NORTH MACEDONIA Social Protection Situational Analysis This project is funded by the European Union NORTH MACEDONIA Social Protection Situational Analysis © 2022 International Bank for This work is a product of the staff of The World Bank with external contri- Reconstruction and Development / butions. The findings, interpretations, and conclusions expressed in this The World Bank work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 1818 H Street NW, Washington DC 20433 This publication was produced with the financial support of the European Telephone: 202-473-1000 Union. Its contents are the sole responsibility of World Bank staff and do Internet: www.worldbank.org not necessarily reflect the views of the European Union. For the European Union, the designation of Kosovo is without prejudice to positions on status and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Rights and Permissions Kosovo Declaration of Independence. The material in this work is subject to copyright. Because The World The World Bank does not guarantee the accuracy of the data included in Bank encourages dissemination of this work. The boundaries, colors, denominations, and other information its knowledge, this work may be shown on any map in this work do not imply any judgment on the part reproduced, in whole or in part, for of The World Bank concerning the legal status of any territory or the noncommercial purposes as long as endorsement or acceptance of such boundaries. full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ii NORTH MACEDONIA Social Protection Situational Analysis NORTH MACEDONIA Social Protection Situational Analysis Contents: LIST OF FIGURES iv LIST OF TABLES iv LIST OF BOXES iv LIST OF ACRONYMS vi 1. Introduction 1 2. Poverty, labor market outcomes and demographics 3 3. Overview of the social protection system in North Macedonia 6 4. Cash transfers to support the poor, the vulnerable, and persons with disabilities 9 5. Social services 16 6. Pensions 19 7. Employment and ALMPs 22 8. Learning from the COVID-19 response 26 9. Reform priorities 28 LIST OF REFERENCES 31 Annex 1 33 iii NORTH MACEDONIA Social Protection Situational Analysis List of Figures: Figure 1: Poverty headcount ratio at $5.50 a day (2011 PPP) (% of 3 population) Figure 2: Labor market indicators, Western Balkans 4 Figure 3: Social protection coverage for the total population by 7 program Figure 4: Expenditure in social protection programs, selected 8 countries (% of GDP) Figure 5: Social protection spending by program (% of GDP) 8 Figure 6: Number of beneficiaries of main cash benefits, 2018- 10 2020 Figure 7: Social assistance program spending over time (MKD 12 billions, constant, 2019=100) Figure 8: Spending on cash transfers (% of GDP) 12 Figure 9: Coverage of social assistance by age groups, before and 13 after the 2019 reform Figure 10: Application and evaluation procedures for social 14 assistance Figure 11: Gross benefit ratios and theoretical replacement rates, 21 EU and Western Balkans, 2016 or recent Figure 12: Coverage of the elderly under social protection programs, 21 North Macedonia. Figure 13: Expenditure on labor market policies, 2018 (% of GDP) 25 List of Tables: Table 1: Overview of the social protection system in North 6 Macedonia Table 2: Comparison of actual and simulated adequacy results 14 for North Macedonia’s social assistance programs Table 3: Pension parameters in North Macedonia 20 List of Boxes: Box 1: The functions of social protection, social insurance, 6 social assistance and labor programs iv NORTH MACEDONIA Social Protection Situational Analysis Acknowledgments This analysis has been prepared by a World Bank team composed of Efşan Nas Özen, Cornelius von Lenthe, Sarah Coll-Black, Zoran Anusic, Stefanie Brodmann, Bojana Naceva and Jamele Rigolini. The team is grateful to Sanja Madzarevic-Sujster, Gozde Meseli Teague and Leonardo Ramiro Lucchetti for contributing to the data analysis. The team would like to thank representatives of ILO (International Labour Organization) for their generous sharing of information and Manuel Salazar (World Bank) for providing comments on an earlier draft of this note. Special thanks to Darcy Gallucio for editing and providing detailed comments, as well as Elizaveta Tarasova for the cover page and graphic design. The team would also like to thank members of the Employment Service Agency and the Ministry of Labor and Social Policy for their useful discussion and comments, with a special thanks to the Policy Unit which generously shared data and took the time to detail policy objectives, implementation plans, and lessons learned. In particular, we would like to thank Darko Dochinski, Deputy Head of the Labor Law & Employ- ment Policy Department for coordinating the consultations among government ministries. The note draws on lessons learned through the Social Services Improvement Project (P162246), the North Macedonia COVID-19 Response Project (P173916) and the Social Insurance Admin- istration Project (P170343). Finally, the team appreciates the valida- tion of findings and comments received from Professor Maja Mitev and Professor Dimitar Nikoloski, as well as members of the UN Resident Coordination Unit, United Nations Children’s Fund (UNICEF), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and United Nations Development Programme (UNDP) at a consultation of the situational analysis in November 2021. The analysis was made possible due to the generous funding from Europe 2020 Trust Fund by DG NEAR. The note was prepared under the guidance of Linda van Gelder (Country Director for the Western Balkans), Massimiliano Paolucci (Country Manager for North Macedonia) and Cem Mete (Practice Manager, Social Protection and Jobs Global Practice, Europe and Central Asia Region). v NORTH MACEDONIA Social Protection Situational Analysis List of acronyms ALB Albania ALMP Active labor market program BIH Bosnia and Herzegovina CBMIS Cash Benefit Management Information System CCT Conditional cash transfer ESA Employment Service Agency EU-SILC European Union Survey on Individual Living Conditions EUR Euro GDP Gross Domestic Product GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GMA Guaranteed Minimum Assistance ICF International Classification of Functioning, Disability and Health ILO International Labor Organization IPA Instrument for Pre-Accession Assistance ISA Institute for Social Activities KSV Kosovo LRIS Last resort income support MKD North Macedonia and North Macedonia Denar MNE Montenegro MLSP Ministry of Labor and Social Policy NEET Not in employment, education or training NGO Nongovernmental organizations PA Parental allowance PAYG Pay-as-you-go PPP Purchasing power parity SDC Swiss Development Cooperation SFA Social Financial Assistance SILC Survey on Income and Living Conditions SPEED Social Protection Expenditures and Evaluation Database SRB Serbia SWC Social Work Centers TRR Theoretical replacement rate UNDP United Nations Development Programme UNICEF United Nations Children’s Fund USD United States dollar vi NORTH MACEDONIA Social Protection Situational Analysis Introduction Although North Macedonia has the second lowest payments that could further extent coverage and poverty rate in the Western Balkans, poverty is still facilitate access of poor and marginalized people relatively high, and households with less educated to these benefits. Additionally, reforming the disa- adults, ethnic minorities, and households living bility assessment and certification system could in northern and rural areas are more likely to be bring further coherence and transparency into the poor. In terms of labor market outcomes, despite system, such as through the ongoing piloting of the improvements in the recent years, employment International Classification of Functioning, Disability and activity rates continue to be low, particularly and Health (ICF). Beyond this, further steps could for women and youth. Relatively high informality, be taken to improve the efficiency of the programs, emigration and an aging population are additional such as (i) complementing the provision of cash challenges. Finally, the COVID-19 pandemic led to transfer support with information (for example, significant deteriorations in the labor market and good parenting practices), (ii) further strength- poverty outcomes, and though government policies ening the case management system (see section on acted to preserve jobs, provide incomes and contain social service below) and (iii) potentially harnessing the fallout, employment declined by 0.1 percentage the education allowences to promote the uptake points between June 2019 and June 2020, wiping of preschool, once the supply of these services has out the employment and participation gains from expanded. 2019. Social protection is a fundamental pillar of social While social protection covers more than half of policies. It is essential to protect people from falling the population in North Macedonia, this is driven into poverty and destitution; help people cope by high and rising levels of spending on social with adverse idiosyncratic or systemic shocks and insurance, while social assistance spending remains smooth consumption over their lifetime; and ensure below regional averages. At the same time, North access to jobs and promote human capital accu- Macedonia has been implementing an ambitious mulation. Social protection comprises a variety social protection reform, including the establish- of policy tools, ranging from cash transfers to the ment of a guaranteed minimum assistance scheme, poor and persons with disabilities to social services that offers the opportunity to improve coverage, for vulnerable populations, employment and labor targeting and adequacy, and appears to be more market programs and unemployment insurance, effective than the previous, scattered programs and old-age pensions.1 in alleviating poverty. The ongoing reforms to social protection are anticipated to lead to a more The objective of this note is to present a situational adequate provision of cash transfers to the poor and analysis of the social protection system of North the delivery of a broader range of quality services to Macedonia. It assesses based on existing evidence vulnerable populations in their homes and commu- the extent to which the social protection system in nities. However, while reforms to cash benefits are North Macedonia fulfils its purpose. Based on this advancing well, there is a need for further analysis analysis, this note then proposes areas for reform to confirm that these reforms are bearing fruit. in the short-, medium-, and long-term that the Initial analysis suggests that the reform can be government may consider. To this end, this note effective, but the success and sustainability of the seeks to assess each category of social protec- reform crucially lies on implementation to ensure tion, namely: social assistance, social services, social that all eligible people are reached. To this end, insurance (specifically pensions) and labor market analysis of the delivery systems from the perspec- programs, in terms of program coverage, equity, tive of potential and actual beneficiaries could sustainability and effectiveness. Based on this identify gaps in outreach, intake, enrollment and analysis, it proposes policy priorities and future areas Back to table of contents 1 Health insurance is not considered in this analysis, although it forms part of social insurance mechanisms. 1 NORTH MACEDONIA Social Protection Situational Analysis of focus. The note is based on analysis of adminis- the introduction of case management, which aims trative data, the most recent SILC household survey, to help ensure the provision of integrated services a review of relevant literature and engagement to the poor and vulnerable. Section 6 discusses with technical experts in the Ministry of Labor and pensions. Section 7 then explores employment and Social Policy (MLSP) and with select development active labor market programs (ALMPs). Section 8 partners.2 considers the recent social protection response to the COVID-19 pandemic and Section 9 concludes North Macedonia has strengthened its social by offering an assessment of the main areas for protection system through comprehensive reforms reform. in social assistance, social services and pensions. This note considers, based on existing evidence, the extent to which the social protection system in North Macedonia satisfies four basic principles. The first is adequacy. That this, the level and generosity of support provided should reflect the level of need of poor and vulnerable households. The second is balance and effectiveness. Are the funds allocated to each program used effectively or are there ways to improve impacts for equal levels of spending? Also, could programs’ design be improved to better promote objectives such as poverty reduction, employment and the acquisition of human capital? And is the balance of spending across programs appropriate given the population’s vulnerabilities and needs? The third element is equity. Government spending on social protection systems should invest more on the poor and vulnerable population than on the middle or upper classes—and possibly signif- icantly more. This is not always the case, especially when spending on non-contributory pensions is considered. The fourth and final element is sustain- ability. Is the level of spending sustainable across time and can the system honor promises that are made to future generations, in particular in terms of pension benefits? Based on this analysis, this note offers initial recommendations for consideration by the government. The situational analysis note is structured as follows: the next section reviews the main poverty and labor market outcomes in North Macedonia, comparing it with peers and relevant country groups. Section 3 introduces a framework to consider the perfor- mance of the social protection system and then outlines the broad characteristics of social protec- tion in North Macedonia, by program type and expenditure. The following sections assess the performance of each sub-sector of social protec- tion. Section 4 looks at non-contributory cash transfers to support the poor, the vulnerable and persons with disabilities and assesses the recent social assistance reform. Section 5 discusses social services and assesses the changes in social services as a result of the social protection reform as well as Back to table of contents 2 2 In February 2022, the government announced increases to the minimum wage and changes to the pension indexation. Due to the timing of the publication, these changes are not considered in this analysis. NORTH MACEDONIA Social Protection Situational Analysis Poverty, labor market outcomes and demographics North Macedonia has the third lowest poverty Figure 1. Poverty headcount ratio at $5.50 a day rate among Western Balkan countries, but it is still (2011 PPP) (% of population), 2021 estimates significantly higher than other comparator country 25% groups, and some groups are more likely to be poor 22% than others. The poverty rate steadily decreased 19% 20% from 35 percent in 2009 to 17 percent in 2021, and 17% 16% extreme poverty from about 10 percent in 2009 15% to 3.4 percent in 2018.3 The poverty rate, never- theless, is still significantly higher than the average 10% 10% of seven small transition economies of Europe (7STEE)4 or European Union (EU) countries (Figure 5% 1). This progress has been uneven, as poverty is 3% 2% more pronounced in certain regions and for certain 0% groups of the population. First, households with ALB KSV MKD MNE SRB 7STEE EU less educated adults and those with more children Source: World Bank. 2022. Steering through Crises. Western are more likely to be poor. Second, ethnic minori- Balkans Regional Economic Report No. 21. Spring 2022. Note: ties are poorer than ethnic Macedonians: more ALB, SRB, MKD, MNE, 7STEE and EU estimates are derived than 40 percent of the lowest income quintile was from the income based SILC-C data, whereas KSV is measured comprised of ethnic Albanians in 2017, as compared using the consumption based HBS. Income measures in the SILC and con-sumption measures in the HBS are not strictly to 15 percent in the highest quintile, and the Roma comparable. population is concentrated in the lowest quintile. Ethnicity explains a higher percentage of inequality the second quarter of 2019, with only 37.2 of work- than any other country in the region.5 Finally, ing-age women having been employed compared poverty is higher in the north of the country and in to 57 percent of men. It is estimated that these rural areas. gender gaps in the labor market generate a loss of about 16 percent of gross domestic product Labor market outcomes have improved in recent (GDP) each year in the country.6 While the trendline years, but employment and activity rates continue in terms of employment had been encouraging, to be low. Despite the unemployment rate having labor productivity growth has been low in recent decreased by more than 10 percentage points from years, which, in addition to the COVID-19 crisis, will 28 percent in 2014 to 17.5 percent in the second hamper further positive developments in the labor quarter of 2019, North Macedonia continues to market. In addition, North Macedonia’s labor market have the second highest unemployment rate in is characterized by stark regional differences. While the Western Balkans (Figure 2). Unemployment is only 10.9 percent of the working population were especially concentrated among youth, women and unemployed in the southeast in 2018, the northeast minorities. While the total employment rate is close faced unemployment rates of more than triple that to the average of Western Balkan countries, women at 35.9 percent.7 have drastically higher inactivity (53.3 percent in the second quarter of 2019 compared to 32.5 percent for The combination of high inactivity and high unem- men) and higher unemployment rates (20.3 percent ployment hinders employment for youth. Despite compared to 15.5 percent for men). Family responsi- an improvement from 15 percent in 2012, employ- bilities, lack of available or affordable childcare, low ment rates for youth (15-24 years old) remain low educational levels and cultural reasons contribute at a little over 21 percent in 2019, with a mere 16 to the high inactivity of women. The employment percent for young women. With about 35 percent gap between men and women was 19.8 percent in in 2019, youth unemployment is higher than the average of Western Balkan countries as well as the Back to table of contents 3 3 Source: WDI (Accessed October 2021). Poverty is measured as absolute poverty using the poverty line for upper-middle-income countries, estimated at US$5.5 per day in 2011 PPP. Extreme poverty is calculated using the international poverty line, estimated at US$1.90 per day in 2011 PPP. Note that the World Bank uses these international poverty lines for comparability across countries, and these rates differ from national statistics due to differences in poverty lines. 4 7STEE refers to the seven small transition economies of Europe, namely: Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovak Republic and Slovenia This note compares North Macedonia to this group of countries as peers, while also comparing it to its neighboring countries in the Western Balkans. Where appropriate, it considers comparisons to EU averages. 5 European Bank for Reconstruction and Development. 2017. Transition Report 2017-18. 6 Cuberes, D. and Teignier, M. 2016. Aggregate Effects of Gender Gaps in the Labor Market: A Quantitative Estimate. Journal of Human Capital 10:1. 7 SEE Jobs Gateway. NORTH MACEDONIA Social Protection Situational Analysis EU, particularly for young women (41.1 percent, competition from the informal economy is also cited see panel (b) in Figure 2). North Macedonia’s rate as one of the biggest obstacles to doing business.10 of youth neither in education, employment nor training (NEET) is also higher than all other Western An aging population with low birth rates and high Balkan countries except Albania and Kosovo (panel emigration contribute to the challenges in the (d) in Figure 2), as well as the EU average. labor market and to social protection. The fertility rate decreased from 2.2 in 1991 to 1.5 in 2019, with Informal employment is high, including in the population growth 0.1 percent annually. Popula- formal sector, which can affect the protection of tion dynamics are affected by migration out of rural workers and their access to social protection. In areas to the cities and abroad.11 Estimates based on 2019, 14 percent of the working population were census data from destination countries suggest that informally employed, more than half of whom were more than 250,000 citizens reside abroad, making employed in the agricultural sector.8 According to North Macedonia one of the largest diasporas in the International Labor Organization (ILO), in 2019, the world as a percentage of the total population.12 28.6 percent of informal workers were active in the The combined effect of low population growth formal sector, with construction and wholesale and and emigration is estimated to decrease the work- retail trade being the two largest non-agricultural ing-age population from 71 percent to 60 percent, sectors affected.9 This type of informal economy not to increase the share of the elderly from 12.5 percent only deprives workers of social protection extended to 25 percent, and to require around 700,000 addi- through the labor laws or access to social insurance tional workers to sustain the working-age popu- (such as, unemployment benefits) and significantly lation by 2050.13 As the population ages, there is hampers government revenues, but the unfair growing pressure on working age adults to provide Figure 2. Labor market indicators, Western Balkans a. Employment rate b. Unemployment rate 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% WB6 ALB BIH MNE MKD SRB KSV WB6 ALB BIH MNE MKD SRB KSV Total 15+ Male 15+ Female 15+ Total 15+ Male 15+ Female 15+ Total 15-24 Male 15-24 Female 15-24 Total 15-24 Male 15-24 Female 15-24 c. Inactivity rate d. NEET rate, ages 15-24 90% 35% 80% 30% 70% 25% 60% 50% 20% 40% 15% 30% 10% 20% 10% 5% 0% 0% WB6 ALB BIH MNE MKD SRB KSV WB6 ALB BIH MNE MKD SRB KSV Total 15+ Male 15+ Female 15+ Total 15-24 Male 15-24 Female 15-24 Total Male Female Source: SEE Jobs Gateway: https://data.wiiw.ac.at/seejobsgateway.html. Note: Data for employment, unemployment and inactivity are for 2019 Q2; data for NEET rate are for 2018. Back to table of contents 4 8 Informality Brief ILO (2020). 9 Informality Brief ILO (2020). 10 EBRD. 2019. North Macedonia Country Diagnostic. 11 World Development Indicators 12 World Bank. 2020. Social Insurance Administration Project, Project Appraisal Document. Washington DC. 13 World Bank. 2018. Seizing a Brighter Future for All: former Yugoslav Republic of Macedonia Systematic Country Diagnostic. NORTH MACEDONIA Social Protection Situational Analysis care to their parents and elderly relatives, a task that often falls to women. Due to migration out of rural areas, elderly people in communities in some areas, particularly in the east of North Macedonia, are being left to age without care and support from their families. The COVID-19 pandemic has led to significant deteriorations in the labor market and poverty outcomes, though government policies acted to preserve jobs, provide incomes and contain the fallout. Employment declined by 0.1 percentage points between June 2019 and June 2020 and, in the absence of the labor market and cash assistance support the government provided in response to the pandemic, poverty would have increased by about 6 percentage points due to COVID-19.14 Although the government support was able to mitigate some of the impacts of the crisis on the labor market, employment and participation gains from 2019 were wiped out.15 More information on the social protection measures against the COVID-19 crisis are presented in the later sections. Back to table of contents 5 14 World Bank. 2020. Western Balkans Regular Economic Report No. 18: An Uncertain Recovery. Fall 2020. Washington DC. 15 World Bank. 2021. Western Balkans Regular Economic Report No. 19: Subdued Recovery. Spring 2021. Washington DC. NORTH MACEDONIA Social Protection Situational Analysis Overview of the social protection system in North Macedonia The social protection system in North Macedonia is comprised of social assistance, social services, social insurance, and labor programs, each of which are considered separately in this Note. Social protection systems rest on four main pillars: social assistance, social services, social insurance, and labor market programs (Box 1 explains the functions of each of these pillars). These broad categories are applied globally and underpin most analysis on social protection. In the sections that follow, these four broad categories are modified to reflect the structure of the social protection system in North Macedonia, as laid out in Table 1. Box 1: The functions of social protection, social insurance, social assistance and labor programs Conceptually, social protection systems rest on the main pillars of social insurance, social assistance, social services and labor market programs. Social insurance aims to smooth income across the life cycle and protect people from shocks and typically comprises benefits based on individual contributions (that is, old-age pensions, disability pensions and survivors’ pensions); individuals who contribute to these programs are entitled to benefits, usually based on the length and level of their contribution. Social assistance generally aims to protect people from falling into poverty and provide support at points in the life cycle; it encom- passes noncontributory programs, including noncontributory pensions (often called social pensions), and family- and child-related cash benefits. Social services support individuals and their families to improve their living conditions when facing various risks throughout the life cycle, such as children, adolescents, the elderly or persons with disabilities.16 Finally, employment and labor market programs aim to improve the functioning of the labor market (through employment services), improve labor supply (through training) and increase labor demand (through subsidies or public works); they also seek to smooth income during unem- ployment (through unemployment insurance) or protect employment for childbirth (through maternity or parental benefits). Table 1. Overview of the social protection system in North Macedonia Category Benefits and programs • Guaranteed Minimum Assistance • Child Allowance and Education Allowance • Parental allowance (means-test introduced to universal program, but current beneficiaries continue to benefit) Cash transfers to support the poor, • Disability allowance Social assistance the vulnerable, • Compensation for assistance and care for another person and persons with • Compensation of part-time salary disabilities • Housing allowance • Permanent compensation • One-time financial assistance • Social assistance for the elderly • Information and reference services • Professional assistance and support services • Counseling services Social services • Home services • Community services • Out-of-family protection services Back to table of contents 6 16 Lindert, K, et al. eds. 2020. Sourcebook on the Foundations of Social Protection Delivery Systems. Washington, DC: World Bank. NORTH MACEDONIA Social Protection Situational Analysis • Solidarity PAYG Social insurance Pensions • Mandatory pillar based on individual accounts • Voluntary private open and occupational pension funds • Individual counselling • Intermediation • Unemployment benefits • Active Labor Market Programs (ALMPs): o Entrepreneurship support o Internship Program o Financial support for job creation Employment and ALMPS o Wage subsidy o Work engagement o Training for a well-known employer o Training for demanded occupations o Advanced IT skills training • Youth Guarantee • Labor Market Activation of vulnerable groups project Source: Authors’ elaboration (2021). Led by the Ministry of Labor and Social Policy, the Figure 3. Social protection coverage for the total social protection system encompasses institutions population by program across the central and local levels. The Ministry of 60% Labor and Social Policy (MLSP) is responsible for planning, regulating, financing and supervising 50% social protection benefits and services. The Institute for Social Activities (ISA) sets standards, supervises 40% the professional work, and implements monitoring 30% activities for social service providers, while the Employment Service Agency (ESA) is responsible 20% for implementing labor market policies through a network of Employment Offices. At the local level, 10% Social Work Centers (SWC), municipalities and other licensed providers provide services. In practice 0% though, despite an emphasis on decentralization, All social All social All social All labor protection insurance assistance market municipalities and other service providers are yet programs to assume responsibility for service provision and Source: Social Protection Expenditure and Evaluation Database SWCs continue to play a central role. using SILC 2019 data, World Bank. While social protection covers more than half of the social services was low in 2019, amounting to less population in North Macedonia, this is driven by high than 0.1 percent of GDP. Social insurance spending and rising levels of spending on social insurance, has historically been high, has steadily increased in while social assistance spending remains below the the last decades and is currently higher than the average for lower middle-income countries. Social Western Balkans average (9.9 percent of GDP as protection programs cover more than 50 percent compared to about 8.5 percent on average for the of the population, with 40 percent of the popula- Western Balkans countries17). Spending on social tion receiving support from social insurance, close assistance has doubled since 2010, and importantly to 14 percent from social assistance, and finally, 2 by about MKD 1 billion denars (over 0.1 percent percent participating in labor market programs of GDP) between 2018 and 2019, when the social (Figure 3). Expenditure on social protection in North assistance reform was implemented, to 1.3 percent Macedonia is higher than the Western Balkans of GDP (Figure 5). Despite this increase, North average (Figure 4), although far below the average Macedonia’s spending on social assistance is lower spent in EU member states. The largest share of than average for the Western Balkans countries (2.1 the country’s social protection spending is on social percent)18 as well as the averages for low-income insurance (9.9 percent of GDP) and, prior to the 2019 (1.47 percent) and lower-middle-income countries reform, spending on social assistance was around (1.59 percent).19 This suggests that further spending 1.2 percent in 2018 and fragmented. Spending on on social assistance may be justified. Back to table of contents 7 17 This average omits Bosnia Herzegovina, for which social insurance data for 2019 are incomplete. 18 The SPEED databases classify social protection programs funded from government revenue as social assistance. As such, part of this difference might stem from the differences in definitions. For example, maternity leave benefits (which represent the largest share among social assistance benefits) are paid from the budget and included in non-contributory benefits (that is, social assistance) in Serbia, while in North Macedonia, maternity leave is financed from the health fund, thus it is not a social assistance benefit. 19 World Bank. 2020. The Atlas of Social Protection Indicators of Resilience and Equity (ASPIRE). NORTH MACEDONIA Social Protection Situational Analysis Figure 4. Expenditure in social protection programs, selected countries (% of GDP) 16% 14% 12% 10% % of GDP 8% 6% 4% 2% 0% SVK KSV ALB MNE MKD BGR BIH 2018 SRB ROU WB6 2017 2017 2019 2019 2019 2017 2019 2017 Average - latest year*** Labor market programs (%) Social assistance (%) Social insurance (%) Social care services (%) Source: World Bank SPEED Database (accessed October 2021). Note: *** Simple average of the total social protection spending (percent) among the six Western Balkans countries on the chart: Albania (ALB), Serbia (SRB), Montenegro (MNE), North Macedonia (MKD), Kosovo (KSV) and Bosnia and Herzegovina (BIH). Information for Bosnia and Herzegovina does not include all social insurance expenditures. Figure 5. Social protection spending by program (% of GDP) 12 10 8 % of GDP 6 4 2 0 13 15 14 18 11 1 10 16 19 17 7 3 5 8 2 4 0 6 9 0 0 0 0 0 0 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Social assistance Labor market programs Social Insurance Source: Social Protection Expenditure and Evaluation Database, World Bank. Back to table of contents 8 NORTH MACEDONIA Social Protection Situational Analysis Cash transfers to support the poor, the vulnerable, and persons with disabilities The design of cash transfer programs in North Macedonia provides much-needed income support to poor families, the elderly, and persons with disabilities and also conditions the receipt of some benefits on the participation of children in school, based on evidence of the positive impact of such conditions on educa- tional outcomes.20 North Macedonia has been implementing an ambitious social assistance reform, which offers the opportunity to improve coverage, targeting and adequacy, and appears to be more effective than the previous, scattered programs in alleviating poverty. Further investments in the delivery system, as well as reforming the disability assessment and certification system, would strengthen the provision of cash transfers. Beyond this, additional steps could be taken to improve the efficiency of the programs, such as (i) complementing the provision of cash transfer support with information (for example, good parenting practices), (ii) further strengthening the integrated case management system (see section on social service below), and (iii) potentially harnessing the education allowances to promote the uptake of preschool, once the supply of these services has expanded. North Macedonia started implementing a compre- Guaranteed minimum assistance constitutes a hensive social protection reform program in 2019 significant improvement and is designed to provide that aimed to consolidate its fragmented, often a comprehensive social safety net, with initial overlapping benefit schemes. Social assistance analysis suggesting that this reform is bearing spending before the reform was comparatively fruit. An analysis of the previous scheme (Social low, highly fragmented across several programs Financial Assistance (SFA)) found that although it and skewed toward non-means-tested programs. was a cost-efficient program, low coverage and low For example, one of the largest programs in terms adequacy22 led to virtually no impact on poverty.23 of spending, the non-means-tested parental In addition to consolidating programs, in an effort allowance (PA) program, involved a continuous to expand coverage, the eligibility threshold for benefit to the mother of the third child born alive the GMA calculation was increased to MKD 4,000, after January 2009. Inconsistencies in the design about 40 percent higher than the SFA threshold of and coverage of programs made the system ineffi- MKD 2,871. Thanks to this change in eligibility, the cient. The reforms set out in the new Law on Social program started with about 5,000 more benefi- Protection and the amendments to the Law on Child ciaries compared to the SFA (28,000 in May 2019 Protection resulted in a series of changes, including as compared to 23,000 for the SFA in April 2019, the introduction of a means-tested guaranteed see Figure 6). In terms of payments, GMA provides minimum assistance (GMA) scheme that replaced all the difference between the household income and current means-tested social assistance programs.21 the established threshold, which is a maximum GMA beneficiaries also receive an energy allowance MKD 10,000 per month for a family of five, using of MKD 1,000 between October and March. The an equivalence scale (see Table 2 in Annex 1). GMA new Law on Social Security for Elderly Citizens, beneficiaries automatically receive an energy poor enacted in May 2019, introduced a means-tested allowance of MKD 1,000 from October to March and social pension for the elderly (age 65 years and are eligible for the educational and child allowance. older). Finally, amendments to the Law on Child As a result, the support provided under the GMA is Protection introduced an educational allowance more adequate than previous programs. and a reformed child allowance; the reformed parental allowance scheme introduced by this law transformed the untargeted and costly parental allowance (PA) program into a means-tested PA. Back to table of contents 9 20 The impact evaluation of the conditional cash transfer (CCT) program on secondary school enrollment and attendance showed positive impacts on enrollment, especially among older youth who are disproportionately likely to drop out of school. (World Bank. 2019. Implementation Completion and Results Report for the Conditional Cash Transfers Project. Washington DC). 21 These include Social Financial Assistance, Permanent Financial Assistance and Financial Assistance for person whose status was child without parents and parental care. 22 Adequacy refers to the level of the benefit. This is often assessed as the total transfer as a share of total income or expenditure. 23 World Bank. 2018. Sowing the Seeds of a Sustainable Future: North Macedonia Public Finance Review. Washington DC. NORTH MACEDONIA Social Protection Situational Analysis Figure 6. Number of beneficiaries of main cash benefits, 2018-2020 Reform 35,000 30,000 28,117 32,386 26,618 Number of beneficiaries 25,000 22,980 20,000 19,936 15,000 11,539 10,000 7,074 7,247 5,000 3,288 2,987 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 2018 2019 2020 SFA CA PFA GMA New CA Source: Analysis based on administrative data provided by MLSP. Note: The government modified the eligibility criteria for the GMA in early 2020 to respond to the COVID-19 pandemic. Some of the increase in GMA beneficiaries in 2020 may be due to this change and the impacts of the pandemic. A parallel reform of the legislation to protect allowance, and SWCs reassesses their eligibility for children provides additional child and education the two allowances if a household’s right for GMA allowances. A child allowance is provided for children terminates. under the age of 18 years living in households that have a total average monthly income below a certain The parental allowance program is being replaced threshold in the past three months.24 The threshold by a means-tested allowance, which is expected starts from MKD 6,800 and increases according to lead to significant improvements in cost-effi- to household characteristics through an equiva- ciency. Aimed at promoting population growth, lence scale up to eight members. The allowance the previous PA provided monthly allowance for all amount also changes from MKD 1,000 to MKD families that had a third child until the child reaches 1,900 according to the number and ages of the age 10, and the program by itself consumed 0.4 children in the household.25 The new child allowance percent of GDP in 2017 with no visible benefits in program increased the threshold (from MKD 6,000 terms of population increase. The reform intro- to MKD 6,800) and removed the eligibility restric- duced a means-test for eligibility such that the tion to those who are currently working or receiving family needs to earn less than the minimum wage unemployment benefits. As a result, beneficiaries of of the previous year to be eligible, while the current the child allowance program more than quadrupled beneficiaries and those who could apply until March from below 4,000 in the old program (in 2018) to 2020, ten months after the reform, will continue over 13,000 in the new one. The education allowance to benefit from the previous program irrespective is an extension of the conditional cash transfer (CCT) of their income status. As a result, there was no for secondary education under SFA and is provided initial sharp decrease in the number of beneficiaries, to households with a child in primary or secondary although a decreasing trend could be expected, nor education conditional on the child attending at least any impact yet on overall social assistance spending. 85 percent of the realized teaching hours.26 The The payment amount remained at MKD 8,048 per threshold is set at MKD 6,800, and also increases month. with the number of people in the household. The annual payment is MKD 8,400 for primary school A universal non-contributory pension27 was intro- students, and MKD 12,000 for secondary school duced in 2019 as a means-tested social assis- students. GMA beneficiaries are automatically tance program for the elderly, but the take-up of eligible for both the child allowance and education the new program is currently low. A monthly cash Back to table of contents 10 24 This benefit is not available for those who own another family house or apartment in which they do not live or do not use it for living; apartment or house under construction; business space; savings / savings investment in the amount of over 70,000 denars; and securities. 25 Amounts for child and education allowances are taken from the Law on Child Protection, which states that they would be increased in line with the increase in the cost of living for the previous year published by State Statistical Office in January for the current year. 26 According to the Law, the right to education allowance is exercised if the child is enrolled as a full-time student in primary or secondary school. The Right to Education Supplement is used for a child who attends at least 85 percent of the total number of realized teaching hours and did not use the education supplement for the same school year. 27 Law on Social Security of Elderly, enacted in May 2019 (Official Gazette 104/2019) introduced a right and “lifetime benefit for social security of elderly,” with all the features of a social pension. NORTH MACEDONIA Social Protection Situational Analysis transfer of MKD 6,000 and an energy allowance agencies and social networks such as the Ministry of MKD 1,000 for the winter months (similar to a of Labor and Social Policy, Ministry of Education, two-adult household benefiting from the GMA) are local governments, Employment Fund (AVRM), available for individuals age 65 years and older who Social Work Centers. Further, the certification are citizens who have had a permanent residence in processes are not coordinated and take too long to North Macedonia for the last 15 years. The transfer be completed. Efforts are underway to reform the is means-tested: individuals cannot own property, disability assessment system, with the piloting of have a pension or other kind of income from North a disability assessment based on the International Macedonia or another country, and did not generate Classification of Functioning, Disability, and Health any income in the past three months from any (ICF) for children and youth (0-26 years old). The sources prior to the submission of the application. Laws on Child Protection and Social Protection are The same conditions apply to the partner of the currently being revised to use the ICF as the basis applicant. The program started in May 2019 with for assessing the disability and care allowance. merely 70 beneficiaries and reached about 8,000 beneficiaries by the end of 2020.28 Although the current assessment for children and the youth is medically based only, a plan has been The reforms significantly improved the design formulated to reform the system to fully align of disability benefits, increased coverage and with the ICF. A new institution, the National Body decreased duplications, but a non-unified disability for the Assessment of the Functionality of Children assessment and certification system still need to and Youth under 26 Years Old, has been set up to be addressed. Disability benefits and services are implement the reform in the next several months scattered across the social assistance and social and to coordinate the process in the future. The insurance pillars of the social protection sector. Social reform started in 2012, with a pilot supported by insurance includes pension and disability insurance United Nations Children’s Fund, which developed and is administered by the Pension and Disability the instruments based on the ICF and included both Insurance Fund. Social assistance before the new an assessment of the functionality of the person and Law on Social Protection included several categor- the need for services. All the instruments, finalized in ical and means-tested benefits; the reform consol- 2016 and adapted to the country’s context, should idated them under two programs. The first of these be fully implemented by 2020. The reform plan programs is the disability allowance, which replaced proposes nine bodies of assessment throughout and improved the older categorical benefits. The the country (two in Skopje and the other seven in program increased coverage by including moderate the regions), with professional assessors contacted and severe intellectual disability. The previous cate- specifically. Each body will consist of four profes- gory-based benefits also suffered from significant sionals (a psychologist, a special education officer, duplications: almost 60 percent of the old Mobility, a social worker and a part-time physician) and one Blindness and Deafness Allowance beneficiaries person serving the technical secretariat. The profes- benefitted from either the Personal Care Allowance sionals are required to have more than ten years of or the Permanent Financial Assistance.29 The new experience in the disability area and training on ICF. disability allowance decreased these duplications At the moment, the proposal is for the ICF bodies to by consolidating most categorical programs.30 be under the Ministry of Health, although it is not Second, the GMA includes a higher equivalence clear whether alternatives including the National scale for households that have members with disa- Body acting as an independent body directly under bility. Importantly, the eligibility test for GMA does the government or under the Ministry of Labor and not consider the disability allowance. The GMA Social Policy, could be viable options. did retain a special allowance for households that have children with disability, personal assistance Despite being lower than comparator countries, and care allowance, and a salary compensation for social assistance spending has increased since shorter working hours due to care of a child with 2010, with a notable jump in 2019 after the social disabilities. Despite these improvements, ineffi- assistance reform. As discussed above, with 1.3 ciencies in the disability assessment procedures percent of GDP, North Macedonia’s social assistance contribute to the exclusion of many persons with spending is lower than comparator countries. On disabilities from the available benefits. Disability the other hand, spending increased from less than certification is requested and assessed by central MKD 5 billion to about MKD 8 billion (in constant and local government institutions, social insurance 2019 prices) between 2010 and 2018 (Figure 7). Back to table of contents 11 28 Ministry of Labor and Social Policy. 29 ESPN Flash Report 2019/40. North Macedonia strengthens disability rights with a new Law on Social Protection. 30 Personal Care Allowance was not consolidated under the disability allowance. NORTH MACEDONIA Social Protection Situational Analysis Much of this increase was due to family and child Figure 7. Social assistance program spending over allowance programs, including the former parental time (MKD billions, constant, 2019=100) allowance program, as well as disability benefits. 10 As a result of the social assistance reform, expendi- 9 tures tripled in the second half of 2019 compared to the first half.31 Spending on poverty alleviation 8 programs increased by about half a billion MKD 7 between 2018 and 2019 with the introduction 6 of the GMA program, and spending on the family Billion MKD and child allowance increased by about MKD 0.2 5 billion with the new child and education allowances. 4 Notably, these rates of spending do not yet reflect the impact of the reform of the parental allowance 3 into a means-tested program and thus, assuming 2 spending on other programs remains constant, 1 overall social assistance spending is anticipated to fall. Currently, North Macedonia’s spending on cash 0 transfers (including last resort income support and 11 13 15 12 14 18 7 17 6 9 16 19 10 5 4 8 0 0 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 other cash benefits) is the equivalent of 1.3 percent of GDP, lower than Albania, Bosnia and Herzego- Disability social pensions Family and child allowance Old age social pensions Poverty alleviation programs vina, Kosovo and Serbia (Figure 8). War veterans pensions Targeted subsidies (health) The design of the comprehensive reform package emphasizes its potential to improve coverage Figure 8. Spending on cash transfers (% of GDP) and targeting, which appear to be materializing. 5.0% Prior to the reform, in 2017, close to 30 percent of the bottom quintile was covered by social 4.5% assistance, among the highest in the Western Balkans but significantly lower than the average 4.0% of 7STEE countries, which was almost 70 percent. 3.5% Initial results indicate that the reform has further improved coverage: results of an evaluation of the 3.0% effect of the reform on coverage show an increase % of GDP of close to 11 percent for the bottom quintile.32 2.5% Importantly, simulations suggest that increases 2.0% in coverage of the poor are likely to be smaller for younger age groups, and larger for adults and older 1.5% poor (Figure 9). Prior to the reform, the emphasis on non-means-tested programs translated into 1.0% relatively low benefit incidence for all social assis- 0.5% tance for the bottom quintile compared to other countries in the Western Balkans: 49.5 percent 0.0% in North Macedonia as opposed to between 73 ROU - MNE - MKD - ALB - SRB - BIH - KSV - percent and 77 percent in Albania, Kosovo, Monte- 2017 2019 2019 2019 2019 2018 2017 negro and Serbia, but the reform is likely to result in Source: World Bank staff estimates based on national gains in targeting efficiency. While survey data that statistical data and SPEED database. refer to the post-reform period are not yet available, Note: Data for 7STEE are 2018 or latest. Spending on cash the reform can be assessed by simulating the new transfers includes last resort social assistance, social pensions and all other means-tested and non-means-tested cash- programs. The simulations use the changes in the based benefits. Last-resort income support (LRIS) includes eligibility criteria.33 Simulation results suggest a poverty alleviation programs and targeted subsidies for significant improvement in targeting: 53 percent of vulnerable households. all social assistance beneficiaries are in the poorest quintile, as compared to about 44 percent prior to the reform. Back to table of contents 12 31 SPEED (Accessed October 2021). 32 World Bank. 2020. North Macedonia Public Finance and Competitiveness Development Policy Loan Implementation Completion and Results Report. Simulations in the referenced report are done using SILC. Please note that data in Figure 9 uses Household Budget Statistics instead, for international comparison purposes. 33 Simulations are made using SILC 2019 and by applying the new eligibility criteria to define eligible households for each new program, and assuming payments according to those defined in the law. All eligible households are assumed to benefit from the programs, while in practice, implementation inefficiencies can lead to worse outcomes. NORTH MACEDONIA Social Protection Situational Analysis Figure 9. Coverage of social assistance by age groups, before and after the 2019 reform 57% 53% 54% 52% 51% 51% 52% 48% 40% 40% 37% 37% 32% 32% 24% 20% 16% 13% Under 5 Under 17 18-24 25-49 50-59 Over 60 Poverty rate Coverage among the poor - pre-reform Coverage among the poor - post reform Source: Authors’ calculations (2021). Note: * Poor is calculated as those living under 5.50 USD per day at PPP 2011. Coverage before the reform is based on SILC 2019 results, while coverage post-reform is based on simulated indicators developed using the SILC 2019 survey. The reform has also improved adequacy, although poverty by about 2.2 percentage points at the 5.50 it can further be improved. Before the reform, USD per day poverty line and 4 percentage points the adequacy of social assistance payments was at the 3.20 USD per day poverty line. Similarly, for lower than other Western Balkan countries. With children under age 18 years, the reformed social the reform, the average amount of transfers to assistance programs have the potential to reduce each household increased from a little below poverty by 4.4 percentage points at 5.50 USD MKD 3,000 to about MKD 7,000. In line with this poverty line and 6.7 percentage points at the 3.20 increase, considering all social assistance programs, USD a day poverty line.35 However, this assumes all simulated results suggest that, among the poorest eligible beneficiaries are reached and can benefit quintile of the population, adequacy increased from from the program. 53.7 percent to 62.0 percent.34 Prior to the reform, transfers to the second quintile were slightly higher However, to improve effectiveness of the overall than those received by the poorest quintile (MKD program and ensure that all eligible beneficiaries 16,147 as compared to MKD 15,371, respectively (see are reached, crucial implementation elements must Table 2). This was due to the heavy weight of cate- be taken into consideration. Further investment in gorical programs over means-tested programs. The communications and outreach would advance the reform reversed this inefficiency: simulated results aims of the social protection reform to, among other suggest that the average per capita transfer after aims, ensure that everyone who is eligible is aware the reform is more than MKD 17,777 for the poorest of the right to apply for support and is able to do quintile and MKD 15,335 for the second quintile, or so. An assessment conducted by UNICEF found close to 62 percent of the average income per capita that during the COVID-19 pandemic, 27 percent of the poorest quintile as compared to about 23 of households that were eligible for the modified percent for the second quintile. On the other hand, GMA36 were unaware of their eligibility. Notably, despite this increase, per capita social assistance the steps listed in Figure 10, which draw from the payments on average remain around 31 percent of Law on Social Protection, start with the application the poverty line. process. This corroborates a general notion that globally the first step in the delivery chain (outreach) Initial analysis suggests that the reform has been is often the weakest.37 Additionally, there is some effective, but the success and sustainability of the suggestion that communication and outreach reform crucially lie on implementation to ensure target the general population and are not tailored that all eligible people are reached. The reformed to the specific needs of poor and vulnerable popu- social assistance programs can potentially reduce lations. Back to table of contents 13 34 Adequacy is calculated as the average per capita transfer value for the poorest quintile as a percent of the average income per capita for the poorest quintile. 35 Simulated results using USD 5.50 PPP and USD 3.20 PPP as alternative poverty lines. This alternative use demonstrates that the impact of programs is higher for lower income groups. 36 As part of the response to the COVID-19 pandemic, the Government modified the eligibility for the GMA to extend coverage to additional households. See the section on the COVID-19 response below. 37 Lindert, K, et al. eds. 2020. Sourcebook on the Foundations of Social Protection Delivery Systems. Washington, DC: World Bank. NORTH MACEDONIA Social Protection Situational Analysis Table 2. Comparison of actual and simulated adequacy results for North Macedonia’s social assistance programs All Social Assistance (Pre-Reform) All Social Assistance (Post-Reform, Simulated) Value-yearly Avg. per capita Avg. per capita Avg. per capita Avg. per capita Avg. per capita Avg. per capita transfer value in transfer value in transfer value in transfer value in transfer value in transfer value in the survey the survey (Q1) the survey (Q2) the survey the survey (Q1) the survey (Q2) Value-yearly 16,046 15,371 16,147 16,780 17,777 15,335 Avg income per capita* 110,037 14.58% 13.97% 14.67% 15.25% 16.16% 13.94% Avg income per capita 28,652 56.00% 53.65% 56.36% 58.56% 62.04% 53.52% (Quintile 1) Avg income per capita 67,484 23.78% 22.78% 23.93% 24.87% 26.34% 22.72% (Quintile 2) Poverty line (at 5.50 a 51,722 31.02% 29.72% 31.22% 32.44% 34.37% 29.65% day)** Poverty line (relative) 110,440 14.53% 13.92% 14.62% 15.19% 16.10% 13.89% *** Minimum wage (yearly) 208,440 7.70% 7.37% 7.75% 8.05% 8.53% 7.36% **** Source: World Bank staff estimates using SILC 2019 data. Note: Calculations are made by applying the new eligibility criteria to define eligible households for each new program, and assuming payments according to those defined in the law. All eligible households are assumed to benefit from the programs, while in practice, implementation inefficiencies can lead to worse outcomes. * Welfare aggregate per capita is calculated as gross income deducted by spending on rent, health and durables. ** Calculated as icp2017 (international comparison rate) * cpi2017 (1) *365 *5.50. *** Calculated as 60 percent of the median per capita income. **** Calculated as minimum wage in 2018 (second half) * 12. Reported by Eurostat at https://appsso.eurostat.ec.europa.eu/nui/ submitViewTableAction.do ***** Quintiles are created using per capita welfare aggregate after social assistance transfers. Figure 10. Application and evaluation procedures for social assistance Individual, legal SWC must complete representative, parent its evaluation of the The right to social or guardian applies to application within 60 protection starts on SWC. CSW can also days of the the day of the initiate the procedure application* application ex o cio SWC requests relevant SWC makes individual SWC reviews the evidence from public plans for social conditions of the insitutions within 3 assistance, social household randomly days of receiving (or services and activation and at least once a inititating) the for members of the year application household The public institution SWC sta inspects the submits the relevant applicant's household documentation in 3 to make the decision days after receiving on the application the request Source: Authors’ elaboration based on the Law of Social Protection and the Law of Child Protection (2021). Note: * The maximum number of days within which a request needs to be finalized may vary between 30 and 60 days depending on the service. Back to table of contents 14 NORTH MACEDONIA Social Protection Situational Analysis The Cash Benefit Management Information System and information on the benefits of accessing health has improved the effectiveness of cash transfers, and education services; and (ii) integrating into the through improvements to the targeting and case management system (see next section below) payment system, among others. The Cash Benefit a specific focus on early childhood development Management Information System (CBMIS) has of children in beneficiary households. In addition, different modules for the determination of benefits once the supply of preschools has improved, the and services, payments, controls, analytics and education allowances could be extended to support statistics, security, among others, and access to the younger children access early childhood education different modules are provided to relevant personnel, and care. More generally, a focus on integrated such as social worker, supervisor, accountant, etc. service provision can help overcome some of the The eligibility module operates as an integrated challenges associated with intersectoral coordi- beneficiary registry that allows people to apply for nation at the local level, including with health and various types of benefits through a single process education. These issues are considered further using only their national ID, with annual recertifica- under the section on social services below. tion. Self-reported information is complemented by data exchange with other administrative systems under an interconnectivity (interoperability) project that seeks to link administrative systems for 14 institutions.38 The institutions have memorandums of understanding for data exchange but do not yet have rectification protocols to reconcile differ- ences or errors in information across agencies. The CBMIS is estimated to include information on over 30 percent of the populations, thereby providing an integrated beneficiary registry and the initial steps toward a social registry. For payments, the system issues a certificate to enrolled beneficiaries, who bring the certificate to the payment service provider of their choice (through partnerships with 10 banks), and the bank then sends back the record to the MLSP to link the account of the beneficiary to the bank for benefits payments. Payments are made monthly. Despite these improvements, the MSLP has not yet systematically reviewed the expe- rience of applying and receiving payments from the perspective of the beneficiary, and as such further gaps are not yet visible. While the reform of cash benefits will have a positive impact, these benefits can be further enhanced by purposively promoting the use of health and education services. Expanding the coverage of social assistance, while also improving the effective- ness and adequacy of this support, will help families meet their basic needs and access much-needed health and education services by helping meet any costs associated with accessing these services. Additionally, education allowances will continue to promote educational investments for poor children. This foundation can be further expanded by (i) complementing the provision of the GMA, family and child allowances, as appropriate, with support to parents to improve their parenting practices and/ or improved access to social services as needed, Back to table of contents 15 Real-time connectivity between the MLSP, the Pension and Disability Fund and the State Employment Agency has been achieved. 38 NORTH MACEDONIA Social Protection Situational Analysis Social services North Macedonia has embarked on an ambitious reform of social services, against the backdrop of dein- stitutionalization and decentralization. This reform is anticipated to move toward a beneficiary-cen- tered system that supports the provision of integrated services, although realizing the full objective of this reform will take time, as it requires a shift in terms of how services needs are assessed and how they are delivered, financed, monitored and licensed. Initial progress is being made to reform the financing of services, to expand the menu of services that are offered, the licensing, including the training of staff, and monitoring. In parallel, the MLSP has introduced case management, which aims to respond to the needs of individuals, their families and communities and is in the process of replacing its information systems with a single, integrated system. Further lessons will be learned as these initial pilots of social service move toward full implementation, the case management evolves and the integrated information system is initiated. This also offers an opportunity to expand the scope to support the integrated provision of health and education services. The reform of social services in North Macedonia services providers. Through the 2019 reform, the is seeking to, among other aims, expand the range MLSP is seeking to shift roles. The municipalities of social services available to vulnerable popula- will take the lead in identifying their priorities and tions across municipalities. The 2019 Law on Social offering services in partnership with local service Protection defines social services as (i) services of providers, while the MLSP will set standards and information and referral; (ii) professional assistance frameworks, monitor the provision of services and and support services; (iii) counselling services; (iv) finance services. This approach is consistent with a home services, including help and care at home global shift away from governments delivering social and personal assistance; (v) community services;39 services directly to acting as the steward, which sets and (vi) out-of-family care services.40 The Law also standards, assures quality and finances services. As created a category of innovative services in recog- a first step in this reform, the MLSP has reformed the nition that not all needs, and by extension the range licensing of social service providers. In parallel, the of services, are known to the MLSP in advance to MLSP is piloting the financing of services through be set out in the Law and associated Rule Books. grants awarded in response to a call of applications Recognizing that the needs of populations across by municipalities and local service providers (to date, municipalities differ, the Law sets out a process by these have been nongovernmental organizations). which municipalities, initially with support from the While this reform is progressing, it requires a funda- Social Work Centers and the MLSP, assess their mental shift in the way organizations work within needs and identify the types of social services to the system, demanding, among other changes, a be offered. This reform demands that municipal- significant increase in the capacity of municipal- ities take the lead in assessing the needs of their ities to manage service providers, the Social Work populations, which requires skills and expertise that Centers to monitor service provision and the MLSP most municipalities do not yet possess. Despite the to support lower-level implementers. This pilot will intention of government to provide this full range of also offer lessons for the long-term financing of service, in practice, the availability of social services social services. and number of social workers decreases dramati- cally in regions outside the capital, Skopje. The government’s aim of moving toward the provision of community-based care services, away Consistent with global trends, the mandate of the from the legacy of institutional care, is progressing Ministry of Labor and Social Policy has shifted to well. Progress has been made in the deinstitutional- standard setting, quality assurance and financing, ization of children, with all children under 18 living in with service provision by municipalities and institutions now placed in foster care or group homes Back to table of contents 16 39 The government provides day care and temporary residence for children at risk, persons with disabilities, marginalized people, the elderly and other individuals with specific social problems. 40 Out-of-family services in the form of living with support, foster care and institutionalization is provided. NORTH MACEDONIA Social Protection Situational Analysis with social workers assigned to them.41 While North on the assessed needs of an individual, their family Macedonia prepared and adopted the National and community; and (iii) introduce an individual plan Deinstitutionalization Strategy for 2018–2027 with for activating a beneficiary supported by improved the technical and financial support of the European coordination between Social Work Centers and Union, the progress in the deinstitutionalization of Employment Centers. The MLSP is currently persons with disabilities has varied across regions tendering the new integrated information manage- and severity of the disabilities, as integrating indi- ment system that will support the integration of viduals with severe physical or mental disability has social assistance and social services which have so proven difficult in some cases. In some instances, far been supported through separate information the MLSP has had to overcome concerns raised by management systems. The new integrated infor- staff and the public. Notably, the number and skills mation management system is designed to collect of available staff is a constraining factor. It is often information on the needs of all household members difficult to find the skills and licensed staff, given to support decision-making on how to address the that this skill set is in high demand in European range of risks and vulnerabilities faced by a family. countries. While the vision for cash management is well artic- As its population ages, care for the elderly will ulated, efforts to roll out the new system demand become increasingly important. Long-term care concerted attention to mentoring and coaching encompasses health services and care services, that of Social Work Center staff. The MLSP has issued may be privately provided, funded through insurance guidelines and is training SWC staff on the new or funded by the state, particularly for older people system of case management. The Ministry is also who meet established eligibility criteria, such as seeking to provide on-the-job training to support those who are poor. Care services can be provided the significant change in the day-to-day work of in homes, enabling older people to continue to social workers demanded by the case manage- live independently, or in elderly homes. Currently, ment system, as well as a structure for supervision. few organizations provide services to the elderly However, despite an increase in staffing in Social in North Macedonia and, in general, much of this Work Centers, a lack of qualified staff and low staff provision is project-based. There are some positive motivation undermine this reform. This points to signals that this may be changing, as home-based the need to continue to respond to broader issues care for the elderly featured prominently among related to the motivation of staff, the reported high the grants to municipalities and service providers administrative work burden on social workers and for social services. In contrast, support to the frequent staff changes. Nonetheless, the number caregivers of the elderly is less well development. As of beneficiaries of cash benefits and social services the number of older people grows, the country will managed through this new unified system has need to grapple with important questions of how grown fast, with total numbers reaching 17,800, to increase service provision in a financially sustain- of which 60 percent are women, and making up able manner. The MLSP has started this process by for almost three-quarters of all beneficiaries in key looking into options for the co-funding of services social centers, such as Kumanovo.42 by the individual and state, that is, by requiring that a service user (elderly person) pays a percentage of The ongoing reform of social services offers the the service costs, based on his or her income. possibility to significantly advance protection among the poor and vulnerable and, as such, these An additional innovation in the 2019 reform reforms should be sustained and furthered. As was the introduction of case management to discussed in the sections above, the reform of social support the delivery of integrated social services services offers the potential to expand the range and promote activation. The case management of services across municipalities and improve their approach mandated by the 2019 social protec- responsiveness to local populations, by moving tion reform aims to provide integrated social and service provision closer to the population. It will take child protection services to individuals or families, time to realize the full extent of this reform, given including the activation of GMA beneficiaries into the fundamental change in the roles and respon- work. The new case management system aims sibilities of organizations and staff it requires, and, to (i) create an integrated registration process for as such, sustaining these reforms is vital, while also benefits and services, with the Case Manager as the providing intensive support to front-line staff in sole focal point; (ii) adopt a tailored approach based the municipalities, SWC and service providers. The Back to table of contents 17 41 A small number of children became adults or returned to their family of origin. 42 https://www.mtsp.gov.mk/covid-19-ns_article-ministerkata-shahpaska-vo-poseta-na-centarot-za-socijalna-rabota-vo-kumanovo-centarot-za-socijalna-r.nspx NORTH MACEDONIA Social Protection Situational Analysis introduction of case management, supported by an integrated management information system, is particularly innovative, positioning North Macedonia at the forefront of social protection in the region. These investments could be harnessed to support further investments in the human capital of the poor by extending the case management system to consider the access to and use of health and education services by beneficiaries of social assistance and social services. This can be done by adding this focus to the initial needs assessment carried-out by municipalities and by extending the data exchange agreements for the management information system to include Ministry of Education and Ministry of Health to track the use of education and health services, respectively, by beneficiaries (beyond what is currently required for the education allowance) and establishing a formal system of noti- fications to Social Work Center staff when health and education services are missed, with a request for follow-up by social workers. Back to table of contents 18 NORTH MACEDONIA Social Protection Situational Analysis Pensions Pensions aim to smooth income, and by extension consumption, across the life cycle into old age. The provision of adequate pensions mitigates poverty in old age, thus helping to protect the nutrition, health and well-being of the elderly. North Macedonia is one of only two Western Balkan countries that currently have a multi-pillar pension system, and among the two, North Macedonia has fully developed its system. North Macedonia’s pension system seems relatively effective in reducing poverty compared to peers; however, there are concerns around its coverage and equity. For example, pension coverage of the elderly poor is lower than relatively wealthier elderly populations, although the introduction in 2019 of a govern- ment-funded means-tested social assistance program for the elderly offers the possibility to further expand coverage among the poor.43 Importantly, while reforms have improved the sustainability of the system, ad hoc increases in pension and decreases in contribution rates have undermined progress. North Macedonia needs a stronger package of policy measures for fiscal stabilization and improving equity. The pension system of North Macedonia rests on GDP, which, after diverting 1.1 percent of GDP to three pillars: a solidarity pay-as-you-go pillar, a individual accounts in the second pillar, resulted in a second fully funded mandatory pillar based on PAYG pension benefit and overall pension deficit of individual accounts and voluntary private open and 3.5 percent48 and 4.6 percent of GDP, respectively. occupational pension funds. An ambitious reform in The pension deficit, covered by direct transfers from the beginning of 2000s increased the mandatory the central government budget, crowds out funds retirement age to 64 for men and 62 for women,44 equivalent to what the country spends each year on reduced accrual rates and introduced the so-called education. Swiss pension indexation formula based on 50 percent wages and 50 percent consumer price Reforms improved sustainability, but subsequent inflation. The second pillar was introduced in 2006, ad hoc increases in pension and decreases in and the third was introduced in 2009. A change contribution rates undermined progress. The latest in 2012 decreased the accrual rate for service reform implemented in 2018 made changes in years post-2013 for pay-as-you-go (PAYG)-only eligibility, indexation and contribution as well as a participants and tightened the criteria for disability further harmonization of accrual rates.49 Aiming to pensions. North Macedonia and Kosovo are the only abolish ad hoc indexation, the reform introduced two Western Balkan countries that currently have a 100 percent consumer price indexation of pensions, multi-pillar pension system, and among the two, with an extra indexation in case of a GDP growth North Macedonia has fully developed its system.45,46 above 4 percent in the previous year. It also increased Table 3 provides an overview of pension parameters the pension insurance contribution rate in 2019 and in North Macedonia. 2020, respectively to 18.4 percent and 18.8 percent from 18 percent, its value since 2010. Finally, second North Macedonia spends a moderate share of its pillar members older than 50 years old were given GDP on pension benefits compared to its peers the option to switch to the PAYG pillar.50 The series but generates a large pension deficit. Pension of reforms increased the support ratio from 1.31 in benefits spending was 8.2 percent of GDP in 2018, 2005 to 1.83 in 2018, the highest in the Western comparable to Romania and Bulgaria and lower than Balkans, and the theoretical replacement rate to many EU countries. It is estimated that the extra above 50 percent, bringing North Macedonia closer expenditures due to the ad-hoc indexation in 2020 to the EU than Western Balkans.51 However, in may total MKD 2.6 billion, or more than 3 percent response to an increase in the minimum wage and of total pension outlays, which may reach overall 11 pension in 2019, the government introduced an ad percent of GDP.47 On the other hand, contribution hoc, discretionary indexation of pensions in addition collections only partially finance pension payments. to the CPI indexation, which undermined the Contribution collection in 2018 was 5.8 percent of positive impact of the 2018 reform on sustainability. Back to table of contents 19 43 This program (the Social Pension) was discussed under Cash Transfers in the sections above. 44 Early retirement is still an option for hazardous and arduous occupations. Reform of the mandatory early retirement in hazardous occupations, its current financing arrangement, as well as the list of occupations eligible was announced in the Economic and Social Reform Program 2020 for the second phase of the pension reform. 45 Bejakovic P., and Z. Mrnjavac. 2020. Fully Funded Pension System in six non-EU Balkan Countries. https://hrcak.srce.hr/index.php?show=clanak&id_clanak_jezik=347743 46 Misheva K. et al. 2019. Challenges and opportunities of the Macedonian pension system according the EU recommendations (social, legal and financial aspects). EU and com- parative law issues and challenges series (ECLIC 3). Editors: Dunja Duić and Tunkica Petrašević. Executive Editor: Ante Novokmet. 47 Based on PIOM data, the World Bank team estimates that the extra pension expenditures in 2020 due to ad hoc indexation paid in January 2020 amount to MKD 2.3 bn and the extra health contributions for pensioners to MKD 0.3 bn for a total of MKD 2.6 bn. This represents 3.3 percent of overall expected pension outlays in 2020 or 0.38 percent of GDP. NORTH MACEDONIA Social Protection Situational Analysis Table 3: Pension parameters in North Macedonia Retirement Age 64 years old for men and 62 years old for women, both with 15 years of contributions Service Period for: Until 2001 2001-2012 2013-2018 2019 2020 Non II-pillar members 2.33% - men 1.8% - men 1.61% - men 1.54% - men 1.47% - men with less than 15 years 2.60% - women 2.05% – women 1.84% - women 1.54% - women 1.47% - women of service Declining (art 228) Declining (art 228) Non II-pillar members 2.3%-2.0% - men 2.3%-2.0% - men 1.61% - men 1.54% - men 1.47% - men with more than 15 years 2.6%-2.1% - 2.6%-2.1% - 1.61% - women 1.54% - women 1.47% - women of service Accrual rate (Net) women women From 2003 II-pillar members that 2.33% - men 0.75% - men 0.75% - men 1.00% - men 1.00% - men opted in the system 2.60% - women 0.86% - women 0.86% - women 1.14% - women 1.14% - women – From 2003 II-pillar member that 0.75% - men 0.75% - men 1.00% - men 1.00% - men mandatorily joined the 0.86% - women 0.86% - women 1.14% - women 1.14% - women system For PAYG-only participants: 78.4% in 2020, declining to 72% in 2040. Maximum net For voluntary II pillar participants: 78.4% in 2020, declining to 72% in 2040, but with maximum PAYG net accrual rate accrual rate for service before 2006 of 11.65% (men), and 13% (women). For mandatory II pillar participants: no maximum PAYG accrual rate. Career earnings, net wage revalued with historical average wage growth. Pensionable base 35%-41% (scaled in proportion to service period) of 2002 average net wage indexed same as regular Minimum pension pensions. 2.7 * average net wage in North Macedonia in previous calendar year. Maximum pension Indexation post- 100% CPI rate of change; supplementary 25 percent wage indexation in case a real GDP grows above 4 retirement percent per year. Professional incapacity: at least 50% reduced work capacity, minimum age of 45, and one-third of contribution period above age 20 years old (26 years old for tertiary education). Eligibility for disability pension General incapacity: 80-100% incapacity, minimum age 20 years old (age 26 years old for tertiary education), and at least of one-third of contribution period above age 20 years old (26 years old for tertiary education); for injury at work, regardless of service period. 80% of the old age pension for full incapacity in case of work injury and professional disease, declining to Level of disability 72% by 2040. pension Professional incapacity: 38% men and 44% women is the replacement rate upon attainment of age; pension supplements 10-20% for 80-100% incapacity. Age 50 years old in case of widow. Eligibility for Age 55 years old in case of widower. survivor’s pension Children aged 15 or under and until age 26 if students or lifetime if incapacitated. Level of survivor’s 70% of contributor’s entitlement if one person; 80% to be divided by two people; 90% to be divided by pension three people; and 100% to be divided if four or more people. Second pillar New entrants (regardless of age) since 2006 mandatory, voluntary opt-in for insured individuals below age participation 50 years old. Total: 18.8% Pension PAYG: 12.8% contribution rate Second Pillar: 6% Back to table of contents 20 48 “Deficit” is defined here as the cash pension deficit, that is, pension benefit payments minus PAYG pension contributions. 49 Before the reform, for members of the two-pillar pension system, accrual rates were 0.75 percent for men and 0.86 for women and were then raised to 1 percent and 1.14 percent, respectively. Accrual rates of the first PAYG pension system have been lowered from 1.61 percent to 1.54 percent in 2019 and 1.47 percent in 2020. 50 With the amendments to the Law on Mandatory Fully Funded Pension Insurance from December 2018, all members of the mandatory pension funds who had joined the second pillar voluntarily (and who were first employed before January 1, 2003) and who were born before January 1, 1967, were given the chance to choose to terminate or continue their membership in the second pillar. 51 EU Aging Report 2018, PAYG pension agencies in Western Balkans countries. NORTH MACEDONIA Social Protection Situational Analysis In terms of adequacy, the pension system in North Macedonia is more generous than other Western Balkan countries although lower than the EU average (Figure 11). The theoretical replacement rate (TRR)52 for North Macedonia is closer to the EU countries than the Western Balkans. With around 40 percent, the gross benefit ratio (share of current gross pension to gross average wage) is also higher than the other countries in the Western Balkans, although slightly lower than the EU average. Figure 11. Gross benefit ratios and theoretical replacement rates, EU and Western Balkans, 2016 or recent 100% 80% 60% 40% 20% 0% KD H E LT SK BG AT FI IT R EE PL U L B E SE CZ U K BE CY FR SI O T EU E ES EL H K LV PT LU 27 D RS N I N M D D H SR BI U RO H N FE M M BI Gross Benefit Ratio Theoretical Replacement Rate Source: EU Aging Report 2018, EU Adequacy Report 2018, pension agencies in Western Balkans countries. Although North Macedonia’s pension system Bank’s Pension Policy Challenges 2020 report finds seems relatively effective in reducing poverty that the reforms could not reverse the system’s compared to peers, there are concerns around its worsening trends, and that a more decisive set coverage and equity. Poverty risk among the elderly of measures are needed to stabilize the system is lower than in other social groups and lower than at adequate benefit levels. Estimates show that other Western Balkan countries.53 Pension coverage a strong reform, including raising the retirement of the elderly poor is lower than relatively wealthier age and harmonizing PAYG-only accruals for the elderly populations (Figure 12), although with the entire service period (as opposed to future only), recent introduction of the means-tested social would prolong workers’ stay in the labor market, pension (discussed under the section above on Cash increase new replacement rates and reduce pension Transfers), coverage of the elderly poor may expand expenditures and deficits by up to 2 percent of GDP over time. The multi-pillar system and the ad hoc annually by the 2030s.55 increases in indexations cause concerns around equity. Accrual rates for funded system participants Figure 12. Coverage of the elderly under social are disproportionally lower than for the PAYG-only protection programs, North Macedonia. participants which create inadequate multi-pillar 97% 98% 100% 95% reforms and are linked to specific cohorts, gender 92% and contribution periods. These differences result in 90% 80% an inequitable distribution of payments such that 80% the poorest elderly make up about only 6 percent 70% of pension beneficiaries, whereas 37 percent are 60% in the highest quintile. Overall, only 9 percent of pension beneficiaries among the group age 65 50% years and older is in the poorest quintile, whereas 40% 33 percent is in the highest quintile.54 In addition, ad 30% hoc increases in indexations are likely to generate further inequalities between different pillars. 20% 10% North Macedonia’s pension system needs a 0% stronger package of policy measures for fiscal Q1 Q2 Q3 Q4 Q5 stabilization and improving equity. The World Source: Authors’ calculations using SILC (2019). Back to table of contents 21 52 The theoretical replacement rate is the share of an average earner's pension for 40 years of service in average wage. 53 Eurostat EU-SILC (2019). The indicator used for this comparison is at-risk-of poverty rate for the 65+ age group and is defined as the share of persons with an equivalized dis- posable income below the risk-of-poverty threshold, which is set at 60 percent of the national median equivalized disposable income (after social transfers). The indicator for North Macedonia was 14.8 as compared to 16.1 for the EU-27 average in 2019. 54 Source: World Bank SPEED database (October 2021). 55 Source: World Bank. 2020. North Macedonia: Pension Policy Challenges 2020. Washington DC. Simulations are conducted in the report using the World Bank's Pension Reform Options Simulations Toolkit (PROST) model. NORTH MACEDONIA Social Protection Situational Analysis Employment and ALMPs North Macedonia’s labor market has seen stable growth in employment in recent years, in part due to ambitious reforms by the Employment Service Agency (ESA). The novel youth guarantee supports a smooth transition from the education system to the labor market and jobseekers at later stages in their careers can access a range of active labor market programs (ALMPs) that promote employability and help them transition back into employment. Despite a significant expansion of its services, however, the ESA has not seen a much-needed increase in funding. These constraints, both in terms of human and financial resources, limit the extent to which further progress can be made. With the current available resources, a focus should be on expanding effective employment services and programs, by, among others, introducing a transparent monitoring and evaluation framework. More funding is needed to increase the number of staff at the ESA who engage with jobseekers and to update the available evidence on the effectiveness of the programs and adapt accordingly. Looking forward, North Macedonia could aspire to develop a system of lifelong learning that is more closely tied to a person rather than a place of work and offer training opportunities not only to jobseekers but to workers as well. As citizens of North Macedonia leave the formal of the total number of unemployed (according to education system, the Employment Service Agency survey data). Jobseekers with only primary education supports jobseekers with employment services and or less make up the largest share of jobseekers programs to access jobs. North Macedonia’s labor (around two-thirds of jobseekers); however, many market policies are coordinated by the Ministry of active labor market programs require secondary Labor and Social Policy (MLSP) and implemented education. Given the current human capacity, the by the Employment Service Agency (ESA). In 2019, ESA could consider outsourcing the intermediation the MLSP authored the Revised Employment and process for entire hard-to-serve target groups such Social Reform Programme 2022, which defines the as those with only primary education or less. key labor market and employment challenges and associated reforms to be implemented by 2022. ESA provides opportunities for lifelong learning The priorities and reforms identified revolve around through the provision of vocational training as part addressing the high levels of unemployment of of their ALMPs. Continuous VET allows workers to disadvantaged groups, the prevalence of informal access training opportunities and gain new skills employment, the capacity constraints of the ESA even after leaving the education system. The ESA and strengthening social dialogue. As part of work is responsible for much of the public provision carried out by an Inter-ministerial working group, of adult learning through purchasing continuous the MLSP is currently authoring a new employment VET and implementing other ALMPs, while the strategy that formulates how the government aims Adult Education Center and nongovernmental to address challenges around employment growth organizations also provide training on a smaller scale. between 2021 and 2027. The 2021 Operational Plan The ESA offers three different on-the job training of the ESA lays out how some of these challenges programs called trainings demanded by employers, are to be addressed through implementation of training in skills for occupations in demand with employment services and ALMPs, with a focus on priority for GMA beneficiaries and digital skills activating youth (up to age 29 years old), long-term training.56 In 2019, a total of 2,011 jobseekers took unemployed and GMA beneficiaries. Programs part in these trainings, which are conducted by offered by the ESA are accessible to all jobseekers external private providers sourced through open who are actively looking for work and who check calls. These trainings are put in place in response to in at one of their offices at least every 30 days. In employers’ demands. The ESA conducts a skill needs 2019, 101,748 individuals were registered as active survey each year, and a large number of jobseekers jobseekers at the ESA, representing around half are trained in IT skills; however, there is little Back to table of contents 22 56 Digital skills training is separated into those that must be provided at a licensed provider, which are very advanced skills (such as, data analysis, automation tester, etc.) and those which are provided by unlicensed providers for more intermediate skills (such as, graphic design, digital marketing, etc.). It appears that the very advanced trainings have not been made use of since 2015, whereas the other training has had between 100 and 300 beneficiaries, except for one year (2019) when it had 1,048 beneficiaries. NORTH MACEDONIA Social Protection Situational Analysis evidence of the effectiveness of these trainings in there is a need for updated rigorous evidence on terms of employment outcomes. Employers receive program effectiveness. The findings of a recent a monthly training compensation, paid conditional experimental study on the wage subsidy conducted on a certain share of training graduates being hired. by an external evaluation team have not informed The ESA ensures the upholding of certain quality program design yet, and similar evidence is needed criteria during training but lacks a systematic for other programs as well.58 tracing system of vocational training beneficiaries to monitor long-term program outcomes. Additionally, reforms are required to ensure that the provision of ALMPs is timely and on-demand. Coverage of ALMPs has been consistently For almost all programs, including training, potential increasing, with a focus on expanding wage beneficiaries or providers must apply following a subsidies and self-employment support. The ESA public announcement. Such calls are often issued at offers a range of ALMPs besides training, most short notice and training providers are required to notably wage subsidy, internship, self-employment, submit a sizeable number of documents, providers and public works programs. Among these, the must be licensed, and programs are required to internship program for youth up to the age of 34 be accredited. These bureaucratic procedures years is the largest program in terms of beneficiaries, and time-consuming processes for accreditation aimed to support the education-to-work transition. outweigh the potential benefits for many training Targeted support to youth is key, as it takes a young providers, especially given the often-small number of person a long time (on average 2.5 years) from the beneficiaries. Not only does this prevent jobseekers time of graduation to attain a stable job, and the from accessing trainings which are designed to the share of long-term unemployed among the youth most up-to-date standard, but non-public-training ranges between 65 percent among youth with providers also struggle with timely provision of tertiary education and 85 percent among youth curricula and certification. This often leaves only the with basic education only.57 The wage subsidy and public vocational secondary schools as potential self-employment programs have broader target providers of training. Employers must await calls groups, including youth, long-term unemployed for the measures they are interested in, rather than and unemployed aged 50 years old and older. accessing the services when they are demanded. Wage subsidy recipients receive slightly more than the minimum wage and self-employment grantees The youth guarantee helps youth to transition from are eligible to receive between MKD 307,500 and the education system to the labor market, but more MKD 615,000 (EUR 5,000–10,000). Each year, a evidence is needed on its effectiveness. The youth work engagement program provides more than a guarantee, which was introduced in 2018, aims to thousand jobseekers the opportunity to acquire provide all youth aged 15-29 years old with an offer skills in local infrastructure and environmental for employment, continued education and training protection projects with a limited duration of or participation in an ALMP within four months of 22 working days per month. Coverage of these registering as a jobseeker. A pilot was conducted ALMPs have increased considerably, with almost 8 in 2018 with 5,266 participants, of which almost percent of jobseekers taking part in ALMPs, up 2.5 42 percent of participants found employment percentage points from 2015. or took part in an ALMP. These results provided evidence enough for the program to be rolled out However, the evidence upon which program design on a nationwide basis, with 20,302 young people is based is outdated. The last rigorous evaluation registering in 2019 and 25,502 young people which is referenced as a basis for ALMP design registering in 2020. Of those registered, around 35 was conducted by the ILO for the period 2010 percent were either employed within four months and 2014. The evaluation found the internship or took part in an ALMP. Out of the 2,327 youth program and training demanded by employers to who benefitted from an ALMP, 28 percent received be effective, whereas the wage subsidy and the wage subsidies, but most were enrolled in the training for occupations in demand showed little internship program. As part of the youth guarantee, positive effects on both employment and subjective the ESA offers career guidance and support job outcomes. However, both the composition of matching, but only 3,042 youth made use of such jobseekers as well as the design of programs as services, of which 1,204 individuals were profiled laid out in the Operational Plan have changed since and only 67 individuals received career counselling. then, in part as a response to the evaluation. Hence, While detailed monitoring data are provided on Back to table of contents 23 57 World Bank. 2019. Finding Solutions to Youth Unemployment in North Macedonia. Washington DC. 58 Carneiro, P., Armand, A., Tagliati, F. and Xia, Y. 2020. Can Subsidized Employment Tackle Long-Term Unemployment? Experimental Evidence from North Macedonia.CEPR Dis- cussion Paper DP15192. Washington DC: World Bank. NORTH MACEDONIA Social Protection Situational Analysis the number of individuals partaking in the youth increase in financial or human resources in several guarantee and its services, a detailed evaluation years, the agency has continuously expanded and report has not been released thus far to explore advanced its services and programs. In recent years, potential ways of increasing the uptake of such the youth guarantee was piloted and rolled out on services for youth of all education levels. a national basis; a profiling system was introduced; and the activation strategy of GMA beneficiaries is in A system to activate GMA beneficiaries has been the process of being implemented. While resources co-developed with the European Union and have remained constant, the ESA’s programs and implementation has been moving forward in 2021. services warrant an expansion to a broader set of The Labor Market Activation of Vulnerable Groups clients. Increases in funding could likely lead to an project has created a system within which the expansion of the ESA’s services and ALMPs but Social Work Centers and ESA offices collaboratively should be accompanied by measures to ensure the provide support to GMA beneficiaries by providing effective use of the expanded resources, such as jobseekers with individual action plans covering continuously and rigorously evaluating its activities. 12 months of services. During this period, 1,200 pilot participants will receive psycho-social and Total labor market spending is higher than the individual mentoring support, skills and vocational regional average but low relative to comparable training, and will be offered suitable ALMPs. Due EU countries. In 2018, North Macedonia spent 0.43 to the COVID-19 pandemic, implementation has percent of its GDP on labor market policies, out of been delayed and thus far only training has taken which slightly more than one-third was spent on place. However, in September 2020, the tender ALMPs (0.15 percent of GDP) and almost half on for psycho-social support services was published unemployment benefits (0.20 percent of GDP). In and an IT tool for the purpose of the project was in comparison, countries in the seven small transition development. economies of Europe spent on average 0.65 percent of GDP on labor market policies. In 2021, in North Despite only serving a share of the total Macedonia, about 7 percent of the ESA’s financing unemployed, the ESA is already faced with an for ALMPs will stem from international donors such increasing caseload due to reductions in the as the Swiss Development Cooperation (SDC), the number of counsellors. The ESA is responsible for EU’s Instrument for Pre-Accession Assistance (IPA) coordinating employment services, implementing and the United Nations Development Programme ALMPs and administering unemployment benefits. (UNDP).61 Overall expenditures in inflation-adjusted Employment services are vital in matching jobseekers terms have increased significantly from MKD 2,288 to the type of employment most beneficial to them. million in 2015 to MKD 2,933 million in 2019; however, However, the agency’s number of counsellors has total expenditures in terms of GDP remained been consistently shrinking over the past five years. relatively constant.62 While overall expenditures did While there was only a small reduction in registered not increase at the same pace as the economy, the jobseekers over this time period, the number of distribution of spending within the ESA shifted from counsellors reduced from 418 in 2015 down to 342 administrative spending to ALMPs. Spending on counsellors. Hence, the caseload ratio, the number of local and central administration was reduced from registered jobseekers per counsellor, has increased 12.2 percent in 2015 to 6 percent in 2020, whereas by 20 percent since 2017 and was at 298 in 2019. the budget share spent on ALMPs increased from This is significantly higher than the EU’s average 28 percent to 36 percent over the same period. caseload, which ranges between 100 and 15059 but lower than the Western Balkan’s average. Currently, Unemployment benefits protect human capital profiling of jobseekers is done on a face-to-face in times of shock, but coverage of jobseekers in basis, hence conducting some form of statistical North Macedonia is low. In North Macedonia, 1.2 profiling prior to the jobseeker’s visit to determine percent of payroll is paid in contributions toward the distance from the job market could reduce some unemployment benefits, all of which is covered by of workload for counsellors and improve matching the employer. Employees are eligible to receive the to the relevant programs or employment. Although benefit if contributions were paid for at least nine vacancies must be announced to the ESA according months uninterrupted or 12 months intermittent in to the Labor Law, job matches brokered by the ESA the previous 18 months.63 The duration of benefits have reduced by almost one-third in the past five lasts from a minimum of one to a maximum of 12 years.60 Despite the ESA not having received an months, with recipients receiving 50 percent of Back to table of contents 24 59 European Commission, “Assessment Report on PES Capacity,” 2015. https://ec.europa.eu/social/BlobServlet?docId=14323&langId=en; Ágota Scharle, “Comparative Study on Western Balkan’s PES Performance,” 2018, https://www.esap.online/ files/user/docs/Comparative study on Western Balkans PES performance_2018.pdf. 60 World Bank. 2018. Efficiency Analysis of the Employment Agency of the Former Yugoslav Republic of Macedonia, 2012-2016: Summary Note. Washington DC. 61 Operational Plans 2021. 62 Expenditures are inflation adjusted and in terms of 2019 MKD. Spending as a share of GDP was 0.4 percent in 2015 and only increased to 0.42 percent in 2019. 63 Unemployment Benefits are regulated by the Law on Employment and Insurance in Case of Unemployment. Official Gazette of RM 112/2014. NORTH MACEDONIA Social Protection Situational Analysis their average monthly net wage over the previous Figure 13. Expenditure on labor market policies, two years. Expenditures for unemployment 2018 (% of GDP) benefits have ranged between 0.13 percent and 1.4% 0.23 percent of GDP in the past five years, which is Total LMP (incl. administration, placement and related services) significantly more than what most other countries 1.2% 1.19% in the Western Balkans spend on passive labor Active LMP (including Vocational 2018 Expenditures (% of GDP) Training) market programs but less than a third of the EU 1.0% Passive LMP (unemployment average (Figure 13). However, despite the relatively benefits) high amount of funding, only between 4 percent 0.8% and 6 percent of all registered jobseekers receive 0.65% the benefit per month, which peaked at 7,186 0.6% beneficiaries in May 2020.64 Coverage is limited 0.48% 0.43%0.42% by a multitude of factors, such as informality, high 0.4% 0.36% shares of long-term unemployment (more than half of all those registered as jobseekers at the end of 0.2% 0.10%0.08% 2020 had been unemployed for more than one year65) or because employees who left their job of 0.0% ia ia vo ia ) 7 EE H their own accord or in mutual agreement were not 19 on rb an -2 Bi so 0 T Se lb EU ed 7S Ko (2 eligible for the benefits.66 More than two-thirds of A ac ro M g jobseekers who received unemployment benefits ne th te or in 2020 did so based on being seasonal workers. on N M Public employment services in other countries have Sources: EU-27/7STEE: Eurostat; North Macedonia: launched short training programs to complement Administrative Data; Kosovo: Paun Jarallah et al. 2019; unemployment benefits aimed at seasonal workers Albania: Administrative Data NAES. Montenegro: MONSTAT as an optional benefit which can be used to upskill and ZZZCG. Note: 7STEE refers to the seven small transition economies of Europe, namely Bulgaria, Croatia, Estonia, during the off-season. Latvia, Lithuania, Slovak Republic and Slovenia. Looking forward, North Macedonia could aspire workers at the risk of redundancy, all the way to to develop a system of lifelong learning that is introducing individual learning accounts through more closely tied to a person rather than a place which rights for training can be accumulated by of work and offer training opportunities not only an individual independent on labor market status. to jobseekers but to workers as well. Job creation Such a system of lifelong learning requires not only in North Macedonia is held back by many different information on skills that are in demand currently business constraints, including political uncertainty, but also those that are emerging and the strong unfair competition by the informal sector and a lack involvement of the private sector in the planning of adequate skills in the population. A quarter of large and execution of skills training as well as an effective firms (100+ employees) and 19 percent of medium market for skill provision.70 Real-time analysis firms (20-99 employees) rank an inadequately skilled of online vacancy data could also supplement workforce as the second most binding business the available information on demanded skills or environment constraint.67 Evidence suggests that occupations.71 the skills in demand are first and foremost technical, relating to the specific jobs, but workers are also expected to have many transversal skills: team work capacity, communication skills, time management skills, independence, ambition, among others; and there are important skills gaps relating to these aptitudes.68 The weaknesses reflect difficulties in the skills development system, which will become even more apparent as occupational tasks are changing and new occupations are appearing. North Macedonia should begin exploring innovative approaches to lifelong learning that may range from ALMPs providing upskilling opportunities for workers in the off-season,69 promoting training for Back to table of contents 25 64 Based off of administrative data, using the number of unemployed who received benefits per month. In total, 24,762 individuals received benefits throughout the year 2019. 65 The same had been true at the end of 2019, when 56 percent of all unemployed were registered for 12 months or longer. Source: ESA. 2021. Overview of registered unemployed according to the waiting time for employment. http://av.gov.mk/content/Statisticki podatoci/Декември 2020/O4_vremenacekanje122020.pdf 66 The ILO finds that there is a tendency to misuse termination of contract by mutual agreement (see: ILO. 2020. COVID-19 and the World of Work Rapid Assessment of the Employment Impacts and Policy Respons- es – North Macedonia. Geneva). 67 World Bank. 2020. Enterprise Surveys - North Macedonia 2019 Country Profile. Washington DC. 68 World Bank. 2017. Looking for skills in the former Yugoslav Republic Macedonia. Washington DC. 69 The Austrian Competence with Systems program, for example, focuses on upskilling workers who are prone to periods of unemployment. The goal of this program is to provide upskilling for people with only compulsory or lower levels of educational attainment, already with some job experience. It can be completed between unemployment spells, making it particularly interesting for seasonal workers. The training is based on competences and aims to ensure long-term and sustainable knowledge building. 70 A so-called “contestable training market” is characterized by non-public training providers (such as, private or nongovernment organization providers) offering training in addition to public providers. There are transparent requirements for accreditation of all training providers as well as information on the quality of training providers. Contracting is oftentimes done based on performance. 71 Brancatelli, C., Marguerie, A. and Brodmann, S. 2020. Job Creation and Demand for Skills in Kosovo: What Can We Learn from Job Portal Data? World Bank Policy Research Working Papers, 2020. Washington DC. NORTH MACEDONIA Social Protection Situational Analysis Learning from the COVID-19 response North Macedonia rapidly responded to the COVID-19 pandemic, declaring a state of emergency and modifying legislation to enable the expansion of GMA to the poor who were negatively affected by the pandemic as well as extending unemployment benefits and providing support to firms. The response through the GMA was groundbreaking in the region, as it extended the coverage of its existing social assistance program, thereby allowing it to leverage the investments in established delivery systems and staffing. However, delays in implementation suggest that further consideration is needed to determine how to ensure that support quickly reaches people. In addition, as the crisis is prolonged, additional measures should be firmly targeted to the most vulnerable households and firms. Looking forward, the decision to retain the ability to expand the GMA in response to shocks positions North Macedonia well to respond to future crisis. Further investments in delivery systems, however, will help ensure a timely response. The 2019 social assistance reform allowed North within the Law, it was generally recognized that a Macedonia to act fast during the COVID-19 faster response is necessary during crisis periods. pandemic, as it provided a foundation upon which As such, the MLSP took concerted steps to fast to build a rapid response. The government acted track these applications at the end of 2020. Further quickly in response to the pandemic, amending analysis is needed to identify how to ensure a faster the Law on Social Protection (by Official Gazette response to applications in the future. Unlike other 89/2020) to relax the eligibility criteria and simplify countries in the region, the GMA benefit was not the procedures,72 allowing the authorities to easily increased for existing beneficiaries as the existing extend the coverage of the GMA program. This value was deemed to be sufficient. response through the GMA was possible due to the 2019 reform that consolidated social assistance For those who lost their jobs due to the crisis, programs and adopted a common poverty- eligibility criteria for accessing unemployment based criterion. The energy poor subsidy was benefits were eased for a short time only and as extended from six months to one year.73 Emergency a result, unemployment benefits did not expand hygienic product packages were distributed to to the extent expected. While the government social assistance beneficiaries, and social housing planned to extend unemployment support by beneficiaries are granted exemptions for rent 40,300 individuals, the number of approved payments. The Law on Child Protection was also applications were only around 13,500 by February amended (by Official Gazette 311/2020) such that 2021.75 As mentioned above, eligibility for accessing during crises and emergencies, school attendance unemployment benefits entails continuous formal will be abolished as an eligibility criterion for employment for at least nine months, or 12 months education allowance. intermittently within the last 18 months, and involuntary separation. The government relaxed the While the government acted quickly to expand eligibility criteria for the unemployment benefit for coverage of the GMA, implementation faced a very short time, extending the benefit to those delays. Since March 2020, 24,294 households have workers that had terminated their contract “by applied to the GMA based on the revised targeting mutual consent” between March and April 2020. criteria.74 The process by which the eligibility of these According to the new employment strategy, only applications were assessed followed the established 16.2 percent of the newly registered jobseekers procedures, although delay were experienced due to during the COVID-19 pandemic were eligible to staff shortages in the Social Work Centers as staff fell apply for unemployment benefits. This highlighted ill and were absent from work. While the response to the ineffectiveness of the current unemployment applicants was often within the 60 days stipulated benefit system in protecting vulnerable households Back to table of contents 26 72 The GMA program expansion eliminated eligibility criteria that apply in normal circumstances but are not relevant in an emergency for all new applicants (for example, a 12-month ban for applying and awarding of the GMA, vehicle possession and real estate property; relaxation of the three-month rule for income assessment; relaxation of the activation requirement). The program’s income eligibility thresholds remain the same. 73 Further initiatives can be found at https://www.mtsp.gov.mk/covid-19.nspx 74 This data is as of May 2021. 75 Source: MLSP (March 2021) NORTH MACEDONIA Social Protection Situational Analysis during short periods of unemployment. To tackle additional focus of building and utilizing human some of the issues around low coverage of capital. For social protection, this would translate as unemployment benefits, as well as non-coverage improving health and education outcomes through due to termination by agreement, the ILO provided cash transfers as needed and boosting labor market guidance on a potential introduction of severance participation in the face of existing pressures and pay. Given the potential negative impacts of strict COVID-19 through active labor market policies. dismissal protection, an alternative consideration Finally, narrowing fiscal space makes it even more could be the introduction of individual savings important to consider the effectiveness of any accounts to which employers contribute. This can implemented policies, emphasizing the need for also be extended to the informal sector. building strong monitoring and evaluation systems. Wage subsidies, social security contribution The increasing frequency of shocks from climate subsidies and state guarantees for commercial change and other global trends suggests the loans were introduced to retain jobs. Firms that importance of further strengthening the ability suffered a reduction in turnover of 30 percent of the social protection system to respond to compared to the previous year were eligible to crisis. Shocks are likely to be increasingly frequent receive wage subsidies covering the net minimum in North Macedonia, as a result of climate change wage of MKD 14,50076 for the months of April, May and the increasingly interconnected global and June 2020. This measure was reintroduced in economy. A growing body of evidence shows the fifth package for the months of February, March that shocks disproportionately affect the poor, and April 2021. This measure also included subsidies drawing attention to the important role that social to cover social security contributions of employees assistance can play in crisis response. Building on the in sectors most affected by COVID-19, including lessons learned through the COVID-19 pandemic tourism, transport and catering, among others. This could help ensure that the government has the social security contributions subsidy per employee systems and procedures in place to provide rapid could be up to 50 percent of the contributions for support to its population in response to the next the average salary paid in 2019. In return, firms were crisis, thereby protecting the poor and vulnerable. required to retain their levels of employment from Retaining the legislative basis to expand the GMA February 2020 onward, not being allowed to let any to respond to emergencies positions the country employees go, unless they retired or the contracted well for the next crisis. Further consideration of terminated based on mutual agreement. According how to provide support more rapidly to affected to a recent Enterprise Survey government support populations could help ensure a timelier response in reached nearly 60 percent of the firms survey, with the future, including both the delivery systems for over 90 percent of the firms that received some the GMA and the interlinkages of the GMA with the form of government support having received it in Crisis Management Center and the Protection and the form of wage subsidies. Rescue Directorate. As the crisis is prolonged, the focus needs to be on generating higher impacts in reducing the poverty implications of COVID-19, stimulating opportunities for human capital development for old and new vulnerable groups, while ensuring benefits are fiscally sustainable. A simulation analysis for North Macedonia suggests a 1 percentage point increase in the poverty rate, or about 25,000 new poor, because of the crisis. Using existing social protection tools, North Macedonia was able to respond swiftly to the negative economic effects of the COVID-19 pandemic, despite difficulties in covering the informal sector. This support is vital until recovery can be achieved, but continuing support is likely to exacerbate existing fiscal pressures. Thus, going forward, additional support should be targeted to most vulnerable households and firms, with an Back to table of contents 27 76 This is equivalent to USD 260. NORTH MACEDONIA Social Protection Situational Analysis Reform priorities The ongoing reforms to social protection are financing of services, to expand the menu of services anticipated to lead to gains in human capital that are offered, the licensing and contracting, among the poor and vulnerable through the more including the training of staff, and monitoring. adequate provision of cash transfers to the poor Incorporating the lessons from this first phase of and the delivery of a broader range of quality the reform will help ensure that it remains relevant, services to vulnerable populations in their homes with broad-based support among stakeholders. and communities. However, while reforms to cash The introduction of a case management system, benefits are advancing well, there is a need for supported by a new integrated management further analysis to confirm that these reforms are information system, offers significant benefits, as achieving their objectives. Initial analysis suggests this can be harnessed to support the integrated that the reform can be effective, but the success provision of health and education services to poor and sustainability of the reform crucially lies on and vulnerable populations, while also monitoring implementation to ensure that all eligible people are health and education outcomes. reached. To this end, analysis of the delivery systems from the perspective of potential and actual With regard to pensions, a key focus needs to beneficiaries could identify gaps in outreach, intake, be on securing the financial sustainability of the enrollment and payments that could further extend system, while assessing the extent to which the coverage and facilitate the access of the poor and new means-tested cash transfer for the elderly vulnerable to these benefits. Additionally, reforming expands coverage among the poor will require the disability assessment and certification system attention. Importantly, while reforms have improved could bring further coherence and transparency into the sustainability of the system, ad hoc increases in the system, such as through the ongoing piloting pensions and decreases in contribution rates have of the International Classification of Functioning, undermined progress and North Macedonia needs Disability and Health (ICF). Beyond this, further a stronger package of policy measures for fiscal steps could be taken, such as (i) complementing stabilization and improving equity. the provision of cash transfer support with accompanying measures, such as information on With regard to labor programs, despite a significant good parenting practices or “nudges” to promote expansion of its services, the ESA has not yet seen a the use of health and education services, (ii) further much-needed increase in funding. These constraints, strengthening the case management system (see both in terms of human and financial resources, limit section on social service below) and (iii) potentially the extent to which further progress can be made. harnessing the education allowances to promote With the current available resources, a focus should the uptake of preschool, once the supply of these be on expanding effective employment services services has expanded. and programs, by, among others, introducing a transparent monitoring and evaluation framework. Similarly, the ambitious reform of social services is More funding is needed, however, to increase anticipated to move toward a beneficiary-centered the number of staff at the ESA who engage with system that supports the provision of integrated jobseekers and to update the available evidence services at the local level, including cooperation on the effectiveness of the programs and adapt with municipalities and private providers. Realizing accordingly. Looking forward, North Macedonia the full objective of this reform will take time, as could aspire to develop a system of lifelong learning it requires a fundamental shift in terms of how that is more closely tied to a person rather than a services are delivered, financed, monitored and place of work and offer training opportunities not licensed. Initial progress is being made to reform the only to jobseekers but to workers as well. Back to table of contents 28 NORTH MACEDONIA Social Protection Situational Analysis Finally, the response to the COVID-19 pandemic demonstrated the importance of having in place a social assistance program that can expand to reach people who fall (deeper) into poverty as a result of shocks and a functioning unemployment benefit system. Further investing in the systems and procedures to support a rapid expansion of the GMA would position the country well to respond to future shocks, which are predicted to become more frequent in the future, as a result of climate change and other global trends. These reforms are summarized in the table below. The Government is currently preparing a Human Capital Strategy, which offers an opportunity to advance these reforms to help ensure that poor and vulnerable members of society benefit from investments in health and education, thereby promoting inclusive growth. Short term Medium term Long term Cash transfers to support the poor, the vulnerable, and persons with disabilities Further assess 2019 reform based • onsider further expanding • C Consider extending education • on analysis of administrative data coverage of the GMA to the bottom allowance to include preschool/ and 2020 SILC. quintile of the population. kindergarten children to promote Consolidate and modernize disa- • early childhood development. bility assessment and certification. Assess the delivery systems from • the perspective of beneficiaries to identify means of further improving outreach, enrollment and payments. Consider offering accompanying • measure to social assistance for families with children, such as access to services, information on good parenting practices and early childhood development. Social services urther ongoing reform of social • F valuate the reform of social • E urther expand the provision of • F service delivery, financing, provision, services to identify second order long-term care for the elderly, licensing and monitoring. reform priorities including exploring options for • R eview the case management • B uild the case management private provision. system to identify how it could be system further to support referrals leveraged to promote outcomes between social protection, health focusing on: (i) integrated needs and education to ensure that the assessment; and (ii) the new inte- same children receive key services. grated management information system to support data exchange and referrals with health and education. romote capacity development • P at the local level to ensure decen- tralization of social services can be completed efficiently. Back to table of contents 29 NORTH MACEDONIA Social Protection Situational Analysis Short term Medium term Long term Pensions Assess coverage of pensions • Adopt a stronger package of • (contributory and social pension) policy measures for fiscal stabi- among the elderly poor. lization and improving equity, for example, by raising the retirement age and harmonizing PAYG-only accruals for the entire service period (as opposed to future only). Employment and ALMPs Outreach and promotion of • ncrease funding for the ESA, with • I Expand the ESA’s client base to • the ESA services and programs predictable funding streams. include the employed who areat targeting lesser skilled unemployed, • E xplore the introduction of statis- risk of redundancy or off-season especially youth. tical profiling of jobseekers to workers once funding is secured. Update tools to provide labor • increase efficiency of counselling. Explore the introduction of indi- • market information and career • E xplore ways to transform the vidual learning accounts, which guidance to recent graduates and call-based application system for can be used to finance educa- ensure continued funding. ALMPs into open programs that tion or training, independent of Create clear and transparent moni- • are continuously available. labor market status (i.e., whether toring and evaluation framework formal sector employee, informal stablish systematic graduate • E which includes conducting and workers, unemployed or out of tracing system for all ALMPs. distributing the results of regular the labor force). mprove labor market interme- • I rigorous evaluations of ALMPs. diation, for example by piloting Reform the Law on Adult Education • outsourcing of hard-to-serve to shorten accreditation procedures clients using performance-based for non-public training providers. contracting. Disaster preparedness and response Systematically assess the readi- • uild information system to • B ness of current social protection support rapid identification of programs for crisis response (learn people affected by shocks (i.e., from Covid-19 response), including social registry). capabilities of rapid outreach, stablish disaster risk protocols. • E assessment, enrollment and dentify financing mechanisms • I payment. (including reserve fund, budget Map (internal/external) actors • reallocation). with responsibility to contribute to disaster response and establish mechanisms for coordination. Back to table of contents 30 NORTH MACEDONIA Social Protection Situational Analysis List of References Ágota Scharle, “Comparative Study on Western Lindert, K, et al. eds. 2020. Sourcebook on the Balkan’s PES Performance,” 2018, https:// Foundations of Social Protection Delivery www.esap.online/files/user/docs/Compara- Systems. Washington, DC: World Bank. tive study on Western Balkans PES perfor- mance_2018.pdf. Misheva K. et al. 2019. Challenges and oppor- tunities of the Macedonian pension system Brancatelli, C., Marguerie, A. and Brodmann, S. according the EU recommendations (social, 2020. Job Creation and Demand for Skills in legal and financial aspects). EU and compar- Kosovo: What Can We Learn from Job Portal ative law issues and challenges series (ECLIC Data? World Bank Policy Research Working 3). Editors: Dunja Duić and Tunkica Petrašević. Papers, 2020. Washington DC. Executive Editor: Ante Novokmet. Carneiro, P., Armand, A., Tagliati, F. and Xia, Y. 2020. Operational Plans 2021. Can Subsidized Employment Tackle Long-Term Unemployment? Experimental Evidence from World Bank. 2017. Looking for skills in the former North Macedonia. CEPR Discussion Paper Yugoslav Republic Macedonia. Washington DP15192. Washington DC: World Bank. DC. Cuberes, D. and Teignier, M. 2016. Aggregate World Bank. 2018a. Efficiency Analysis of the Effects of Gender Gaps in the Labor Market: Employment Agency of the Former Yugoslav A Quantitative Estimate. Journal of Human Republic of Macedonia, 2012-2016: Summary Capital 10:1. Note. Washington DC. ESPN Flash Report 2019/40. North Macedonia World Bank. 2018b. Seizing a Brighter Future for strengthens disability rights with a new Law All: former Yugoslav Republic of Macedonia on Social Protection. Systematic Country Diagnostic. EU Aging Report 2018, PAYG pension agencies in World Bank. 2018c. Sowing the Seeds of a Sustain- Western Balkans countries. able Future: North Macedonia Public Finance Review. Washington DC. European Bank for Reconstruction and Develop- ment. 2017. Transition Report 2017-18. World Bank. 2019a. Finding Solutions to Youth Unemployment in North Macedonia. Wash- European Bank for Reconstruction and Develop- ington DC. ment. 2019. North Macedonia Country Diag- nostic. World Bank. 2019b. Implementation Completion and Results Report for the Conditional Cash European Commission, “Assessment Report on Transfers Project. Washington DC PES Capacity,” 2015. https://ec.europa.eu/ social/BlobServlet?docId=14323&langId=en; World Bank. 2020a. Enterprise Surveys - North Macedonia 2019 Country Profile. Washington ILO. 2020. Overview of the Informal Economy in DC. North Macedonia. Back to table of contents 31 NORTH MACEDONIA Social Protection Situational Analysis World Bank. 2020b. North Macedonia Public Finance and Competitiveness Development Policy Loan Implementation Completion and Results Report. World Bank. 2020c. North Macedonia: Pension Policy Challenges 2020. Washington DC World Bank. 2020d. Social Insurance Adminis- tration Project, Project Appraisal Document. Washington DC. World Bank. 2020e. Western Balkans Regular Economic Report No. 18: An Uncertain Recovery. Fall 2020. Washington DC. World Bank. 2021. Western Balkans Regular Economic Report No. 19: Subdued Recovery. Spring 2021. Washington DC. Back to table of contents 32 NORTH MACEDONIA Social Protection Situational Analysis Annex 1. Income eligibility thresholds per household type for the GMA Income eligibility threshold Number of household members in MKD (in USD) 1 4,000 (70) 2 (adults) 6,000 (106) 2 (one parent with one child) 6,400 (113) 3 (adults) 7,600 (135) 3 (parents with one child) 6,400 (113) 4 (parents and two children) 6,800 (120) 4 (parents, one child, one adult) 8,000 (142) 5 (parents and three children) 7,200 (128) 5 (adults and one child) 9,600 (170) 5 (adults) 10,000 (177) Back to table of contents 33 © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This project is funded by the European Union