Unemployment Rates in Albania: An Analysis

INTRODUCTION

Albania is one of the economically last developed countries in Europe. After the collapse of the communist regime, Albania achieved an economical growth, but poverty level is still high. There is a strong link between poverty and unemployment because the lack of employment is one of the main determinants of poverty. Albania is considered as a poor country, that’s why a high level of unemployment exists. This is a phenomenon that disquiets the Albania’s society, so it is important to discus about this topic.

This paper gives the unemployment level and its changing during years in Albania. The period of time that we have taken into account is 1995-2009.

In this paper we are going to talk about the unemployment’s concept at the beginning and then its effects on the economy and society in chapter 5. We are going to give the unemployment rate of Albania, during this period according to age, gender and education and its values in different cities in chapter 3. Another point that will be shown in this paper is of course the precautions taken by the government to reduce the unemployment rate given in chapter 6. And finally we are going to show the conclusions of our work.

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GENERAL OVERVIEW ABOUT UNEMPLOYMENT

2.1. UNEMPLOYMENT’S CONCEPT

Unemployment is the time period when a person isn’t actually working, but available for work and currently looking for work. The working age population includes people from 16 years old to 65 years old for men and 60 for women. It consists of two groups: active population (labor force) and inactive population.

Labor force includes employed and those in search of employment (the unemployment people). In this assessment should be taken into account the difference between:

-Individuals currently working, considered those who accomplish a payable work of residence, even if temporally absent from work.

– The unemployed, those considered not at work, but actively seeking employment or waiting to return to work.

Outside the labor force are classified people that are in working age but they aren’t currently working or they don’t want to. This group consists of students, the invalids, students of working age, those who perform military service, and persons not currently looking for work.

The flow of movement between these categories can be expressed with the Fig.2, where:

1 shows the flow of people who change job.

2 show the flow of people who lose their job.

3 show the flow of people from the ranks of unemployed who find a job.

4 show the emergence of the unemployed out of the labor force (as unemployed who do not require work anymore).

5 show the entry or the reentry in labor force, but first as unemployed.

6 show entry or reentry in labor force, but now as busy at work.

7 show the loss of employment and the exit out of the labor force (such as pensioners, or people returning to school).

The total number of losing jobs is given by the amount of movement 1, 2 and 7.

The total number of finding jobs is given by the amount of movement is 1, 3 and 6.

The difference between the losing jobs and the finding jobs shows the difference in employment.

Changes in unemployment are given by the difference (5+2) – (3+4).

Changes in unemployment measured by the unemployment rate, which represents the percentage ratio of the number of unemployed and the labor force:

Unemployment rate= (unemployed workers / total labor force) Ã- 100%.1

TYPES OF UNEMPLOYMENT

Unemployment is an inevitable process for each country, so that we can find it among each person in different kinds. The most kind of unemployment we can find in Albania are:

Frictional unemployment, which is created as a result of continued movement of workers from one job in search of another job, which is better than the first. This kind of unemployment is inevitable and economically justifiable, as leading to more efficient redistribute of labor resources. In this group are also included students who have just been graduated and are looking for a job, or women that have been away for a while from the labor market. These people are considered as volunteers unemployed.1

Structural unemployment, that occurs due to changes in demand and the supply to work as a result of fundamental changes occurring in the basic branches of economy. If an economy suffers from long-lasting low aggregate demand, it means that many of the unemployed become disheartened, while their skills (including job-searching skills) become “rusty” and obsolete. This means that they may not fit the job vacancies that are created when the economy recovers. This kind of unemployment can also be caused by technological progresses, since it means that fewer workers are needed to produce the same level of output every year.1

Cyclical unemployment is associated with declining demand for certain goods and services, especially at the stage of economic downturn, which leads to the decline in demand for manpower in the factories that manufacture these products or services. This is caused by a business cycle recession and wages not falling to meet the equilibrium level.1

Seasonal unemployment, which is related to seasonal nature of the product or service, for example in the branches of the construction industry, tourism, etc. It is linked to certain kind of jobs.1

Voluntary unemployment includes that group of people who choose not to work for different reasons, such as economical/financial reasons or any other.1

Hidden unemployment is the unemployment that does not appear in government statistics, due to the way the statistics are collected. Only those who have no work but are actively looking for work are counted as unemployed. Those who have given up looking, those who are working less than they would like or those who work at jobs in which their skills are underutilized are not officially counted as unemployed, though in a sense they are.1

UNEMPLOYMANT RATE IN ALBANIA

The lowest rate of unemployment of these years is 12.3% in 1996, while the highest is 18.4% in 1999. From 1995 until 1999 we have successive ups and downs of the unemployment rate. This is due of the transition that in these years has been higher. While from 1999 with unemployment rate 18.4%, the unemployment rate has been decreasing gradually, reaching its lowest level in 2008 with unemployment rate 13%. However these digits are still high. Our country suffers from the phenomenon of unemployment.

According to the report of the Central Intelligence Agency (CIA) 3 official unemployment rate is rather deformed three times lower than the real rate of unemployment. There are at least three reasons that make the data on unemployment rate not to be real. The main reason is informality, which is the number of employees who aren’t declared from the employer.

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1scribd: MAKROEKONOMI-Inflacioni-Dhe-Papunesia. Url: http://www.scribd.com/doc/33883062/MAKROEKONOMI-Inflacioni-Dhe-Papunesia

2 INSTAT see Instituti I Statistikes

3 CIA (2010): library/publications/the-world-factbook/Albania. Url: https://www.cia.gov/library/publications/the-world-factbook/geos/al.html

Also, there are the unemployed who do not plead their self as unemployed. In this case they do not appear in official records as unemployed. This is a problem associated with lack of functionality and efficiency of office work. In the calculation of the unemployment rate also isn’t disregarded unemployment in agriculture. Rural areas, in which lies the main map of poverty in the country, are supposed with full employment, since no one is registered as unemployed.

According to the report, having such a large labor force in agriculture, when this sector provides 21.7% of Gross Domestic Product and almost zero unemployment rate, it’s explained why according the official methodology, the unemployment rate is only 12.5%. So, these are some of the reasons that make the unemployment rate not to be real.

UNEMPLOYMENT RATE according to gender

Throughout the years the percentage of unemployed females in Albania has been higher than the percentage of males, this for some reasons. In Albania are developed more activities oriented towards the employment of males. Specifically, trade, construction or development of hotels and restaurants, where dominate male employees. Also these years were closed enough industrial activities, in which there were employed a significant number of females.

While the rural-urban movement does not give females many opportunities coming from rural areas to enter in the job market. Also females being most charged with house works and take care of everything, no firm has no interest to employ them before a male, because they often can take permissions, will require maternity leave etc. These can be some of the reasons why the level of unemployed females is higher than the unemployed males.

The year 1999, in which the unemployment rate is the highest, marks the greatest number of unemployed males and females, respectively 16.4% of males and 21.4% of females in Albania were recorded as unemployed.

While the lowest number of unemployed males registered in 1996, where 11.4% of males are registered as unemployed and the lowest number of unemployed females registered in 2007 where 12.2% of females are registered as unemployed.

The number of unemployed people observed that has ups and downs, both in females and males until 2000, while after 2000 till 2007 is observed a general reduction of unemployed males and females. In 2008 is noticed an increase in the number of unemployed females from 12.2% to 13.5%.

UNEMPLOYMENT RATE according to age

Unemployment also varies according to age groups population. Three main age groups are: 15-19 years old, 20-34 years old and over 34 years old. Unemployment appears in higher rates for the first age group because young people are less able to adapt to the labor market. These rates have been high till 2001 and after this period dominates 20-34 year old age group as unemployed. Whereas all persons over 34 years old represent lower values in the unemployment rate since the majority of them are busy to work. This rate has been higher in the period 1998-2001 and since then has maintained a constant level.

UNEMPLOYMENT RATE according to education

According to the education level of unemployment, the major part of unemployment rate consists of people who have octennial and high-school education. This may come from different reasons such as the low level of intelligence, or any other. The difference rate between unemployed people with octennial and high-school education is low. In the period of time 1998-2000 there were more unemployed people who had high school education than with octennial education, but since 2001 this ratio has changed. From 2001-2009 there are more unemployed people with octennial education. Whereas people with university education have fewer chances to be unemployed since they have more opportunity to find o job.

UNEMPLOYMENT RATE in different districts

Unemployment rate varies in different districts of Albania. During 2008 this rate was different in different districts. Its values are shown in Fig 6, which represents the ratio of unemployment to the all districts of Albania. According to the data set, the highest rate for the unemployment this year has been in Kukës with a value of 30.9%, a high value compared to the other districts. It is followed by the district of Shkodra with 24.2%, then Lezha with 22.1% and 17.7% in Vlora. The lowest rate is given for the district of Tirana, around 7.3%. It probably comes from the fact that, Tirana is the capital and so on is a developed city, where employment opportunities for citizens are higher. Therefore this rate is lower in this city. As for other districts this rate varies with small values.

CONSEQUENCES OF UNEMPLOYMENT IN ALBANIA

Unemployment causes a lot of individual and social costs. A long period of unemployment reduces the human capital value and increases to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression. Also another consequence of unemployment is that the unemployed people may lose their skills. At another point when a person is unemployed, he has lack of income. This causes less leisure. As some other serious consequences of unemployment we can mention the increasing number of divorces, crime and greater alcohol abuse. So the unemployment influences in the every-day life of the unemployed people.

Unemployment causes reduction of incomes level and this brings the reduction of the country’s economic growth. The GDP is lower than it could be if the unemployed people were employed. As a result the whole economy and society suffer from people being unemployed. Also high levels of unemployment bring consequences at the level of taxes and government borrowing, and at the expenditure of government. Because of the existence of a high level of unemployment, the income that could be taken from taxes will fall. While unemployed people do not work, do not earn, and thus they do not pay taxes. This affects in the decrease of the level of income that the government collects. On the other hand, the government should help the unemployed by giving them economic assistance.4 In Fig 7 is presented the number of families receiving economic aid versus the total number of households in all districts of Albania.

It is noted that the highest percentage of the families that profit economic aid is in Kukës. As we said before, the unemployment rate in this district is also the highest of all districts in Albania. Dibra, Shkodra and Lezha have also high percentages of families with economic aid and the levels of unemployment in these districts are high. Durrës, Fier, Tirana and Vlora have the lowest level of families in economic aid. But we have seen that Vlora had a high level of unemployment, although the percentage of families in economic aid is in lower levels.

So the government loses as a result of the decline in tax collection and higher spending on families who have unemployed members. As a result the budget deficit may be increased, which increases and the risk of the government. These are some reasons that the level of government borrowing may increase. So we can say that all the society and the economy suffer from high levels of unemployment.

PRECAUTIONS OF THE GOVERNMENT

The government has to interfere continually to reduce the unemployment rate. The Albania’s government has taken some precautions to low-down the level of unemployment. We can mention the opening of new workplaces, such as in infrastructure. The last years the government has realized a lot of projects in infrastructure and in this way, there are opened new workplaces. Also the government has practiced training and program applications to boost employment. As we have said in Albania the number of unemployed females is greater than unemployed males, and so the government has practiced free vocational training for women heads, victims of trafficking and roma women.

Reforms in the fiscal system, in the improvement of the business environment by lowering taxes significantly, investments in infrastructure and the attracting of foreign investors to invest in Albania, encouraging investors to employ staff from Albania are the main factors that has contributed to the economic growth and, consequently, to the creation of new workplaces. So these are the main precautions that our government has taken to prevent and reduce the unemployment in Albania.5

CONCLUSION

Unemployment is an inevitable process that happens in every country. It is found in different types such as frictional, structural, cyclical, seasonal, voluntary and hidden unemployment. This phenomenon is visible in every society, but it appears in different values.

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5 Ministry of Social Work and Issue and Equal Opportunity (2007): Strategji-Standarte/Strategjia e Punesimit. Url: http://www.mpcs.gov.al/images/stories/ministria/downloads/strategji-standarte/plani_i_veprimeve_per_zbatimin_e_strategjise_se_punesimit2006-2013.zip

Although Albania’s recent economic growth has reduced poverty level, it is still a country with a higher rate of unemployment. This rate has been changing over years. It has been in its lowest levels in 1996 with 12.3%. The highest rate has been in 1999 with a value of 18.4% and from then it has been reducing continually. In 2008 this rate was 13%. It’s not a low level, but anyway is the lowest level Albania has ever had in the last 10 years. According to gender the percentage of unemployed females in Albania has been higher than the percentage of males. According to age, the level of unemployment has been higher for the age group 15-19 years old till 2001, and since then it has been higher for the age group 20-34 years old. Whereas the age group over 34 years old is always characterized of lower levels of unemployment according to the other age groups. Unemployment rate according to education has been higher for people with high school education till 2001, and from then it has been higher for people with octennial education. Whereas people with university education are characterized of lower levels of unemployment. In different districts are recorded different values. Its value is higher in Kukës and lower in Tirana.

The unemployment brings a lot of affects in the society and the whole economy. It reduces the human capital value and increases to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression. It increases the number of divorces, crime and the level alcohol abuse. The unemployment brings the reduction of the country’s economic growth. It reduces the level of the incomes that could be taken from taxes and increases the expenditure for economic aid given by the government for the unemployed people.

The government has taken some precautions to reduce the level of unemployment; such are the reforms in the fiscal system or by opening new workplaces. It has practiced training and program applications to boost employment. The percentage of unemployed females is in high levels, so the government has practiced free vocational training for women. Also it has taken reforms in the fiscal system, in the improvement of the business environment by lowering taxes significantly, investments in infrastructure and the attracting of foreign investors to invest in Albania, encouraging investors to employ staff from Albania.