In December, Serbia’s average net salary exceeded the value of the average consumer basket for the first time. However, despite progress in workers’ incomes, Serbia still lags behind the European Union in labor costs. According to Eurostat, labor costs in Serbia are five times lower than the EU average.
In Serbia, the average cost per employee per working hour is around 1,000 dinars (about 8 euros), compared to 33.5 euros in the EU and 37 euros in the Eurozone. However, this gap has decreased from previous years, with labor costs in Serbia rising to 11 euros per hour from around 5 euros between 2012 and 2016.
The key issue for Serbia is its tax and social security system, which burdens employers, especially at the minimum wage level. The system’s high taxes at lower wage levels contribute to low net income for workers. There is a call for a more progressive tax system to alleviate this burden.
Another factor affecting Serbia’s labor costs is the structure of its economy, with lower wages in sectors such as agriculture and simple services, where low-skilled workers dominate. Additionally, the informal economy in Serbia, accounting for 21% of employment, also affects wage levels and productivity.
A progressive taxation system, with exemptions for dependent household members, is seen as essential to improve the financial situation for both employers and employees. Currently, the lack of such exemptions leaves those on minimum or average wages with higher tax burdens.
