Off the Books Work in Western Balkans Offers a Dangerous Social Safety Net

Millions of laborers in the six states of the Western Balkans work in the informal economy without contracts or rights. They are the first in line when austerity measures, pandemics and exploitative employers hit. And there is little hope that this precarious state of employment will be ending anytime soon. 

Azra worked far away from the tumult of Baščaršija, the central square in Bosnia and Herzegovina’s capital, Sarajevo. She earned her living in a small drinking house in the suburbs. "Guests pull you by the arm to make you sit in their lap,” she says. “I worked there for a short while, then I left. And the girls I have seen in these sorts of watering holes … it makes me sick to my stomach. And I have a daughter," says the woman who asked to be called Azra. She does not want her real identity disclosed because she is afraid of her employers.

Azra was born and raised in Sarajevo, and as a single mom tried to keep her family afloat by working in cafes and small inns. Sometimes she cleaned the bed sheets in rooms where illegal prostitution was taking place. Sometimes she served inebriated guests for 15-hour shifts and only earned 7.5 euros per day. Sometimes the owners would just decide not to pay her wages.

Not a single day in Azra’s entire working life in Bosnia and Herzegovina has been spent legally employed. After years of toil, she does not have a pay slip or contract to verify her earnings—leaving her ineligible for a pension and jeopardizing her access to health insurance.

The Balkan triangle: state-employer-worker

Azra is one of many. It is estimated that several million workers in the Western Balkans work illegally. This leads to exploitation, as experienced by Azra and corroborated by others interviewed for this article.

It's not that Azra did not fight for her rights. Whenever she would ask her employer for paperwork, she says the answer would be, "If you don't like it, there's the door." Once, desperate for her employer to be held accountable for their actions, she went to turn herself in to the labor inspectors. The inspector told her that she was “lucky that the owner did not burn her with oil from the deep-fryer." "Inspectors do not dare to check certain employers,” says Azra, “because they are afraid of them.”

Mario Reljanović has seen plenty of cases like Azra’s. He is an associate at the Institute of Comparative Law in Belgrade, the capital of Serbia, and specializes in worker's rights. "The state has always had a two-fold relationship towards off the books employment,” says Reljanović. “On one hand, the taxes and contributions are welcome in any state treasury. On the other, I presume that those who set the policies are fully aware of the fact that off the books employment persists primarily because of the great tax burden imposed on the wages, which forces employers to look for off the books solutions and the workers to accept such solutions.”

Reljanović sees problems at every point in the triangle between the state, employers and workers. "There are small businesses who simply cannot employ people legally and still remain profitable, but there are also owners who come to the factory they own in a SUV worth 100,000 euros to hand out wages in cash from an envelope containing 50 euros each, saying that they have no more money,” he says.

The state administrations in the Balkans often view off the books work as a "social policy" of sorts, says Reljanović. The idea is that it's better for people to earn a living—even in this way—than to have no work and rise up in protest.

But what about the workers? "They do not believe that paying taxes will make any significant difference for the better,” says Reljanović. “Nobody believes that they will see retirement—a fear that is well-founded because nothing is being done to reform the pension system. Plenty of people think it is not worth it to be legally employed and have a part of their pay go into the state pension fund. They see their grandparents, who were employed for decades before retirement, with pension checks that rarely go higher than 100 euros per month."

We asked a Belgrade cafe owner, who did not want his name revealed, about the role of pensions in the social safety net. "Pension? What pension? People are sure that there will be no pensions for anyone thirty years from now. They figure it’s better to get paid now, in cash. And anyway, what are they supposed to say to the employer? Ask to be officially employed? If the employer did not do that already, it ain't happening."

The cafe owner claims that all his employees are on the books, because labor inspectors have a habit of homing in on food and drink service. "Maybe they don't hit places owned by people who are well-connected in this city and state,” he says, “but they come to my place constantly."

He also says that the unwritten rule in hospitality services is to register the employee for minimum wage so that the dues to the state are minimal. The rest of the agreed-upon wage is paid out in cash.

Hardest hit by the pandemic

"Hidden economy in the Western Balkans 2020,” a publication by Southeast European Leadership for Development and Integrity (SELDI), presents dramatic numbers that confirm our interviewees’ stories. While the share of workers without written contracts on their job is four percent in Bosnia and Herzegovina and 25 percent in Kosovo, there are many more people in all the countries of the region that have a contract showing a smaller wage than the one they actually receive. That percentage is 19 in Kosovo and Northern Macedonia, and goes up to 34 percent in Albania. This phenomenon is called "envelope wages.” SELDI estimates that the most vulnerable industries for envelope wages are agriculture, real estate, wholesale trade and construction.