Statistique, Développement et Droits de l‘Homme
Session C-Pa 6e
Socio-economic Changes During the
Transition: Case of the Republic of Macedonia
Vera NAUMOVSKA
Montreux, 4. – 8. 9. 2000
Statistique, Développement et Droits de l‘Homme
Socio-economic Changes During the Transition: Case of the
Republic of Macedonia
Vera NAUMOVSKA
Faculty of Economics Skopje
Bul. Krste Misirkov bb
91000 Skopje, Republic of Macedonia
T. + 389 91 116 466 F. + 389 91 118 701
verana@eccf.ukim.edu.mk
ABSTRACT
Socio-Economic Changes During the Transition: Case of the Republic of Macedonia
The long-term economic problems from the '60s to late '80s years of the 20th century were one
of the main reasons for the economical and political reforms in early '90s in the countries from
Central and Eastern Europe (CEE) with Communist regime. These reforms were called transition
processes and are still existing. The transformation of former socialistic countries of CEE in society
with parliamentary democracy and market economy had most serious problems in field of
employment and social status of the households. It was case also with the Republic of Macedonia.
The consequences of the economical transformation to market economy were feel by the employed,
because the socialism was a system which proclaim a full employment- with full care for people.
Now it was impossible. The authorities of that regime do everything only to have smaller
unemployment. It was on the load of economical efficiency and productivity. Therefore during the
transition processes, first who feel the consequences of all changes were over plus workers, which
as technological, organizational and economical surplus were dismissed? From other hand
privatization process of the state or self-management enterprises (in Republic of Macedonia) was
the reason for bankrupt on numeral enterprises and some of them have economical problems and
the workers take the salaries with delayed or in amount less than national average pay. That was
reason for decline of living standard of the workers and destroying of the middle class which went
in poverty. The households must spend save money from earlier and after that to ask for social help
from social founds. Also the consequences were exist in the health care and protection. With this
paper we want to show the difficulties of the transition processes, special about the unemployment
and social status of the population and poverty.
RESUME
Les changements socio-économiques pendant la transition : le cas de la République de
Macédoine
Les problèmes économiques à long terme qui se sont posés depuis les années 60 jusqu'à la fin
des années 80 sont l'une des raisons principales qui ont dicté les réformes économiques adoptées
au début des années 90 dans les pays d'Europe centrale et orientale (PECO) qui avaient subi des
régimes communistes. Ces réformes, regroupées sous le nom de processus de transition, sont
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toujours en cours. La transformation des PECO anciennement socialistes en sociétés à démocratie
parlementaire et économie de marché a entraîné de très graves problèmes au niveau de l'emploi et
des conditions sociales des ménages. Tel a été également le cas en République de Macédoine. Les
conséquences de la transition économique vers l'économie de marché ont été ressenties par les
personnes possédant un emploi, car le système socialiste prétendait au plein emploi et à l'assistance
intégrale de la population. Ceci est devenu impossible. Les autorités de ce régime s'efforçaient au
maximum de minimiser le chômage, mais aux dépens de l'efficacité et de la productivité. Aussi, au
cours du processus de transition, les conséquences de tous ces changements ont-elles affecté
surtout les travailleurs licenciés car excédentaires au point de vue technologique, organisationnel
et économique. D'autre part, le processus de privatisation des entreprises nationalisées ou
autogérées a entraîne (en République de Macédoine) la faillite de beaucoup d'entre elles, et
certaines ont été affectées par des problèmes économiques qui ont entraîné, pour les travailleurs,
des retards de paiement des salaires ou des baisses de leurs rétributions à un niveau inférieur à la
moyenne. Telle a été la raison de la chute du niveau de vie et de la paupérisation catastrophique
des classes moyennes. Les ménages sont contraints de puiser dans leurs économies, puis de
solliciter l'aide des fonds sociaux. Les conséquences sont visibles également au niveau des services
de santé et de l'instruction. Dans le présent article, nous désirons illustrer les difficultés du
processus de transition spécialement en ce qui concerne le chômage, la détérioration des conditions
sociales de la population et la pauvreté.
1. The Social Function of the State with New Transition Processes
The social system and social status are very important areas in the human life and living in
general for every country. In the Republic of Macedonia, the transition processes are starting in the
same time with the state independence from the Federal State of Yugoslavia. With that aim the
authorities bring a new Constitution in 1991 in which was inaugurate the political, economical, law
and social elements of the state sovereignty.
The social system of the state is connected with reinstated principles of the social status of the
own citizens, social justice and making of social security of the citizens.
In the Constitution are proclaiming rights and freedoms of the citizens especial the right of job
and social protection. With the social status of the state are generating social function of the state
and with that is determined and the role of the state in social sphere for existing of the state in which
the dominant unique is the person. Economic development and prosperity is possible with social
care and securities of the population. But the base for the social, health and pension protection of
the citizens of every country depend from the success of the economy which make efforts to ensure
resource for financing of these functions. From other hand of the countries with the socialistic
regime for a long time (between 60’s and 80’s years of XX century) were in deep recession and
therefore they are starting with transition processes.
The transition processes are accompanying for near one decade from early 90’s to 1999
were following with big problems: some objectives and some subjectives. These problems are
reflecting on the status of the population. Majority of them are feeling unfavourable because the
economics and structural reforms were reason for decline of the volume production and a lot of
employed went out of job. They were included in the queuing of the unemployed (the commitment
of full employment with participation rates - employed plus unemployed relative to population from
15 to 64 ranged from 70 to 80% in 1989 in CEE (Central and Eastern Europe) countries - that
participation rate in EU in same year was below 69%) [EU, Sixth Periodic Report, p168]. From
other side a young population with age of the best youth for work, staying out of economical
processes. Commonly, the labour force with share of near half of them out of economic activities is
terrible problem. The common level of the living standard is endanger. The social status was
supported with founds compensation which was not enough and the poverty knock to many doors
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who had good average life earlier (19% of the all unemployed was getting compensation in 1996
and the needs for workers was 0,8% of total unemployment).
We can regret about it, because the human life is impossible to be conserve and interrupt
until better economics conditions come and than should be put in activity again. The time past and
the people are growing older and one decade of working life of the people is serious and
irrecoverable loss.
2. Unemployment and Poverty
The level of the economics development of the every country is connected with the
stratification structure of the population, especial the fan of the social groups, which are the
consequence of the volume of employment and economics absorption of the working age
population. In unreggular economic situation of the state are polarise two basic groups: the small
cohort of rich and very big cohort of poverty. Until in the middle and developed economies, the fan
of the social groups is very wide: small group poverty, biggest group middle class and bigger group
of rich stratum of population.
The problem with unemployment (with bigger supply than demand of labour force) in
Republic of Macedonia is existing from early years of XXth century. Low industrial development at
early years of XXth century had made the people to go in abroad (USA, Canada and Australia). The
industrialisation after the second world war make the agrarian population from the rural areas to
came into the towns and grew the supply of labour force again which had a biggest level in the later
1960s. In that time period the Western Europe (Germany, France, Sweden, Denmark, Netherland,
Belgium, Austria and Switzerland) opens the doors for unskilled workers and accepts the surplus
from our areas. It was not enough especial for young populations, which was coming, and were
with good qualification and education. Therefore as an others socialistic countries and we had to
accept the transition to market economy. It was with a growth of unemployment, which was
significant after 1994 until now, and some of the people again starting to go in abroad: now in USA,
Australia, Canada and New Zealand. But the unemployment is still high and in new millennium
(after 2000), we entrance with this problem.
In the Republic of Macedonia, during all the time of transition processes, there is declining of
the GNP and growing up the rate of unemployment. In campare with the countries in transition
processes from the Central and Eastern Europe (CEE) according the GNP is situated on 3rd the
place from back and after it behind is only Albania, Bosnia and Herzegovina and Ukraine. The
employment is concentrating and present among all kind of groups: high skilled, skilled, unskilled,
elementary school training, high, university and secondary training. Some unemployed workers
have been successful in finding new jobs, while others remaining unemployed for a long time and
most of them are discouraged about finding jobs. The rate of unemployment was 36% in 1996,
31,87% in 1997, 34,48% in 1997, 32,41% in 1998, 48,9% in 1999 (Table 3) and present among all
kind of categories: high skilled, unskilled elementary school, training higher, university and
secondary school training. The group of CEE countries (Bulgaria, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Romania, Slovenia and Slovakia) the rate of unemployment,
which with the start of transition has tended growth from 1995 on has tended to fall except in
Bulgaria, the Czech Republic and Estonia where it increased. However, it is still relatively high in
comparable to levels in EU. As it was between 20 and 30% in 1995 is lowest in Czech Republic
(4%) to 19% in Lithuania and in 1997 it fall under 15% [Sixth Periodic Report, p.199]. Some
employed workers have been successful in finding the new jobs, while others remained unemployed
for a long time and most of them are discourage about findings the jobs. The rate of employment
declining from 37,6% in 1996 on 34,4% in 1997.
Also, the economics situation influence on the internal structure of the population: from the
point of view, cohort groups of young working age active and old population. From the point of
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view the health situation of the population and social protection from temporary unemployment is
accept from the state, but not enough - and money compensation is not enough for basic living
necessities. There are existing effort for professional pre-orientation and pre-qualification of the
temporary unemployment.
According the duration of unemployment we have in 1998: 55,4%, who seek a job for more
than 4 years or 92,2% (Table 1) of all unemployment are waiting for job more than 6 months (in
Poland waiting of job for more than 6 months have been 57,6% at November 1997 [E.
Kwiatkowski, C.Domanski, P.Kubiak, p173]. The percentage of seeking of job increase as growth
duration of waiting job (Table 1). With starting of transition processes, the number of
unemployment grew and was bigger between young active population and the population in best
age (25-40 years old) (Table 2).
Table 1. Distribution of Unemployed by Duration of Seeking a Job (in %)
Duration
1996
1997
1998
men
women total
men
women total
men
Up to 1 month
2.8
3.6
3.2
2.6
2.1
2.4
2.
1-5 months
5.5
4.8
5.2
5.9
4.9
5.4
6.9
6-11 months
10.7
11.2
10.9
9.5
8.5
9.1
9.5
12-17 months
8.2
7.6
7.9
7.1
7.5
7.3
6.0
18-23 months
8.4
7.9
8.2
8.2
9.2
8.6
8.3
2 years
12.6
10.5
11.7
14.5
13.5
14.1
1.4
3 years
9.1
7.5
8.4
10.2
8.8
9.6
12.6
4 years and 42.6
46.9
44.5
42.1
45.5
43.6
53.2
longer
Labour Force Survey, Statistical Office, Republic of Macedonia, April 1998 p. 70
women
1.6
4.8
8.9
5.6
7.4
1.6
11.7
58.4
total
1.8
6.0
9.3
5.9
7.9
1.5
12.2
55.4
In the structure of the persons who lost the job with transition processes are those from 5 to 30
years length of services and between them, majority are those with length of services 10 – 20 years
(Table 2). They are family persons which we take that the average is with 4 member of family, that
show one big number of population is on the margins of standard of living. (Almost one in three
households have unemployed persons in residence).
Consistent with OECD norms, the Macedonian Government has chosen a relative poverty line
to define poverty in the country. According to this definition of poverty, individuals with
consumption below 60% of median annual 1996 adult equivalent consumption or about 50$ per
month are defined as poor.
As in all Central and Eastern European countries, poverty increased in Macedonia in the early
years of its transition to a market economy. The poverty rate increased between 1995-96. In general
the increase in poverty is a result of two factors: a decline in consumption and growing inequality in
its distribution. The poverty rate increased slightly between 1990-1991 rose rapidly between 199395 and continued to increase after 1995. The rates of real households income are change for –45%
in formal job, for 16% in other earning, -5% in social transfers and so on.
Table 2. Persons Seeking Job by Age and Years Employed (in %) (Situation 31 December)
By age
<25
25<age<40
40<age<50
More than 50 years old
1995
1996
1997
31.45
49.2
12.96
5.51
27.68
50.93
14.14
7.24
23.96
52.37
15.32
8.35
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By number of years employed
Without service
74.2
By length of service
<1 year
3.35
1-2
2.05
2-3
1.48
3-5
2.34
5-10
5.14
10-20
6.56
20-30
3.96
>30
0.91
Source: Statistical Yearbook, R. Macedonia, 1998
73.74
73.4
3.18
1.98
1.43
2.25
5.23
6.96
4.2
1.03
3.07
1.94
1.39
2.22
5.13
7.06
4.54
1.24
The poverty is not phenomena which is characteristic for period of transition. As an
undeveloped country, poverty is present from earlier. The transition has increased poverty rates for
all households, no matter their occupation, demographic consumption or major source of income. A
new group of poor has emerged, composed of households headed by the employed or those in
receipt of cache transfers (social assistance). Poverty has diverse characteristics. With transition
processes we got three main groups of poor:
• The traditional poor – consist of rural, agricultural farm households with more the three
children. These households formed the majority of the poor in pre-transition years because
they have limited land and insufficiently livestock to earn revenues for all year.
• The new poor- are consist of non-agricultural households with wage earners, the
unemployed who lost the job as technological, organisational or economical surplus
during the transition processes. In this group belong the pensioners and other cache
incidence of poverty in the country.
• The chronic poor are the group of poor pensioners, elderly without pensions, the disabled
older farm households without pension or other fixed income.
From these kinds of groups, the group of new poor is result of high unemployment as
consequence of the lost the job and majority of them live in urban centres and in households with
one or more unemployed worker. In 1996 poverty rate according Socio-economic status of head
was unemployed 31,2%; farmers 28,4%; seasonal workers 27,5%, employees non-farm 15,4%;
pensioners 13,4% [WB report 19411-mk, Vol.1, p.7]
Table 3. Rates of Unemployment in %
Age groups
<25
25<age<49
50<age<64
1996
69.53
28.18
9.94
1997
74.21
31.5
12.38
1998
70.86
29.9
15.22
total
36.0
31.87
34.48
Source: Labour Force Survey, April 1996, 1997,1998,1999, Statistical Office
1999
62.89
29.61
15.86
32.41
With the economics problems and a big unemployment decline the rate of health insurance
people from 44,6% in 1995, 43,68% in 1996, 41,56% in 1997 and it is following with many
reductions and limitations. Because these rates are less than half, majority of population is obliged
to use alternate medicine help and majority do not report having health problems.
3. Human Resource as a Factor for Economics Development
Human resource as a possible found of labour (with own knowledge, qualifications and skills)
are one of the basic elements of the economics development for every country. The abundance of
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Statistique, Développement et Droits de l‘Homme
human resource as a separate category is not factor for economics development, but together with
others factors of development (nature resources, capital and investment) make an economics
development if they are combined the effectively and efficiency. Also with double role as producer
and consumer, human resource is narrow connected with structure and moving of the economy. As
consumer has a need for goods and as a producer with own qualifications influence to the quality
and quantity of products. From the point of view of own growth it influences to volume of the
consumption founds and level of the volume of production. For growth of both the people must be
with better education or investment in education of the people is the factor for economics
development.
Now during these transition we have majority of workers who lost the job (the reason is
bankrupts of the firms, lower power of the existing firms, which are insolvent) (Table 4).
Table 4. Inflows into Unemployment
1990
1999
Employed
507324
313282
Unemployed
158323
322898
Pensioners
158964
233618
Source: Ministry of Labour and Social Politics, Seminar’ material, 2000
1999/1990
61.8%
206.4%
147.0%
Also one enough big part which work with lower wages than the national average pay, some
of them receive wages with delay of 6 to 12 months and more, and new young population which is
in age of activities can find a job very difficult. As the private sector has expended the youth
unemployment is lower, but most of them are employed with term contracts. The private sector has
grown mostly in trade, services and agriculture and the jobs are in low-paid. Youth unemployment
rate is very high in CEE countries (from 22% in Slovakia to 36% in Bulgaria in 1997 [Sixth
Periodic Report, p180] and very higher in Republic of Macedonia (Table 3).
Therefore, we have very little place of talking for economics development, because the
poverty is our reality.
4. Meaning of the Employment (Socio-economic Aspects)
It is known that the jobs in modern societies give more than an income for covering cost of
living. The job offers social contact with colleagues inside the firms and extended outside work
because the firms collaborate with other firms. The job takes a big part of the day, week or year
which is full with productive activities and the workers are not fell unsuccessful. The employment
makes the families happy and, loss the work makes the people without the contact with others or
declining the frequency of contracts with friends, narrowing the cycle of friends. For young single
people it is psychological distress and new illness. Therefore they spend all nights out of home in
some cafeterias – cafes where they are starting to use drag. Some of young Macedonians feel
socially isolated and saw their unemployment as the main reason. They avoid associating with
people their own age because they could not afford to socialise (in means gathering between
themselves). Therefore expressed pessimism about the future. Unemployment among young people
increased faster during the initial years of transition than among the rest of the work force.
In later ‘80s until especial 1989 year, which was, start year for change toward market
economy all kinds of structural changes (ownership, production, technological, organisational) were
including. The consequences from that were following by declining the share of employment. The
people lost the job and basic securities for family existence. Therefore they had to look for own
existence making own small businesses in trade, catering, financial services and own real estate.
Only those who had a job in public administration were lucky. Majorities of them were including in
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informal economic activities. In Republic of Macedonia, the reasons are same as we met in YonKim [B. Yeon-Kim, p.405]:
• there were not so many job opportunities in the formal economy (many enterprises were
closed or faced severe financial difficulties),
• the new private sector was weak and did not generate a sufficient number of new jobs to
absorb workers from the state sector which were transform holding companies and
• Low income associated with limited job opportunities in the formal economy can result in
household’s involvement with informal economy activities.
Some researchers believe that the tax evasion is universally believed as a prime motive for
informal economy activities [Smith 1989, Frey and Weck, 1983, Schneider 1994]. We are thinking
different. An informal economic activity is result of the small opportunities for finding the jobs in
formal economy.
The care for problem of unemployment get a dominance meaning in the transition economies
and that as a problem is include always in the all kind off elections (local, parliamentary or
presidential).
5. Conclusion
For the population from this region is meaning that with the economic reforms in so-called
state sector, which was, dominated. The starting of market oriented reforms - privatisation of
inefficient state-owned companies, the majority of employed people loss the job. The economic
output has declined, real drop of wages, pensions and other social transfers and the employment are
falling still which had consequences to the standards of living. The people are asking for own
existence in different ways: some of them went in informal sector, some for them founded own
businesses, and some of them went in abroad and majority of them do not know what to do until
now a decade late. The changes are being introduced in a very short period of time and the
consequences are not easy. It can be seen in economic and demographic changes (declining of GDP
- more than the level of 1989 and economic recovery was felt from 1994 and 1995, fallen of natural
growth in population (births minus deaths- from –0.1% in 1993 to 1996 and –0.3% in 1997 for
CEEC) and changes in migration (from –0,23% in 1990-1995).
One decade later after introducing of transition processes more of the old state-owned
enterprises and now joint stock companies are with financial difficulties and the growth the new
private sector is still weak. Therefore they can not generate a sufficient number of new jobs to
absorb workers shed from the and earlier state sector.
It is obvious in these circumstances, that tensions and poverty have been increasing and large
groups of the population have been transformed into socially vulnerable categories (near 2/3 of
labour has lower wages than national average pay, two-thirds the pensioners with lower pension
than average pension, near 40% of working age population, unemployed and near 20% with loss the
job receive unemployment benefits and social assistance.
REFERENCES
1. Document of the World Bank (1999) Focusing on the Poor, Report No. 19411-mk
2. E.Kwiatkowski, C. Domanski, P. Kubiak (1999) Labour Market Policies in Poland in Transition,
Forms Principles and Effects, Proceedings, Faculty of Economics, Skopje
3. European Commission, EU, (1999) Sixth Periodic Report on Social and Economic Situation and
Development
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Statistique, Développement et Droits de l‘Homme
4. B. Milanovich (1988) Income, Inequality and Poverty, The Transition from Planned to Market
Economy, World Bank
5. B. Yeon-Kim, (1999) Poverty and Informal Economy Participation in Romania, Proceedings,
Faculty of Economics, Skopje
6. S. Smith (1986) The British Shadow Economy, Oxford University Press, Oxford
7. V. Tanzi (1982) The Underground Economy in the States and Abroad, Backwell, Oxford
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