Serbian businesses are facing higher labour costs alongside declining formal employment, as rising wages, lower unemployment and improving productivity reshape the country’s labour market and investment conditions.
Average net monthly earnings reached RSD 119,736, or approximately €1,034, in January-July 2026. Nominal wages increased by 11.4% year on year, while inflation-adjusted earnings rose by 8.5%. Despite stronger pay growth, formal employment contracted by 0.6% year on year in January-August, leaving approximately 2.35 million people in formal employment. Much of the decline was concentrated in the private sector.
Manufacturing and Trade Record Employment Declines
Manufacturing was among the sectors reporting job losses, with electrical equipment and apparel production particularly affected. Employment also weakened in trade, indicating that the contraction was not limited to industrial activities.
Meanwhile, Serbia’s unemployment rate fell to a record-low 7.2% in the second quarter, a decrease of 1.3 percentage points compared with the same period a year earlier. Youth unemployment declined to 22%.
Productivity Growth Changes Business Cost Structures
The combination of rising wages, falling formal employment and lower unemployment points to tighter labour-market conditions. Companies are facing higher payroll expenses even as some industries reduce their workforces.
At the same time, economy-wide productivity increased by 4% year on year in the first half of 2026, providing an additional factor in assessing the relationship between labour costs and economic output.
Investment Shifts Towards Skills and Automation
For investors, Serbia’s changing labour-market conditions increase the importance of automation, workforce productivity, infrastructure, engineering skills and access to European markets in determining business competitiveness, alongside traditional labour-cost considerations.
Rising real wages are also supporting household purchasing power and consumer spending, helping sustain retail activity despite the decline in formal employment. The ability of companies to translate higher labour expenditure into greater output per worker will be an increasingly important factor in Serbia’s evolving investment model.
