Employment growth as a challenge of a non-political economy

In a developed economy with healthy growth, employment increases as a result of:
✔ Increased public and private investment,
✔ Development of value-added sectors,
✔ Improvement of the business and innovation climate,
✔ Well-oriented policies on vocational training and workforce mobility.

For example, countries like Poland, the Czech Republic, and Estonia, which have undergone successful transformations, have increased employment not only in numbers but also in quality by improving wages and productivity.
In Poland, employment growth between 2010–2020 was supported by the development of technology, industry, and sophisticated services, not just in low-wage sectors.

In Albania, during this period, employment growth came more from formalization of jobs (2015–2017) than from the creation of new jobs in value-added sectors.
From our ongoing analyses, the main issue hindering labor market expansion is the narrow economic base, which reflects a lack of a sustainable economic model.

What are the characteristics of the labor market in recent years?
Firstly, it is dominated by low-productivity sectors. It relies mainly on trade, services, and construction, which have low productivity and offer low wages. For instance, in 2019, employment in these sectors accounted for over 75% of total employment. This structure has not changed.
Trade and construction often have low value-added, making growth more uncertain. In 2023, the construction sector grew by 8.1%, but average wages remained at 700 euros/month.
The economy lacks advanced industries and investments in technology, which hinders productivity and competitiveness. According to the World Bank, the industrial sector represented only 21% of GDP in 2023, far below the EU average.

Employment growth remains uncertain due to reliance on fragile sectors vulnerable to global and domestic crises. For example, after the COVID-19 pandemic, around 30,000 jobs were lost in tourism and services.
Given the overall outlook, investment in manufacturing, technology, and innovation is key to increasing productivity and higher wages.
Growth in sectors like renewable energy and advanced technology could rescue the economic model and create sustainable, value-added job opportunities.

Secondly, the increase in the number of employed people has not brought strong wage growth. Wage growth in Albania, particularly in the public sector, has been noticeable, but it has created a deep gap with the private sector, which has not benefited to the same degree.
Low productivity and deficiencies in key sectors such as industry and technology have hindered balanced and sustainable economic growth.
The average wage in 2013 was around 360 euros, rising to 576 euros in 2021 and reaching 830 euros in 2024—driven mainly by the decision to raise public sector wages.

Public Sector

• In 2021, the average wage was 70,531 ALL (576 €).
• In 2024, the average wage rose to 100,437 ALL (1,000 €).

Private Sector

• In 2021, the average wage was 54,482 ALL (445 €).
• In 2024, the average wage reached 76,000 ALL (760 €).

The average wage difference in the private sector is three years behind the public sector.
A comparison with neighboring countries shows that wage growth in Albania is lower compared to countries that have experienced higher wage increases and faster productivity improvements.
In a successful economic model, there should be parallel growth of wages and productivity. In Albania, this parallelism has been missing, making wage growth more a result of political decisions rather than significant improvements in productivity in key sectors of the economy.
The need for a sustainable economic model is urgent, where wage growth must be closely tied to productivity gains and investments in industry and innovation.

Thirdly, high emigration is a clear indicator of the failure of the economic model. Between 2011 and 2024, it is estimated that 1,100,000 Albanians (over 90% of working age) emigrated, mainly to Germany and EU countries.
This figure represents a large portion of the active population, directly affecting the labor market and economic development.
The lack of a competitive economy clearly shows that the economy shaped by governments, politicians, and businesses has failed to create high-paying jobs and long-term stability.
Wage increases have not been reflected in productivity. The average wage has mostly increased due to public policies, not as a result of productivity growth.
The dominance of low-profit and largely non-productive sectors has kept the economy at a survival level. The economy is reliant on trade, construction, and services, which offer low wages and little innovation.
Insufficient investments in industry and technology, unsupported by strong productive sectors, have forced young people and professionals to seek opportunities abroad.

A successful economic model should:

• Retain the workforce within the country by offering better opportunities.
• Attract foreign investment in strategic sectors such as technology, industry, and innovation.
• Ensure sustainable economic growth by avoiding dependence on low-value-added trade and construction.

This has happened occasionally, but not with a consistent, intensive, and quality-driven approach year after year.
The fact that over 1 million Albanians have emigrated clearly shows that the economy has not been able to retain and develop its workforce.
True economic growth is not only measured by higher wages but by the sustainability and attractiveness of the labor market.
Albania needs a change in its economic model to stop the hemorrhaging of the workforce and to create a more sustainable future.

Fourthly, forced formalization, not organic employment growth—achieved through government anti-informality campaigns (more as a cover for weak administration than part of sound, integrated policies)—has only brought short-term, non-sustainable results for the long-term economy.

Between 2015 and 2017, employment in Albania increased significantly, but much of this increase was not organic. It was mainly the result of job formalization by the previous government.
The main reason was forced formalization through intensive tax inspections and penalties for businesses operating informally.
This policy led to an artificial increase in the number of declared employees but not necessarily a real expansion of the economy or job creation.
Employment should result from economic development, not fear of punishment. Many businesses were forced to legalize workers but without improving their real conditions.
The economy did not experience a significant increase in productivity during this period. Some small businesses closed, reducing jobs in the private sector.
After the initial pressure of formalization, many businesses found new ways to avoid taxes, showing that the problem was not sustainably solved.
Hidden unemployment and emigration continued to grow, demonstrating that employment growth was not the result of a stronger economy.

Formalization is necessary for a healthy economy, but it must go hand in hand with business facilitation and economic development—not just through penalties.
The model followed in Albania during this period brought about forced employment growth, but not sustainable growth.
Without an economy that produces value-added and new opportunities, forced formalization only shifts the problem rather than solves it.

Can the higher number of jobs compared to 2013 be considered an economic policy success?
If compared only with previous periods in Albania, it is clear that:
✔ Greater formalization of the labor market has been achieved.
✔ The number of jobs has increased by an average of 27,500 jobs per year.
✔ The economy has not experienced a major crisis during this period.

But if compared with a successful economic model, it is assessed that:
❌ Employment is concentrated in low-productivity and low-wage sectors.
❌ There is no strong wage growth or welfare to balance emigration.
❌ Mass emigration shows that citizens do not perceive the economy as stable.
❌ There has been no transformation of the economic model towards innovation and value-added production.

What would constitute real economic policy success?
✅ Diversification of employment sectors, meaning more sustainable industries and technology.
✅ Increased foreign investment in production and innovation.
✅ Improvement of wages and working conditions, not just an increase in the number of employed.

✅ Reduction of emigration by creating conditions for the workforce to stay in Albania.
✅ Linking education to the labor market to enhance workforce quality.

Employment growth in Albania during this period is not necessarily a success of economic policy when compared to developed models.
Employment growth has not been sustainable and has not brought noticeable improvement in citizens’ welfare.
Albania’s economic model has remained reliant on low-productivity sectors, and mass emigration confirms this failure.

How should Albania’s fiscal and economic policies change to pursue a more successful model?

An integration of policies and a transformative approach are essential to building a successful economic model. This requires the coordination of fiscal, tax, educational, and development policies with the goal of creating conditions that foster improved productivity, innovation, and the quality of the labor force. A transformative approach also involves greater inclusion of technology, diversification of economic sectors, and increased market competitiveness.

To achieve this, it is necessary to:

• Reform vocational education and universities by aligning them with the needs of the labor market and industry.
• Stimulate both foreign and domestic investments in high value-added sectors, such as technology, advanced manufacturing, and professional services.
• Reduce bureaucracy and political patronage, which sustain corruption as a mechanism for holding onto power. Instead, innovation should be promoted through a depoliticized and corruption-free administration that creates an environment where businesses can grow without administrative barriers.

Is it possible to implement these changes in Albania, considering the challenges posed by conflicting political and economic interests?

We believe it is, as an inclusive commitment is key to achieving sustainable transformation. To enable the possibility of a successful economic model, all relevant stakeholders must be involved, including:

• The state and public policy: The government must take a leading role in creating a stable and predictable environment for businesses and investors. A strong commitment to deep reforms—ensuring transparency in policy-making, reducing bureaucracy, and establishing a fair tax system—can foster confidence and attract new investments.
• The private sector and entrepreneurs: Businesses must commit to improving productivity, increasing investment in technology and innovation, and developing decent job opportunities. They should contribute to building a sustainable economy by investing in e-commerce, renewable energy, and innovative sectors that offer high value-added employment.
• Civil society and the education sector: Education and vocational training should be tailored to the needs of the labor market to ensure that the workforce is capable of meeting the challenges of an increasingly globalized economy. Civil society, through NGOs and interest groups, can provide policy oversight and help raise public awareness about the importance of reforms and potential improvements.
• Inclusion of the diaspora and global integration opportunities: The Albanian diaspora, as a significant source of knowledge and investment, can play a major role in shaping policies and creating new business relationships and investment opportunities.

Albania should capitalize on trade agreements and European Union integration opportunities to enhance competitiveness and gain access to technology and finance. These are some of the approaches that could contribute to achieving an inclusive opportunity for economic development. The engagement of all interest groups in the development of policies and strategies through open dialogue between government, business, civil society, and education is crucial for aligning labor force skills with market demands. This increases the likelihood of building a successful model and a long-term vision, while maintaining a b