Unemployment and Poverty in Albania

in Economy

Albania’s strong economic performance prior to 2008 was accompanied by positive changes in employment and a strong reduction in poverty rates. The poverty rate, measured by nationalstandards, decreased from 25 percent in 2002 to 12 percent in 2008, and rural poverty dropped by an even more impressive rate from 40 to 15 percent over the same period.
However, the effects of the global and Eurozone crises and sluggish growth appear to have modestly reversed the poverty trend. Labor markets and transfers—public and private—have been key channels for impacts on living standards. The Living Standards Measurement Study (LSMS) data for 2012 indicate that the poverty rate has increased to 14.3 percent since 2008. The extremely poor population, defined as those with difficulty meeting basic nutritional needs, increased from 1.2 percent in 2008 to 2.2 percent in 2012. Extreme poverty has increased for both urban and rural areas. This development is also supported by Labor Force Survey data on employment, which show that 27 percent of Albanian households had at least one member who had lost a job versus a Europe and Central Asia (ECA) average of 18 percent. Available data on the unemployment rate indicate that it increased from 12.5 percent in 2008 to 18 percent in 2014, with the lack of jobs being more pronounced in vulnerable groups such as youth and women. The persistent output gap and strains in the labor market are also reflected in the declining trend of the labor force participation rate. The increase in poverty was partly mitigated by income from pensions and social transfers.
There has been progress on setting up a social safety net for the poor. Further measures are planned to improve equity, efficiency, transparency, and effectiveness in the use of resources for social protection. Ndihma Ekonomike (NE) is the main poverty-oriented cash benefit social assistance program, providing a monthly cash allowance to approximately 7.3 percent of the population (about 100,000 households) on the basis of a means test. Overall spending on social assistance is comparable to other countries in the region (about 1.7 percent of GDP), but the composition has gradually shifted away from benefits targeted to the poor. The relative balance in spending on the NE and disability assistance has shifted significantly over time in favor of disability benefits, crowding out resources for NE. Only about one-quarter of total spending on social assistance in Albania (1.6 percent of GDP) is devoted to NE (0.4 percent of GDP). The poorest 20 percent of the beneficiaries receive 56 percent of all NE transfers, while in the best performing social assistance programs in the ECA region, at least 80 percent of benefits reach the poorest 20 percent of the population. The Government, with World Bank support, has initiated reform of the program to improve its link to poverty, in terms of both transfers from the central level to the municipalities and the selection of beneficiaries at the municipality level.
The World Bank is supporting social protection in Albania through the ongoing Social Assistance Modernization Project, which is supporting social assistance and disability reform. The project is providing support to the Government’s implementation of reforms to improve the equity and efficiency of cash-based social assistance as well as disability programs. Under the equity objective, improving targeting and coverage is a key component of the reforms in both programs.

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