The (propagandized) tourism boom does not bring a boom in employment or wages

BIRN

The Albanian economy added nearly 12,000 new jobs during the 12-month period from the third quarter of 2023 to the third quarter of 2024, according to official data published by the Institute of Statistics.

 The number of employees thus reached 749 thousand people, an increase of 1.6% compared to the same period a year earlier.

The tourism boom, widely promoted by the government, has clearly not had a major effect on the number of salaried employees and those with social security.

 Data on the number of employees published by INSTAT reflect declarations of businesses, government budgetary agencies or public corporations, as well as self-employed individuals to the General Directorate of Taxes.

Regarding salaries, the average gross salary in the Albanian economy reached 78 thousand lekë. This figure includes the salary that the citizen receives, plus the social security contributions he pays and plus the personal income tax. Over the last year, salaries increased by 8.6% but this increase was caused by public sector salaries, which increased by 15% while private sector salaries increased by 5.4%.

Public sector salaries increased significantly this year for electoral reasons and increased at a much higher rate than the growth in budget revenues or the national economy. The draft medium-term budget for 2025-2027 shows that the government has planned a salary increase for this year but zero salary increases for 2026 and 2027, which clearly indicates the electoral and unrealistic nature of this increase.

The gross salary in the public sector reached 97 thousand lek. This figure includes social security contributions for employees and personal income tax.

In the private sector, the average gross salary was 70 thousand lek and the annual growth was 5.4%.

The Albanian economy is expected to slow next year, according to estimates by the International Monetary Fund and the World Bank, to 3.5% real annual growth. This means that the pace of wage and employment growth will also slow.

The increase in employment and wage levels is a concomitant effect of economic growth, so if the economy grows in real terms by 3.5% and in nominal terms by 5 or 6% depending on the inflation rate, neither wages nor employment can grow faster than that because otherwise, the excess money thrown into the economy causes inflation and not an increase in welfare.

 This means that the 15% increase in public sector wages is unsupported by economic growth and, consequently, causes inflation.

However, unlike the public sector, which can go into debt to raise wages, the private sector is unlikely to raise wages as long as economic growth is not present.

 This seemingly simple formula is clearly not convincing to Finance Minister Petrit Malaj, who, in a press conference on Wednesday, declared that “the private sector will be forced to follow the upward trend if it is to be competitive in the labor market.”

Malaj did not provide any explanation as to where private sector companies can get the money to increase salaries, say, by 15%, like the state, in conditions when economic growth is three times lower.