Serbia’s labour market is showing contrasting trends, with unemployment falling to a record 7.2% in the second quarter of 2026 while the number of formally employed workers declined and wages continued to increase.
The average nominal net wage reached RSD 119,736, or EUR 1,034, in January–July, representing an 11.4% year-on-year increase. After adjusting for inflation, real wages rose by 8.5%.
Formal employment fell by 0.6% year on year in January–August, leaving approximately 2.35 million people in formal jobs. The decline was concentrated in the private sector, where employment decreased by 0.7%, particularly in manufacturing and trade. Within manufacturing, the reductions affected segments including electrical equipment and clothing, highlighting the uneven distribution of employment across industries.
Productivity Gains and Changes in Industrial Employment
The simultaneous decline in formal employment and increase in economic output can partly reflect differences in performance between sectors. While some manufacturing activities reduce their workforce, other industries may expand production and exports.
Companies can also increase output through improved equipment, automation and changes in production organisation, reducing the number of workers required for a given level of production. According to the National Bank of Serbia (NBS), economy-wide productivity increased by 4% year on year in the first half of 2026, indicating that higher production efficiency is contributing to changes in labour demand.
Labour Availability and Wage Pressures
The combination of low unemployment and declining formal employment creates additional constraints for companies seeking to expand. With fewer available workers, employers may need to increase wages, invest in technology, reorganise operations or compete more actively for qualified staff.
Higher labour costs can encourage investment in productivity-enhancing equipment and processes. However, wage increases that exceed output gains per worker can also contribute to inflationary pressures, particularly in the services sector.
The labour market’s tightness is not uniform across the population. Youth unemployment stands at 22%, indicating that a significant share of younger workers remain outside employment even as businesses face difficulties finding staff. This points to a mismatch between available workers and employers’ requirements, including differences in skills, geographical location and the sectors in which vacancies are concentrated.
Policy Focus Shifts Towards Skills and Productivity
These developments place greater emphasis on improving labour productivity and facilitating the movement of workers towards expanding industries, rather than focusing exclusively on the creation of additional jobs.
Wage growth is increasingly contributing to income convergence in Serbia, a process previously supported by foreign investment through employment generation. The extent to which higher wages translate into improved living standards without renewing inflationary pressures will depend on productivity growth, workforce training and investment, alongside developments in unemployment and formal employment.
