Income inequality in Serbia is significant, experts say

NEWS 04.08.2018 12:24
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Source: N1

Inequality between the poor and the rich in Serbia is more visible than in any other country of the region, and is also significantly higher than in the European Union countries, showed a research on the income equality in Serbia, conducted by the Belgrade Faculty of Economics professors.

Commenting on the topic, Public Policy Research Centre Executive Manager Tanja Jakobi explained for N1 that, after going through the 1990s war, sanctions and hyperinflation, Serbia’s economic growth after 2000 was not followed by the employment rate increase. Above all, the country was also hit by the global economic crisis.

Jelena Zarkovic-Rakic, one of the authors of the study, said that inequality in Macedonia or Bosnia and Herzegovina is not significantly lower than in Serbia but that the difference in comparison with Slovenia and Croatia is huge. According to her, the reason for that lies in the policies that those countries chose after gaining their independence status.

“Both Slovenia and Croatia chose a modern, progressive tax system, within which the more you earn the more you give to the country. We chose a single tax rate for everyone. We said back then this could help us to be more competitive but it was not crucial for investors,” said Zarkovic-Rakic.

She pointed out that the employment rate started to grow in 2012 but only in the low-paid jobs’ sector.

Jakobi deemed that the problem was also in the heritage of bad educational structure.

“We have many workers who lost their jobs during the privatization and they had no possibility to re-qualify or find a new job- We have an education system which educates the citizens to be registered with the employment bureau,” Jakobi concluded.

According to her, the opening of the low-paid jobs only increases the inequality, as the children from these families are unable to achieve better results in school and advance in that sense.

Speaking of the minimum wage, Zarkovic-Rakic noted that a salary of 20,000 Serbian Dinars (RSD) (some EUR 169) is not sufficient for the living but is huge for the employer who pays taxes and contributions.

“The problem lies in taxes and contributions. The new finance minister announced that contributions may reduce. That is a delicate matter because they (contributions) are important for the budget. (…) Our minimum wage is high, compared to the average wage, although you cannot live with RSD 20,000 per month,” Zarkovic-Rakic concluded.

Both Jakobi and Zarkovic-Rakic noted that social insignificant amounts are earmarked for social welfare – only 0.3 percent of the GDP – which is double less than in Slovenia. They find it positive that the social welfare was not reduced during the crisis period but they think it is not good it is still very low.

(EUR 1 = RSD 118.21)