In Serbia, the average February net salary in the public sector was 108,210 dinars, surpassing the wages of workers outside the public sector by about 55 euros. The February net average for private sector employees was 101,669 dinars, according to the data from the Republic Institute of Statistics. The lowest average salary – 53,967 dinars – was recorded for entrepreneurs and their employees. Within the public sector, the highest average salary was recorded in the state administration – 123,637 dinars, while the lowest was in local administration – 90,932 dinars. In public enterprises, the average salary in state-owned companies was 115,408 dinars, while local enterprises had an average of 97,207 dinars.
Economists argue that comparing the private and public sectors may not make much sense, as public sector wages and operations are determined by political decisions and made centrally, while variables in the private sector depend primarily on market conditions and are decided on a decentralized level within companies. However, economic analyst Milan R. Kovačević agrees that wage growth in the public sector has been much more frequent than in the private sector over the years.
“This is another indication that our management of the budget and the overall economy is not well coordinated. If there’s excessive optimism about economic growth, it often leads to wage increases in the public sector, while the same doesn’t happen in the private sector, which is why there’s a gap,” Kovačević explains. He also notes that this year, due to a higher budget deficit, significant wage increases should not be considered, especially since productivity in the public sector is lacking.
He highlights that in the private sector, in all the companies he knows, no new workers are hired when old ones retire. “Instead, productivity is increased, with modern technology contributing directly. This hasn’t happened in the public sector, where wages are still rising faster. The public sector is not making good decisions that would contribute to further economic growth,” Kovačević adds.
However, the President of Serbia recently pointed out that, due to a decline in GDP compared to previous projections, the wage increases in the public sector will be proportionally smaller in the coming period. Kovačević believes that there is too much focus on wages in Serbia and that the best solution would be to freeze wages for everyone while reducing inflation to a minimum.
“Our current situation is quite the opposite, with inflation significantly higher than the European average. In such an environment, everyone considers increasing prices, and if wages are also increased, it will burden their businesses. This will make long-term economic growth more difficult for the country,” he explains.
While the productivity of the private sector can be relatively clearly measured through the value produced per hour worked, economists argue that measuring public sector productivity is very difficult or nearly impossible.
“The productivity of Serbia’s economy is relatively low, which results in a relatively low GDP per capita by European standards. One problem is that the public sector, instead of helping the private sector, hinders its development by failing to meet the goals set for it. Poor healthcare and low-quality education negatively impact human capital accumulation, and unnecessary bureaucratic procedures carry administrative costs… Solving these issues would directly help Serbia’s economy become more productive, leading to a higher rate of economic growth,” said economist Mihajlo Gajić.
