POLYTICAL ANALYSIS
The Social Condition in the Republic of Macedonia in 2012
Why Republic of Macedonia is on the world’s 1st place in misery
and how can the citizens be helped?
1
Institute for Social Democracy "Progress"
Varsavska 1, Po Box 42, 1000 Skopje
Republic of Macedonia
T +38923061770
F +38923061775
Е [email protected]
www.progres.org.mk
Twitter: @Progres Institut
Facebook: Progres Institute for Social Democracy
YouTube: ProgresTube
2
Abstract
The influential “Economist” in the beginning of 2012 placed the Republic of Macedonia
on the first place on its index of misery.
This analysis similarly confirms that life becomes more difficult for the citizens in the
Republic of Macedonia. Life expenses increase, the poverty widens and deepens, the
unemployment does not go down, and same goes for the unproductive public spending
that do not go down.
On the other side three quarters of the families can afford only food and basic utilities,
more than half of the citizens consider that the budget is spend in favor of the
government, and two thirds say that the government is doing a poor job cutting down
the poverty and unemployment.
The negative social trends are destroying the social cohesion.
To improve the social conditions and to decrease the social revolt in the short term we
suggest immediate implementation of the law on minimal wages for all areas and to
open “SOS Social Stores”.
In the long run, Republic of Macedonia needs to introduce progressive income taxation
to reduce the social inequalities.
3
Introduction
Life in The Republic of Macedonia is becoming
more difficult than ever. The standard of living
shows signs of a continuous decline. This is
becoming more obvious by analyzing the
factors which determine it, like the index of
the costs of living, poverty rates, the
unemployment levels and the rate of inflation
which show signs of deterioration.
For example, the famous and influential
Economist combines the unemployment level
and the inflation rate to calculate the so called
Index of Misery. Using this method, The
Economist, in the beginning of 2012 showed
that R. of Macedonia is the leader in the
world’s misery.
This was more than enough a provocation to
conduct this analysis. We wanted to see what
were the actual social and economic
conditions of people living in Macedonia and
what are their perceptions related to the
relevant Government policies. The analysis
took into account all the data that is publicly
available, especially the data from The State
Statistical Office. In addition to this data, we
wanted to examine the impact of these trends
via a comparative analysis on the perception
of the citizens and conducted a telephone
survey.
The survey which was carried out by the
Institute for Social Democracy "Progress"
included several questions that were used to
measure the perceptions of the population in
terms of current social trends and their
impact on standard of living in Macedonia.
The telephone survey was conducted from
17th to 19th February 2012. By a random
choice, 1.116 respondents were included,
regardless of their political, national or social
affiliation. The topics on which the
respondents were answering were: the
amount of income and whether it meets the
costs of living; the distribution of the state
budget; dealing with poverty and the social
unrest.
The results are subject to a statistical error of
+ / - 3%, and all important demographic data
is included in the annex of this analysis.
The research that we carried out confirms our
concerns. The conclusion is that the citizens of
R. of Macedonia live a much harder life, which
is reflected by the declining standard of living.
We have noted that the salaries cannot keep
up with the drastic increase in the costs of
living, which is evident in the last period. Also,
the number of poor people increases,
followed by a trend of even greater
impoverishment of the poor. In terms of
public perceptions of the social trends, the
survey offered a plastic insight into the social
condition in the Republic of Macedonia.
The majority of respondents in the survey
(46.8%) stated that their salaries were not
enough for anything more than covering the
expenses for food and bills. Also, there is a
remarkably big dissatisfaction of the citizens
in the state budget funds spending. Even
54.2% of respondents stated that the budget
was used by the government for its own
purposes and not for the purposes of the
people, while only 18.5% of respondents have
supported the budget spending.
In the field of poverty and unemployment the
citizens protested even more. 64.5% of
respondents said that the measures taken by
the government to deal with this issue did not
yield results, versus 21.1% who thought the
opposite. Finally, bearing in mind the previous
conclusions, we have to mention the
increasing social dissatisfaction among the
citizens, who are increasingly willing to
express their dissatisfaction on social protests.
A worrying finding is that 42.2%, or more than
half that took opinion on this issue, would
express their dissatisfaction towards the
government on a social protest, against 41.3%
that would avoid gatherings of this kind.
Negative social trends are increasingly
destroying the social cohesion. It is necessary
to take measures to prevent these negative
4
trends that continue to intensify, before anger
escalates into social protests.
To overcome these problems we recommend
the three following measures:
1.
Immediate entry into force of the Law
of Minimal Wage in all industries. As it is
known, in the most socially concerned
industries (textile, footwear and leather
processing), the minimum salary of 8,050
denars (131 EUR) has been delayed for
implementation in 2015, and the employees
in these industries currently have the lowest
personal income.
2.
Introduction of the so-called "SOS
Social Stores" in which the most socially
vulnerable would afford buying the most
necessary commodities with their social
support compensation.
In the long term, Republic of Macedonia
needs to introduce a progressive income tax.
This measure, among other benefits, would
reduce the social inequality and provide funds
to help the most vulnerable social strata in
the Republic of Macedonia.
Decreased standard in numbers
The index of costs of living is the first indicator
that we should take into account in forming
an overview of the trends associated with the
standard of living in a country. Also the index
of costs of living is a coefficient which is
regularly calculated by the State Statistical
Office (SSO).
In January 2012 compared to January 2011,
the costs of living in Macedonia have
increased by 3.19%. The costs of living in
January 2011 compared to January 2010 were
higher by 3.08%, while in 2010, taken in
general, the costs were higher by 1.6%
compared to 2009 1.
Moreover, according to the SSO, the cost of
electricity for less than one year (from April
2011 - January 2012) has increased by 12.3%.
On the other hand, the cost of central heating
in the region of Skopje, on average has
increased by 21% in less than a year (Aug
2011-Jan 2012). Accordingly, in the latest
release of the Albanian Energy Regulatory
Office, The Republic of Macedonia with an
average price of 6.78 cents for kWh, after R.
Albania (7.21 eurocents per kWh), pays the
most expensive electric energy in the Western
Balkans Area and this trend tends to be
followed by even larger increases, because of
the liberalization of the electric energy
market.
The cheapest electricity in the Balkans is
distributed in Kosovo, where citizens pay 4.95
eurocents, followed by Serbia and BiH which
pay 5.81 to 5.42 eurocents per kWh.
At one hand, the costs of living in the R. of
Macedonia have been dramatically and
continuously increased along with the
inflation and indebtedness of the citizens. On
the other hand, high unemployment rate is
not reduced, related to the fact that the
average salary is in relative stagnation in the
last two years and amounts 20,798 denars for
September – November 2011 2 and 21,415
1
Calculated by the Calculator of costs of living within the
website of SSO
2
SSO Report no. 4.1.12.07 from 27.01.2012
5
denars for December 2011 3, which is lower by
0,2% than the average salary in December
2010 (ammounting 21,454 denars) 4.
The rise in costs of living faced by the citizens
contributes to increasing impoverishment of
the people in The Republic of Macedonia. It is
clear that
the
standard of
living in
Macedonia can’t keep up with the latest
increase in costs, and the average family can
barely make it to the end of the month.
4.7%; milk, cheese and
and meat by 2.7%.
eggs by
4.5%
Unfortunately, the
SSO in
2011 no
longer calculates the Consumer’s Basket for
the reasons of "misinterpretation by the
public"
and
harmonization
of
the
methodology with EUROSTAT. At the time
being, there isn’t a comparable indicator that
would compare the Macedonian standard to
the European countries.
The standard of living expressed through the
costs needed to fill the consumer basket is
another
indicator reflecting
negative
social trends. This indicator shows
monthly
costs of food and drinks of an average family
of four.
According to the SSO, for the last quarter of
2010, the costs of an average family for the
consumer’s
basket
amounted from 57.5% to 58.8% of
the
average salary in Macedonia.
When
this data
is
correlated to the
unemployment rate (further described below)
and the fact that a large number of
Macedonian families are living with only one
salary,
then it
becomes
clear that a
large proportion of families in Macedonia,
beside
meeting
the needs
for food and paying overhead costs, cannot
afford anything more.
Today,
the
situation is
most
probably more dramatic if
we consider the
last trend
of price
increase in
early
2011, which is still present. For example,
according to the SSO’s report No. 4.1.12.03, in
2011 compared to 2010, an increase in food
expenses of 6.2% was observed. The largest
increase was observed in: oil and grease by
23.6%; bread and cereals by 10.9%; fruits by
3
4
http://www.stat.gov.mk/sdds/nsdpmon111.htm
SSO Report no. 4.1.11.18 from 10.03.2011
6
Chart no. 1 Index of costs of living in the period 2000 to 2010
Index of costs of living in the period 2000 to 2010
Source: Index of costs of living in the period 2000 to 2010, “Macedonia trough numbers 2011”, report of The State Statistical Office
Deteriorated standard is reflected in the perception of the people
Our survey results confirmed the statistical
data from State Statistical Office. The results
show that the perceptions of the respondents
generally coincide with the actual condition of
worsened living standard measured by
statistics office.
Regarding the question "What can your family
afford with the monthly income," the majority
of respondents (46.8%) responded that they
can only afford for food and housing
expenses.
Food, housing expenses and other essential
products could be afforded by 18% of
respondents, while only 5.4% responded that
they can afford everything they wanted.
A
worrying
percentage
(27.9%)
of
respondents said their monthly income is only
enough to cover the costs of food. The
percentage of answers of respondents, whose
income is sufficient to buy only food,
coincides with the index of poverty, which in
Macedonia approximately amounts 31%.
If the age structure of respondents is
included, the most pessimistic perceptions of
respondents who belong to the age group of
40-49 years of age was observed, of which
32.1% have income enough to cover only the
cost of food.
The largest percentage of respondents aged
18-39 years (52%) responded that the income
was sufficient to cover the costs for food and
housing expenses. Most optimistic were the
perceptions of respondents aged 18-29 years,
7
of which 9.3% responded that they can afford
everything they want. This is a great
contradiction to the unemployment rate in
this age group, which, according to the SSO is
about 45%.
Namely, while young people from EU and US,
on average, receive their first working
engagements at 20 years of age or earlier
(while studying) and begin to build a serious
career after around 25 years of age, a large
percentage of our population is a financially
dependent population. The percentage of
9.3% probably corresponds to some of the
young people who represent a dependent
urban population, whose parents are realizing
high income.
As for the earnings of the respondents which
were segmented by the degree of education,
the
results
proved
to
be
quite
logical. Respondents with lower levels of
education have lower income, and those who
are more educated, believe that they can
afford more, which coincides with the actual
situation of wages amount by education in the
R. of Macedonia.
Most respondents who have not / have
completed only primary school can afford
covering only the food costs, and this figure
ranges from 43.8% to 50.7% for the first and
second category respectively.
The largest percentages of respondents who
have completed high school and college,
however, have revenues sufficient to cover
the costs for food and housing (from 50.4% to
46.5%). The highly educated respondents
29.3% could, besides food and bills, afford the
purchase of additional goods, while only 9.4%
of this category stated they could buy
everything they wanted.
For
the
families who have
one or
more unemployed, the family income in the
highest percentage of respondents was
sufficient to cover only the costs of food and
food
and
housing (41.8% and 42.8%
respectively). Part
of this
group, whose unemployment has a voluntary
character, can afford everything they
wanted (2.5% of the unemployed).
As for the employed, the social picture is the
worst
for
respondents living from
agriculture, ie 54.5% of
respondents who were engaged in this
industry could afford covering only the costs
for food.
Only 27.3% of agricultural families could cover
the costs of food and housing, while none of
them (unlike some of the unemployed), could
afford anything they wanted. This is due
to fragmentation of
agricultural land, outdated equipment and
production technologies, and food production
mostly for personal consumption.
Predictably, in the most part, the pensions of
retirees are sufficient only to cover the costs
for food and housing. Among employees in
state administration as well as those
employed in the private sector have
insignificantly small differences (ranging
within about one percentage in the same
category).
The majority of respondents from these two
categories can cover the cost of food and
housing with their income (51.1% - 52.4%)
and only 24.5% and 23.2% of these two
categories can afford purchasing other
necessary goods.
On the other hand, the owners of private
businesses show greater disparity in the
perception of their purchasing power. On one
hand, most of the respondents in this
category reported that their income is
sufficient only for food and housing (owners
of companies with one or few employees
founded mostly for self-employment). On the
other hand, 14.3% in this category stated that
they could afford everything they wanted
(presumably owners of larger businesses).
8
Chart no. 2: Answer on the question “What can Your Family afford with the monthly Family income?” by employment/industry.
What can Your Family afford with the monthly Family income?
60,0%
Food only
50,0%
40,0%
Food & Overhead costs
30,0%
20,0%
Food, Overhead costs and
Necessary Goods
10,0%
,0%
Anything they want
Undecided
Source: Telephone survey conducted by the Progress Institute, 17-19.02.2012
The survey results according to the ethnic
composition of the population shows that the
majority of Macedonians, Turks, Serbs and
Vlachs can cover their costs for food and
housing, while the majority of Albanians and
Roma can only cover the food costs.
Roma, according to this survey are the
poorest ethnic group in Macedonia in which
72.2% can afford nothing more than buying
food. The survey shows that although only
20.9% of Macedonians can afford other
necessary supplies, and only 6.6% are wealthy
enough to afford everything they wanted,
Macedonians live better than the second
biggest community in Macedonia – the
Albanians, which have a percentage of "rich"
of 2.3% (those who can afford everything they
want). Serbs and Macedonians, according to
the survey show very similar perceptions that
lay within the statistical errors.
The data of the survey on perceived standard
versus real wages is an excellent indicator of
people's perceptions on their economic status
and purchasing power they have with their
salary. Although the information on the
perceptions of the respondents belonging to a
same income group vary by a small margin,
the survey shows a trend which more or less
reflects that people’s perceptions go in line
with the income groups they belong to.
Almost 60% of respondents whose monthly
family income is bellow to 10.000 denars
answered that the income they receive is
enough only to provide them with food. If this
data is linked to the fact that the most recent
calculation of the SSO showed that the
9
consumer’s basket expenses amount 12.342
denars, then we will assume that these
families live below the poverty line. A minor
mitigating circumstance is that some of these
families are farm families who produce their
own food, so that a part of the costs of food is
probably covered by their own production.
answered that their family income is sufficient
to cover their costs of food and housing, and
those with income over 40,000 denars, can
afford, in general buying other necessary
goods. 18.3% of the families with income over
40,000 per month said they can afford
everything they wanted. The results are
shown in the graph number 3.
The majority of respondents with monthly
income of 10,000 denars to 40,000 per month
Chart no. 3: Answer on the question “What can Your Family afford with the monthly Family income?” according to the Monthly Family
Income.
What can Your Family afford with the monthly Family income?
80,0%
70,0%
Food only
60,0%
Food & Overhead costs
50,0%
40,0%
Food, Overhead costs and
Necessary Goods
30,0%
Anything they want
20,0%
10,0%
Undecided
,0%
<6.000
6.000 - 10.000 - 20.000 - 30.000 - > 40.000
10.000 20.000 30.000 40.000
Monthly Family Income (in denars)
Source: Telephone survey conducted by the Progress Institute, 17-19.02.2012
Predictably, depending on the place of
residence, the worst conditions of living occur
in the villages, while the living in towns and
cities is modest on average.
only cover their costs for food and
housing, 28.8% of the population can afford
other necessary goods, while 9.2% of the
citizens of Skopje could afford everything they
wanted.
Living in Skopje is better than the rest of the
country, but still modest. In Skopje, the
largest percentage of the population (45.4%)
10
Increased impoverishment of the people in Macedonia: trend in recent years
Poverty has been the most serious problem in
Macedonia, which drastically reduces the
standard of living of the population. The
existing high rate of poverty is further
increased in the recent years due to the
impact of the global economic crisis on
macroeconomic indicators such as declining
economic growth (GDP decrease of 0.9% in
2009 and a low rate of GDP growth of 1.8% in
2010).
Among the other factors affecting the
decrease of the standard of the population is
mainly the unemployment, which is
constantly present in Macedonia at a rate of
about 30%; increase of the index of retail
prices which showed an increasing figure of
about 2.6% in 2010 versus 2009 and over 4%
in the first three quarters of 2011 versus
2010; the dramatic rise in costs of living
caused by a large increase in overhead costs
(i.e. electricity and central heating), which
boosted the rate of inflation (especially in the
first and second quarter of 2011year with
rates of inflation of 5.2% and 4.1%) and other
factors that show smaller but noticeable
effect of the standard. Poverty as an
extremely negative social phenomenon
progresses even more.
Chart no. 4: Poverty Indexes in R.of Macedonia
Poverty Indexes in R.of Macedonia
35,0%
30,0%
31,1%
30,9%
28,7%
25,0%
Head Count Index
20,0%
Powerty Gap Index
15,0%
9,2%
10,1%
10,9%
10,0%
5,0%
0,0%
2008
2009
2010
Year
Source: State Statistical Office
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Poverty is measured by the most common
two indicators: The Head Count Index and The
Poverty Gap Index. These indicators are based
on the poverty line, which represents a part of
the income of a family that is required to
cover the most necessary needs of life of its
members.
The poverty line in the R. of Macedonia is
defined on the margin of 70% of median
equivalent consumption of necessary goods,
and represents the percentage of people
whose income is below 70% of the median
equivalent consumption. Those families which
are living below this income line are classified
as poor. The costs of provide the most
necessary goods refer to the costs that a
family singles out for buying the necessary
food and other products and services.
The indicators of poverty for The R. of
Macedonia are a troubling. The Head Count
Index which shows the percentage of the
population living below the poverty line is
31% for 2010, meaning that the percentage of
the citizens of Macedonia have not been able
to meet 70% of the necessary needs of life on
a average Macedonian family. This value is
almost unchanged in the period from 2008 to
2010, and with the recent increases in
overhead costs (especially heating and
electricity) in 2011, and the current 2012, this
ratio is expected to mark a trend of even
further deterioration.
As a confirmation of this situation, in addition
we can take into account the values of the
poverty gap index which tells us how poor the
poor are, or on average, by which percentage
should the income of poor living below the
poverty line is necessary to increase, in order
to reach the poverty line (to escape poverty).
This index in the period in which the SSO
provides data (until 2010) shows an increasing
trend that emphasizes social disparity with
the poor becoming even poorer. This index
ranges from 9.2% in 2008, increasing to 10.1%
in 2009 and reaching 10.9% in 2010. Recent
large increases in electricity and heating costs,
will probably increase this number, and show
even more increased social disparity.
Unfortunately, it is realistic to expect that in
2012 the poor in the Republic of Macedonia
will become poorer.
Macedonia shows record unemployment in the region and in the world
The unemployment is a key factor affecting
the
low
standard
in Macedonia. The
unemployment rate calculated by the SSO in
the third quarter of 2011 (last available
information) amounted to 31.2% of the work
capable population 5, a figure which hasn’t
dropped significantly during the recent years.
5
The unemployment in the Republic
of Macedonia in the period from 2008 to 2011
has not been reduced below 30%. The reasons
which amount to this figure are the high
percentage of gray and black economy;
politicization of employment; low level of
economic activity; global recession; a number
of highly qualified labor force that does not
accept employment which is not consistent
with the level of education (voluntary
Report no. 2.1.11.29, State Statistical Office
12
Services” (the employer doesn’t pay taxes,
pension and disability contributions for the
employed), and the like “Contracts for
professional services” for which only personal
income tax is paid, but not the contributions.
unemployment ); unqualified adult workforce
- redundant workers and others.
A primarily concern is the rate of
unemployment of young and skilled labor
force, which should be an engine of the
economic growth. According to the SSO,
44.6% (a half) of the population aged 20-29 is
unemployed. Much of this figure is due to the
jobs of gray economy (not having any
contracts for employment) and a noticeable
percentage of the so called “Contracts for
This situation gives birth to many serious
problems: The Contracts for Services reduces
tax transfers, give rise to extra profits for
employers who don’t report their employees
and creates an unfair competition for
companies that report their employees.
Chart no. 5: Unemployment in R.of Macedonia in the period 2008-2011
Unemployment Rate in R. of Macedonia
35,00%
30,00%
25,00%
20,00%
15,00%
10,00%
5,00%
0,00%
33,80%
32,20%
32,10%
31,25%
2008
2009
2010
2011
Year
Source: State Statistical Office
On the other hand, the decrease of labor
costs reduces actual wages and adversely
affects employment of the qualified work
force. That's another reason for the young
skilled workers to emigrate from the country
and seek employment (seasonal, permanent)
mainly in the EU countries and USA, but also
in Afghanistan and other war zones where
salaries are higher, regardless of the risk.
This further affects the class stratification and
impoverishment of the country, taking into
account that the main profits go to
unsanctioned employers and not as budget
revenues that can further be allocated into
purposeful measures.
If we compare the indicators of
unemployment in Macedonia and the Balkans
region, we will see that R. of Macedonia finds
itself on the top of the scale, even with
respect to the neighboring countries which
showed far worse results in the not so distant
past.
13
This, for example, was showed in the
comparative study of 24/7 Wall Street 6. This
study that studied unemployment in countries
with over two million inhabitants, showed
that in 2010, R. Macedonia was the world
leader in unemployment with 33.8%
unemployment, and was is the only country
with an unemployment rate above 30%.
According to the study, R. of Macedonia was
in the company of Armenia, Algeria, West
Bank and Gaza Strip which have
unemployment rates between 25% and 29%.
During the last period, the government of
Macedonia has shown inferior results in
dealing with the unemployment. We cannot
praise the so-called "Greenfield" investments,
which were a major promising asset of the
present government during the last elections
campaign. The expectations were that these
new foreign investments would have brought
jobs for the younger and more skilled
workforce.
In Western Balkans, in 2010, Bosnia and
Herzegovina had an unemployment rate of
23.4% and Croatia 14.8%. According to
Eurostat in January 2012, 11.5% of Bulgaria's
work capable population was unemployed
and the excessively indebted Republic of
Greece which was shaken by a great social
unrest and demonstrations, showed an
unemployment rate of 19.9% 7.
6
http://247wallst.com/2010/06/23/the-fifteen-nations-withthe-highest-unemployment-in-the-world/
7
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/301032012-AP/EN/3-01032012-AP-EN.PDF
14
The Government deals poorly with poverty and unemployment
The survey on unemployment and poverty
most illustratively shows the perception of
citizens of this topical issue. A huge
percentage of respondents (64.5%) thought
that the government badly handled poverty
and unemployment, while only 21.1% thought
the opposite. 14.3% had no response.
Chart no.6: How is the Government dealing with Poverty and Unemployment?
How is the Government dealing with Poverty and Unemployment?
14,3%
Good
21,1%
Bad
Without answer
64,5%
Source: Telephone survey conducted by the Progress Institute, 17-19.02.2012
The youngest (18-29 years), i.e., those most
affected by this issue are dissatisfied by the
policy of the government regarding this issue.
Nearly 70% of the young believe that the
measures of the government are not
sufficient in regards to this issue.
If we regard the answers according to the
employment status, we can see that naturally,
the most dissatisfied are the unemployed
(73%) and students (75%).
Farmers, surprisingly, were relatively most
satisfied by the measures that the
government implements. 31.8% of them said
the government had a good deal with poverty
and unemployment.
But on the other side, even 63.6% of farmers,
or as twice as much of the previous, consider
that the Government has a bad deal with
poverty and unemployment.
15
Chart no.7: “How is the Government dealing with Poverty and Unemployment?” Segmented by employment/industry
How is the Government dealing with Poverty and Unemployment?
80,0%
70,0%
60,0%
50,0%
40,0%
30,0%
20,0%
10,0%
,0%
Good
Bad
No answer
Source: Telephone survey conducted by the Progress Institute, 17-19.02.2012
Regarding the ethnic composition, more than
twice as many Macedonians were unhappy
with the government than they were satisfied
(44.3% vs. 24.1%).
For Albanians, the proportion is significantly
disproportional,
whereas
a
negligible
percentage (only 3.9%) reported that the
government handles unemployment and
poverty in a good manner, versus 84.4% who
reported that the government has badly
managed this issue.
Residents of rural areas compared to the
residents of urban settlements, disagree with
a greater percentage with the measures of
government on this issue. The percentage of
dissatisfied rural residents, in comparison to
the dissatisfied residents of the capital Skopje,
on this issue is 71.1, to 59.6% respectively.
In Skopje, however, the percentage of those
who thought the opposite (satisfied residents)
was 25.8%. We observe that the issue sparks a
small disparity between the plea of
agricultural families and families living in
villages.
This should be due to the fact that in the rural
areas of R. of Macedonia, while most families
are employed in the agricultural sector, the
rest of the population is either involved in
activities that do not carry high enough
income or are unemployed and live below the
poverty line.
16
Unjustified budget spending has no support from the people
The budget of the Republic of Macedonia in
2012 amounts to 169 billion and has
increased in terms of 2011 when it stood at
159 billion. This increase in budget
expenditures was based on the government
expectations for GDP growth of 4.5% in 2012.
This expectation was unrealistic, taking into
account the trends of the past years and the
impact of the global economic crisis on the
Macedonian economy. Besides that, the
National Bank of R. of Macedonia, the World
Bank and the EBRD had much lower
expectations.
Therefore in April 2012, the government
proposed to rebalance the budget. This was
due the fact that budget income had a drop of
9%. The government continued to raise loans
with foreign banks and increase the debt,
which is not in the long term interest of the
citizens. The new capital is not used to service
the governmental debt to the private
companies. This debt somehow fails to be
paid, although the tax for the undertakings
was properly and timely paid by these
companies to which the government owes.
The Ministry of Finance, on several occasions,
even refused to disclose the exact debt. So,
realistically, companies will continue to fund
capital investments listed in the budget.
On the other hand, the unjustified budget
spending for projects of secondary interest to
citizens become more evident, such as the
high cost of government’s advertising and also
costs associated with the project "Skopje
2014".
They represent a high opportune cost, and
cause permanent irreversible damage to
citizens at a time when the Republic of
Macedonia faces worsened social picture.
Emphasis should be placed on the purposeful
budget spending in programs that can reduce
unemployment, poverty or reduce energy
dependence.
The priorities should be placed in improving
the road infrastructure, modernization of
public health facilities or projects for
improving
the
efficiency
of
public
administration and judicial reforms, which are
especially important in the Euro-Atlantic
aspirations of the Republic of Macedonia.
Such spending should be viewed as a long
term investment in the future of the country.
Unproductive spending for projects that do
not carry wider benefits for citizens,
expenditures for campaigns and various paid
advertisements of the government, and also
the project "Skopje 2014", with their huge
opportune costs create a negative impact on
the socio-economic stability in the future.
Firstly, "Skopje 2014" constricts the budget
spending to only one area, while the rest of
Macedonia depletes as we’ve concluded
above from the data of the SSO and the
surveys. The project "Skopje 2014” was
originally projected at around 80 million
euros, a seriously high amount of money in
times of crisis. But with the continuous
inclusion of new monuments, facades and
panoramic wheels, as well as adding more
annexes of existing contracts, the invested
amount has risen to 250 million euro by early
2012, with a tendency of further increase.
17
Chart no.7: “Does the Government spend the budget in favor of the people or in favor of the Government?”
Does the Government spend the budget in favor of the people or in favor of the Government?
18,5%
27,3%
In favor of the people
In favor of the Government
No answer
54,2%
Source: Telephone survey conducted by the Progress Institute, 17-19.02.2012
These finances are, of course ultimately
financed by the citizens and the economy
through fiscal mechanisms. Because of the
irregular servicing of debts to companies
subcontractors, the government contributes
to burden these companies with additional
costs, which ultimately reflects most of the
employees in these companies. The survey
results confirm unjustified spending of budget
funds and the revolt of the citizens towards
budgetary expenditures.
To simplify the survey we asked: "Does the
government spend the budget in favor of the
citizens or in government’s favor?" More than
a half of the surveyed citizens believe that the
government spends the budget on itself with
the percentage of 54.2 % of the inquired.
Those who believe that the government
works for the benefit of the citizens were
represented by only 18.5%, while the
percentage of the citizens who did not want
to answer this question was 27.3%.
If we broaden the analysis by segmenting the
population by age, we notice that the younger
population is more pessimistically orientated
towards the budgetary expenditures than the
older population. On the other hand, the
educated citizens in the survey took more
attitudes on this matter versus the
uneducated that were more ambiguous, with
a substantial proportion not taking sides.
Retirees
and
employees
in
public
administration were more satisfied with the
government spending than the unemployed,
students and employees in the private sector.
It is noticeable that even in the category of
employees in state administration, which
shows the greatest support to budgetary
spendings in relation to other sectors, those
who thought that the budget is spent
according to the needs of the people (29.5%)
were less than their colleagues in the
administration who considered, however, that
the state budget is spent mainly for
governmental purposes (46.8%).
The students most categorically stated that
the government uses the budget for its own
purposes (by 79.2%), while students who
thought otherwise were only 8.3%.
Segmented by ethnicity, nor Macedonians or
18
Albanians were satisfied with the budget
spending, and it is evident that the Albanians
were less satisfied than the Macedonians
(84.4% unsatisfied to 1.2% satisfied Albanians
versus 44.3% unsatisfied to 24.1% satisfied
Macedonians.
Social dissatisfaction is on the rise
The concept of relative deprivation, i.e.
maintaining a low level of social
dissatisfaction, is important for the social
cohesion among the social groups of citizens.
If the disparity in a society of citizens in terms
of their purchasing power is too high or the
government abundantly spends tax money
without the support of the people who are
constantly impoverishing, then that society
has a serious problem.
For an illustration, we can consider the
situation in the neighboring Republic of
Greece, where government debt went out of
control, the government was spending the
budget very generously on the inert and huge
administrative apparatus and was providing
other unnecessary benefits which at the end
forced Greece to be bailed out and accept
austerity measures which were extremely
unfavorable to the people. These measures
shook the social tissue of the country.
Suddenly a huge number of Greeks lost their
jobs, ant those were people who’ve had high
private indebtedness, without any prospect of
finding another job in the near future.
The result of such events led to massive social
protests that have a negative impact for the
entire state for several reasons: social
protests create a deep divide between social
groups, bear crime, threaten the stability of
the country, and create huge costs during
their conducting, causing material damage
and other adverse effects.
Although Republic of Greece is facing serious
problems,
however,
the
rate
of
unemployment in Greece with regard to
Macedonia is almost as twice as smaller
(<20%). In Macedonia people are much
poorer than Greece, and also Greece is a
more compact state in terms of the ethnic
composition of the population (according to
the most recent census).
Then, why, so far, major social protests in
Macedonia have not yet been observed? The
answer probably lies in the fact that negative
trends in Macedonia were incremental, with a
gradual deterioration and not as abrupt as in
Greece. The difference in the mentality of
both nations also could provide the
explanation. The difficult living conditions and
the established perception of the harsh reality
have already been present for a long time in
Macedonia, and the people have lost hope
that in any way the situation could be
improved.
On the other hand, the Greeks, however, have
continually had a good standard of living in
the previous year’s which suddenly has
started deteriorating during the financial crisis
that started in Greece. At the other hand, It
would be realistic to expect that social
discontent in the Republic of Macedonia will
grow, because of the amplification of existing
negative social trends.
If poverty continues to increase, then the
question should be reformulated to when
these protests are going to happen and not if
they are going to happen.
The question arises: To which extent should
the citizens of Macedonia become poorer in
19
order for massive social protests
demonstrations to take place?
and
To avoid this undesirable (and also very
probable) situation, there is an urgent need to
prevent the negative social trends for
degrading even more. Therefore, the
Government should, as soon as possible, take
series of necessary measures to improve the
standard of living and reduce the poverty gap
of the social strata.
Conclusions
It is a very obvious fact that social trends in
Macedonia in recent years have seen a trend
of deterioration.
The economic crisis with its impact on the
economy, combined with the ineffective and
sporadic government measures to cope with
the newly present reality have drastically
reduced GDP growth, influenced the rise of
prices of energy and rise of retail prices.
These factors coupled with the status quo
situation of the wages, decreased the
purchasing power of the population. The
unemployment rate which shows record
levels, even in comparison with the countries
of the region and more drastically in
worldwide terms, particularly concern the
young people.
As a result, there are a huge percentage of
poor people in Macedonia, with the poor
getting even poorer. By delaying the
implementation of the minimal wage to 2015
in the most concerned industries (textile,
leather and shoe producing industry), which
usually employ social strata with the lowest
incomes, the increase in the disparity in
incomes of citizens further tends to broaden.
Meanwhile, the Government of Macedonia
does not show results in dealing with these
problems, and even more, it increases
unproductive budget spending. The survey
showed that citizens, on the other hand, show
evident dissatisfaction in terms of social
trends and pessimism that the government is
able to solve the problems.
In accordance with the previous observations,
the need to bring special measures that would
have to eliminate the negative effects of such
disturbing trends becomes more urgent.
It is more than necessary to prevent events
that could irreversibly harm the extremely
vulnerable and complex multiethnic tissue of
the social cohesion in Macedonia.
20
Recommendations for measures
To improve the social picture in Macedonia
we urgently recommend the following three
measures:
1) Immediate entry into force of the Law of
Minimal Wage in all industries in order to
prevent further impoverishment and improve
the difficult lives of the most fragile social
strata who are employed in the textile,
leather and footwear industry.
2) Introduction of the so-called "SOS Social
Stores" that will have a temporary character,
in which the most vulnerable strata, i.e. those
receiving social help compensation could buy
the necessary food products at prices which
they can afford.
In The Law of Minimal Wage, for objective
reasons unknown, in the most concerned
industries (textile, footwear and leather
processing), the minimum salary of 8,050
denars was delayed for implementation in
2015, and it is well known the employees in
these industries have the lowest personal
income.
The SOS stores would be established using the
positive experience of the social stores in the
countries of the region.
Besides that, in the near future progressive
profit tax should be introduced. The
progressive tax should use a scale that would
be acceptable to all taxpayers. Among other
benefits, this would reduce social inequality
and would provide suitable funding for the
social strata that are most vulnerable in the
Republic of Macedonia.
21
ANNEX. Demographic data for respondents included in the survey of 17-19.02.2012
Gender
Number
515
601
1116
Percent
46,1
53,9
100
Age
18 – 29 years
30 – 39 years
40 – 49 years
50 – 59 years
Over 60 years
Total
Number
161
202
274
220
259
1116
Percent
14,4
18,1
24,6
19,7
23,2
100
Education
Unfinished elementary education
Elementary education
Secondary education
University education
Total
Number
32
215
538
331
1116
Percent
2,9
19,3
48,2
29,7
100
Work status
Unemployed
Students
Retired persons
Farmers (agriculture workers)
Employed in the public
administration
Employed in the private sector
Owners of private business
Something else
Total
Number
400
48
227
22
139
Percent
35,8
4,3
20,3
2,0
12,5
254
21
5
1116
22,8
1,9
0,4
100
Ethnic affiliation
Macedonians
Albanians
Roma
Turks
Serbs
Bosniaks
Vlahs
Other
Total
Number
808
257
18
6
18
4
3
2
1116
Percent
72,4
23,0
1,6
0,5
1,6
0,4
0,3
0,2
100
Male
Female
Total
22
Family monthly income
Up to 6,000 denars
Between 6,000 and 10,000
Between 10,000 and 20,000
Between 20,000 and 30,000
Between 30,000 and 40,000
Over 40,000
No answer
Total
Number
127
176
308
150
87
82
186
1116
Percent
11,4
15,8
27,6
13,4
7,8
7,3
16,3
100
Place of living
Rural municipalities
Smaller urban municipalities
Bigger urban municipalities
Skopje
Total
Number
336
240
280
260
1116
Percent
30,1
21,5
25,1
23,3
100
23
ABOUT US
The Institute for Social Democracy “Progress”
is founded in 2007. In its activities it promotes
the values of social democracy in Macedonia.
The Institute prepares and publishes
documents, strategies, analysis on social,
political and economic issues in the Republic
of Macedonia, it holds trainings, organizes
seminars and domestic and international
conferences and carries out different types of
research.
The Institute for Social Democracy “Progress”
has rich and continuous international
cooperation with like minded organizations,
foundations and institutes from the region
and Europe, for the exchange of experience,
knowledge and expertise.
WHAT DO WE DO AT PROGRESS?
The activities of Progress fall down in three
areas: political education, political dialog and
political analysis.
Academy for Social Democracy. The certificate
award ceremony for the ones that
successfully completed the Fourth Political
Academy was on March 10, 2012.
Political education
In cooperation with the Friedrich Ebert
Foundation and the Olof Palme International
Centre, Progress organizes the Political
On the weekend of 31.03 – 01.04 the first
training module of the Fifth Political Academy
took place.
24
In cooperation with Kalevi Sorsa, Progress
organizes trainings and workshops for
promoting multicultural democracy and
strengthening stability in Macedonia and in
Kosovo. In Struga in March (23.-25.03) there
was a training workshop with 20 young
activists from different political parties and
non-governmental
organizations
from
Macedonia and Kosovo, in order to
strengthen their skills and capacities for
intercultural dialog and managing differences.
Political dialog
On 11 February 2012, in cooperation with the
Foundation for European Progressive Studies
(FEPS), the European Forum for Democracy
and Solidarity and FES – Skopje, we organized
the one day international conference “EU
Enlargement: A never ending hurdle?”.
Members of European Parliament, members
of national parliaments from EU Member
States and Western Balkan countries, as well
as international and domestic experts,
journalists and researches were present at the
conference.
25
26
In cooperation with the Friedrich Ebert
Foundation, Olof Palme International Centre
and SOLIDAR, under the auspices of the
project “Decent Work Balkan Network”
financed by the EU, on March 2, 2012, we
organized the expert conference “Minimal
wage and decent work conditions in the
Republic Macedonia”, on which MPs,
representatives of employers organizations,
unions and other relevant civil society
organizations and stake holders were present.
and in coordination with the Council for
Political System of SDUM, on March 3, 2012
we organized the expert debate “Usage of
detention as a measure – Macedonian reality
and international standards”, on which
Margarita Caca Nikolovska, former judge in
the European Court of Human Rights in
Strasbourg, Zlatko Knezevic, Judge in the
Constitutional Court of Bosnia and
Herzegovina, professors from the Faculty of
Law in Skopje and other esteemed legal
experts took part.
In cooperation with the Friedrich Ebert
Foundation, Olof Palme International Centre,
27
In cooperation with the Friedrich Ebert
Foundation, and in coordination with the MPs
group of SDUM, on March 23, 2012 we
organized the expert conference “Reforms in
the health system: More problems than
solutions?” on which several eminent
university professors in medicine took part,
along with representatives of doctors
association and unions, and MPs from the
Committee for Health policy of the Assembly
of the Republic of Macedonia.
In cooperation with the Friedrich Ebert
Foundation, on April 6, 2012, we organized
the expert conference “What needs to be
done for the citizens and companies go
through 2012 easier?” on which members of
chambers of commerce, unions and political
stakeholders took part.
28
Political analysis
In the period between 17 and 19 February
2012, Progress conducted a phone poll on a
national representative sample of 1,116
respondents.
The poll researched social issues and the
results are that: three quarters of the
households can afford only food and utility
In the period between 23 and 25 March 2012,
Progress conducted a phone poll on a national
representative sample of 1,116 respondents.
The results showed that: half of the
respondents consider that Macedonia is going
in the wrong direction; two thirds of the
bills; more than half of the citizens say that
the government spends the state budget for
the needs of the government and not the
citizens, and two thirds say that the
government is doing poorly in cutting the
poverty and unemployment. The results were
published in the media.
respondents live worse than last year and two
thirds consider that the government has not
reacted properly in the last wave of price
increase. The results were published in the
media.
29
Institute for Social Democracy "Progress"
www.progres.org.mk
30