria (I)
  • The two central problems
  • the demographic crisis (which is accelerated by
    low-cost labour migration and the brain drain)
  • economic and social transformation coupled with
    the issue of increasing the standard of living
    and incomes to some acceptable level
  • the social security sector is administratively
    regulated top-down and the principles of
    command-administrative decision-making imposition
    are still preserved.

Petkov and Vladikov on Bulgaria (II)
  • Amelioration could be achieved through
  • wider introduction and application of modern
    technology in the national economy
  • improvements in social effectiveness and social
  • fiscal consolidation and restructure public
    finances, strengthen financial stability, and
    mitigate the social impact of the crisis in the

Country case Croatia
  • Although the multidimensional approach and the
    governance of policies and practices have not
    fully become a reality, the assessment can be
    made that a significant progress in cooperation
    and coordination of various bodies and activity
    areas has been achieved in this area.
  • No doubt this is a consequence of economic crisis
    and increased number of unemployed and welfare

Bejakovic on Croatia (I)
  • Absolute poverty is low, but this diagnosis is
    only deceptively consolatory
  • Poverty is characterized by stagnancy - those
    who become poor take a great deal of time to
    escape from penury
  • There is currently a concern that social care
    services are not necessarily targeted to those
    most in need - despite the high percentage of
    social transfers in GDP Croatia has achieved
    little redistribution.

Bejakovic on Croatia (II)
  • Improvement can be achieved through
  • better targeting of social assistance programmes
    to most vulnerable
  • more attention should be dedicated to
    deinstitutionalisation and half-day or day-care
    centres and provision of services in the users
  • a need to increase the scope and improve the
    efficiency of currently insufficient labour
    market programmes.

Country case Kosovo
  • It is the smallest state in terms of territory
    and the newest state in the SEE, but with very
    old, deep and serious economic and social
  • During the 1990s, its economy had already
    suffered from poor economic policies, lack of
    domestic institutions, broken external trade and
    financial links, international sanctions,
    underinvestment and ethnic conflict.

Jeton Mehmet on Kosovo (I)
  • Insufficient long-term economic growth, low
    incomes and limited financial possibility are
    factors that cause a large percentage of poverty.
  • However, economic growth in the past decade has
    been solid but social assistance programmes are
  • Remittances have helped individual families, but
    they are not a source for financing public
    investments in infrastructure and social

Jeton Mehmet on Kosovo (II)
  • Poverty reduction could be achieved through
    strategies that lead to high employment-generating
    and long term sustainable growth.
  • One of the main pillars for growth is export.
  • Creating jobs is a major challenge that needs
    immediate solution. It should be the governments
    responsibility to improve the countrys image and
    attract foreign investors.

Country case Macedonia
  • Apart from the typical transition troubles there
    were also other long-term problems which have
    been prevailing before low level of the
    countrys economic development, higher
    unemployment level and low investment level.
  • Furthermore, economic emigration and low
    education attainment have aggravated the
    transition process.

Milevska Kostova Kotevska on Macedonia (I)
  • Main characteristic of social policy
  • low or limited financial resources and
    insufficient administrative capacity at the
    disposal to the institutions in charge
  • consequently, slow or weak implementation of law
    and reforms
  • hardly sustainable and equitable social
    protection system
  • effectiveness and equity are questionable

Milevska Kostova Kotevska on Macedonia (II)
  • Conclusion and proposals for improvement
  • The interconnectedness between the three areas
    is more than evident - measures undertaken in
    each of them reflect upon the others.
  • Enhancing the capacity of the administration and
    of the personnel working in the institutions for
    social welfare and unemployment.
  • Employment policy still lacks sufficient active
    labour measures.

Country case Moldova
  • Characteristics
  • a complex socio-economic situation, primarily
    linked with increase of poverty after the
    proclamation of the independence
  • transition process had devastatingly impacted the
    country's social situation
  • heavy external debt burden and high dependency on
    migrant remittances
  • unfavourable economic situation has been further
    worsened by political instability

Cornel Ciurea on Moldova (I)
  • Poverty reached its peak after the economic
    crisis in Russia in 1998, when over 53 of the
    population were living on an income of less than
    2.15 USD per day.
  • A slowed rate of economic growth, accompanied by
    significant disparity between development in
    rural and urban areas and constant growth of
  • A significant segment of persons engaged in the
    informal economy.

Cornel Ciurea on Moldova (II)
  • Proposals for improvements
  • an attempt should be made to find the optimum
    ratio between the desired labour market
    flexibility and the required social protection
  • primary health care level should be empowered to
    deal with majority of the health care needs
  • attention should be given to long-term efficiency
    in education, social and health policy
  • The adoption of measures depends on the ability
    of state agencies to undertake ambitious efforts.

Country case Montenegro
  • Achieved independence in 2006, applied for EU
    membership in 2008 and received candidate status
    in 2010.
  • Montenegro has recorded remarkable economic
    growth in recent years, which has created
    opportunities and enabled progress in social
    situation and equity.
  • There are significant differences in the extent
    of the poverty between the regions.

Jadranka Kaludjerovic on Montenegro (I)
  • Main problems
  • amounts of social benefits are not sufficient and
    only reduce the vulnerability of families
  • the timing of social assistance benefits is poor
    and all social assistance benefits are paid to
    beneficiaries with significant delays
  • the educational system is still inefficient, as
    the learning outcomes are very low and labour
    market needs are not fulfilled
  • financing of education is still fully centralized

Jadranka Kaludjerovic on Montenegro (II)
  • Main proposals for improvement
  • significant efforts have been made to increase
    access to education
  • actions have to be focused on further enrolment
    of children in pre-primary education institutions
    and an increase of enrolment, attendance rates
    and quality of education
  • there is a need to implement planned
    decentralization, in the first line to make
    transfer of the financing on local government

Country case Romania
  • The prospect of becoming an EU member
    constituted, for more than a decade, a solid
    external incentive for the transformation of the
  • Experiences show unrealistic expectation of many
    transitional countries that all social problems
    would be solved with EU accession.
  • Romania is in spite of the accession to EU faced
    with serious and overwhelming economic crisis and
    the many difficulties of the integration,
    primarily with many working poor people.

Gabriela Cretu on Romania (I)
  • Despite many difficulties, there was huge support
    for the accession to the EU.
  • For Romanians joining the EU was the equivalent
    to a better quality of life, more and better
    jobs, freedom of movement, their expectations
    were high.
  • Labour migrations in the short-term palliate
    poverty and remittance improve unfavourable
    social picture, but in the long-run can endanger
    family links.  

Gabriela Cretu on Romania (II)
  • Main proposals for improvement
  • investing more in cohesion policies could be a
    balanced solution for achieving higher efficiency
    and a more equitable society
  • a generous level of social protection and lower
    inequality do not necessarily lead to lower
    economic results
  • broadening social security programmes may enhance
    firms flexibility, facilitating labour mobility
    and social services could become a significant
    source of new jobs

Country case Serbia
  • In Serbia, war, sanctions and economic crisis
    produced the unprecedented GDP drop, huge
    inflation, salaries reduction, unemployment
    rise, poverty and economic collapse.
  • The new democratic Government (2000) prepared a
    package of reform proposals whose goal was to
    create a real market economy as well as a strong
    social policy.
  • The period after the democratic changes has been
    characterized by the reforms directed toward the
    creation of macro-economic preconditions for a
    sustainable and stable economic development.

Pavlovic and Arandarenko on Serbia (I)
  • By 2008, dynamic economic growth, stability of
    prices and exchange rate were achieved along with
    the constant growth of foreign reserves.
  • Mandated the sell-off of the old, loss-making and
    inefficient socially-owned enterprises enabled
    the redistribution of resources, and the assets
    redeployment in trade and services.
  • The creation of a large service sector after 2000
    came at a price it was paid by the gradual
    devastation of manufacturing, and agriculture.

Pavlovic and Arandarenko on Serbia (II)
  • Main proposals for improvement
  • Increase the relative share of wage tax revenues
    and decrease the relative share of revenues from
    social insurance contributions in the overall
    labour tax revenue
  • Reduce the tax burden on labour of low-wage
  • Ensure labour tax progressivity by introducing
    three progressive non-zero tax rates on labour
  • Cut the overall combined social insurance
    contributions rate.

Differences are bigger than similarities
  • Due to various socio-economic situations in the
    observed countries and different contributions of
    authors to the book, it is almost impossible to
    perform inter-countries comparisons regarding
    situations, problems and solutions for efficiency
    and equity trade-off, but.

for all observed countries it is important to
  • eliminate (or at least reduce) corruption,
    improve labour regulation and its implementation
    and enhance the business start up regulations
  • insure equitable access to quality public
  • perform institutional reforms regarding
    transparency, accountability and good governance
  • significantly improve weak public administration,
    ineffective oversight of regulatory authorities
    and inefficient judiciary that hinder economic
    and social development.

Conclusion for all observed countries
  • There is no universal model for all countries,
    but there are some indications that SEE countries
    could benefit from establishing a closer
    relationship between employment policy and social
  • In countries with high (particularly long-term)
    unemployment exposed to poverty and social
    exclusion, the interaction between benefit
    systems and employment policy is significant.
  • As countries move to placing an emphasis on
    active jobseekers, the link between policy and
    the delivery of educational, social and
    employment services becomes more important. In
    SEE this link seems to be missing.

Final message
  • Liberalisation of economy and related social
    policy is both an opportunity and a treat.
  • It is an opportunity because it set society free
    and breaks with overregulation in economic and
    social life.
  • It is a treat because many social groups are
    vulnerable but wit adequate policies and measures
    they can be helped.
  • We are the masters of our destiny.

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