Calendar Updated: April 3, 2014
News > The World Bank Country Manager's Blog no. 6: Serbia – state employees galore, but where is the private sector?

The World Bank Country Manager's Blog no. 6: Serbia – state employees galore, but where is the private sector?

Recently in the hotel “Club A”, at Kopaonik, a man was having his morning coffee and talking on his cell phone.

“Hi there, I have found you a job with EPS”, he was saying. “You will work in the protocol of the general manager. The pay is around 50,000 dinars, not much. But once you get the job you will stay there for life. General Manager will interview you next week, Thursday.”

Well, the consequence of this and similar conversations is that Serbia today is by far the biggest state employer in the region, and even in Europe.

I looked at data and here is what I found.

Serbia employs 585,000 people in public administration, as defined by Eurostat (this means including defense but not including SOEs and local government staff), health, education and social protection.  According to Eurostat, countries of relatively comparable size, such as Hungary, the Czech Republic, Bulgaria and Belgium employ from 229,000 (Bulgaria) to 307,000 (Czech Republic), or 317,000 (Hungary) with Belgium the highest at 403,000.

Another number, even more striking, is that Serbia employs even more staff in its public sector than Montenegro, which as a small country one would expect to have a relatively higher number of general government employees. While Montenegro employs 73 people per 1,000 citizens, Serbia employs 92 per 1,000 citizens! One other thing that really makes no sense is that while the number of children is going down the number of teachers goes up. Don’t you think there is something wrong there?

God knows where we would end up if we add the number of those working in all state and publicly owned companies (such as EPS)?! What we do know is that Serbia after 15 years of transition still employs almost as many people in the public sector than in the private sector.

No wonder then that Serbia is also the dismal leader in the amount of money it spends on public sector wages.  Compared to 10 other European countries, mostly new EU Member States, Serbia devotes more of its Gross Domestic Product (GDP) to public sector wages than any other country, bar Slovenia. 

Serbia is the only country - among the eleven I looked into - that over the last five years not only increased the number of employees in the public sector but also increased the portion of its GDP spent on public sector wages. While other countries, such as the Baltic States, rapidly decreased wage bill spending after 2008, Serbia first kept spending flat in 2009-2011, then rocketed upwards in 2011, a trend continued for much of 2012.  And who pays all this? The smaller and smaller number of Tax payers, of course.

The sad story doesn’t end there. The system by which salaries to public sector workers are calculated and paid is made so complicated that hardly anyone can make head and tails of it. For example, there are 8 different base pay calculations, more than 900 coefficients and 72 elements which determine the salary and its development. This makes it possible that people get different salaries for the same job and opens the space for abuse. 

But the worst part of this tale is that, in spite of putting all that money in public sector salaries, Serbia still gets bad results. Its health indicators are one of the worst in Europe compared to funds spent, it scores badly in PISA test for pupils, according to Transparency International Corruption Perception Index in 2011 Serbia ranked 72 out of 177 countries…  

It seems obvious that reforms are urgent, but also imminent. The Government is keen to change things for the better and we are ready to help and support those efforts.