Serbia’s labor market is facing a number of challenges, with rising labor costs, labor shortages, and a need for tax reforms to maintain competitiveness. While unemployment was at 8.1% in 2024, real wages have risen significantly, and employment has slightly increased. However, the growth in unit labor costs, especially in the industrial sector, is threatening the country’s economic competitiveness.
Experts suggest that to remain competitive, Serbia must address rising labor costs without harming employment levels. Mihail Arandarenko, a professor at the Faculty of Economics in Belgrade, notes that despite rising wages, employment is increasing, and real wages are still below the equilibrium level. Labor costs have grown by 30% since 2017, with significant increases in the industrial sector.
Darko Majstorović, president of the Association of Entrepreneurs and Businessmen, highlights the burden of high taxes on wages, suggesting that reducing taxes on net wages would help alleviate this pressure. He also advocates for subsidies to support domestic labor over the influx of foreign workers, particularly as the state has liberalized foreign labor imports.
The supply of domestic labor is shrinking, with 50,000 fewer people entering the workforce annually, which has increased Serbia’s appeal to foreign workers. Wages for foreign workers in Serbia have risen by 80% since 2019, attracting workers from countries such as Russia, China, Turkey, and India. However, Arandarenko expects the influx of foreign workers to slow down as their numbers are still modest.
Companies are compensating for rising labor costs by digitizing processes, automating operations, and investing in employee training and benefits. Companies like Nelt have invested millions in salary increases and employee development. Despite the increase in labor costs, experts emphasize that investing in employees yields long-term benefits for companies.
Looking ahead, economists predict a slight increase in employment and productivity in 2025, but the growth in real wages and labor costs may slow down. There is concern that if fiscal policies continue to increase real wages without corresponding productivity gains, it could lead to higher inflation and external deficits. While the European economic slowdown may impact Serbia, the country’s diverse economy and public investments offer some optimism for future growth.
