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UNCLAS SECTION 01 OF 04 BELGRADE 000041 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON SOCI PHUM PREL SR
SUBJECT: Serbia's "Work Ethic" and Social 
Stability 
 
 
¶1. Summary:  The concept of a "work ethic" in 
Serbia is hard to define, but there is noticeable 
pessimism among Serbia's work force that is a 
result of a few different factors.  First, ethics 
in general, and work ethics in particular, are 
affected by the transitional nature of the economy 
and society after over four decades of "soft 
socialism."  Second, the low pay and limited 
options available to much of the workforce erode 
initiative to seek out opportunities to work. 
Finally, there is a distinct difference in work 
ethics in the labor force among those employed by 
publicly owned enterprises and those employed by 
privately owned enterprises.  The combination of 
high unemployment and a "transitional work ethic" 
is unlikely to breed political instability, but it 
does make the young and the unemployed 
particularly vulnerable targets for revanchist 
populism and/or a desire to emigrate.  End 
summary. 
 
ECONOMIC TRANSITION 
 
¶2. According to respected local economic analysts, 
the majority of the Serbian population has a 
pessimistic view of work that was created by 
Serbia's previous socialist regime.  The socialist 
state ensured neither economic growth nor economic 
efficiency.  Income and benefits were guaranteed, 
and Tito's ability to play the US and USSR off of 
each other during the Cold War assured there would 
be plenty of money in government coffers to 
subsidize an inefficient, lackadaisical economy. 
Workers became used to a high standard of living 
relative to the rest of the Eastern Bloc and 
relatively easy travel throughout Europe, in 
exchange for minimal effort in worker-managed 
(i.e., socially-owned) or state enterprises. 
 
¶3. Following decades of such laxity, Serbia's 
economy and workforce are now going through a very 
difficult transition to a capitalist economy.  In 
this new environment, the older generation still 
believes the state should support the worker. 
Many parents discourage their children from taking 
jobs "below their station" in which they would 
have to actually work, simply for the sake of 
money or career advancement.  This sentiment is 
increasingly being internalized by the younger 
generation, which in many cases snubs the 
corporate ladder and waits for an employment offer 
that meets its own aspirations.   This sentiment, 
combined with a tradition of older generations 
supporting younger ones, has led to children 
staying at home well into their adult years and 
unmotivated - by their parents or themselves - to 
find work.  The phenomenon of students taking on 
part-time employment is uncommon, though there is 
a growing trend of students working summers on the 
Montenegrin coast. 
 
¶4. In this transitional economy, many citizens 
view employment as a "necessary evil," working 
only because of the financial need to survive. 
For those who do work, extrinsic rewards such as 
money, status, and power take precedence over 
intrinsic rewards such as challenge, growth, and 
accomplishment.  A recent local study highlighted 
this problem.  A recent survey of one-half of 
Serbia's urban population over 18 from its four 
largest cities (Kragujevac, Nis, Novi Sad, and 
Belgrade), found that 52.9% were ready to relocate 
for a better salary elsewhere, while reasons like 
the chance for professional advancement (14.7%) 
and the desire for change or challenge (7.4%) were 
far less motivating factors.  Financial motives, 
say local experts, have become so important that 
they have pushed self-actualization far into the 
background, which in turn makes it difficult to 
create and maintain a positive work ethic. 
 
¶5.  A further disincentive to work in the formal 
economy is a deep-seated mistrust of the 
government.  Opinion polling routinely shows the 
government as one of the least-trusted 
institutions in the country, beating out only the 
Hague Tribunal in some cases.  This mistrust 
filters into the labor market by sapping the faith 
of the workforce that the government will put 
income and VAT taxes to good use or allow them to 
operate a business without government 
interference/corruption.  Citizens do not see the 
government as providing needed services or 
infrastructure improvements, but instead see 
inefficient revenue collection, opaque budgetary 
processes, and a mind-numbing litany of local and 
national financial scandals from their leadership. 
Further, the procedures for setting up a business, 
and the petty corruption they see as endemic to 
the process, creates a further disincentive to 
join the formal economy and forces businesses 
"underground."  (Note:  USAID is helping to 
address this issue through supporting a project to 
simplify business registration procedures. End 
note.) 
 
LIMITED OPTIONS 
 
¶6. The Serbian "work ethic" varies according to 
occupation, management ideology, cultural norms, 
and level of income and education, making it 
difficult to generalize.  Given the existence of a 
large informal economy in Serbia, unemployment 
statistics are not exactly accurate but can help 
paint a broad picture of the workforce.  In March, 
2005, there were some 900,000 citizens searching 
for a job in Serbia, with about 2.4 million 
employed citizens.  The unemployment rate of the 
young is about 48%, compared to a rate in the EU 
of only about 15%.  The general unemployment rate 
in Serbia and Montenegro, compiled by the national 
employment service, is about 28%, compared to 10% 
in the EU. However, the unemployment rate compiled 
by the Republic Office for Statistics, consistent 
with ILO and Eurostat methodology, is 19 percent. 
 
¶7. As prominent local analysts note, statistics 
for 2005 show that earnings per worker have been 
increasing from the levels of the Milosevic era, 
but many still feel financial stress. Real wages 
in Serbia in 2002 increased almost 30 percent over 
¶2001. Since then, though, reported wages have 
generally exhibited a downward tendency. The 
average reported monthly salary in Serbia in 
August, 2005 amounted to around 210 euros 
(although real average wages may in fact be 
somewhat higher, given rampant underreporting of 
wages). Nearly 70 percent of households report 
that they cannot make ends meet on a monthly wage. 
A recent survey by a local polling agency found 
that only 12.7 percent of respondents said they 
did not have financial problems, whereas one-third 
said they could barely get by.  Over 38 percent of 
respondents hold two jobs, and 25 percent receive 
help from relatives in order to make ends meet. 
 
¶8. The work environment is improving, yet many 
problems still exist.  Age discrimination is a 
reality; young employees are preferred.  Many job 
applicants complain that personal connections are 
needed for almost any job; citizens must have 
acquaintances at a company in order to have the 
opportunity to be employed there.  Different forms 
of flexible employment such as part-time jobs, 
temporary jobs, and self-employment are present in 
the formal economy only in a very small 
percentage. Moreover, in rural areas and small 
towns, options for employment are virtually non- 
existent; many citizens farm for a living.  In 
Belgrade (which in any case is not representative 
of most of Serbia) the alternatives are better, 
prompting many students and employees to leave 
their hometowns to come to Belgrade.  Although 
options are greater and salaries are slightly 
higher, they soon find that the cost of living is 
significantly higher, especially if renting.  As a 
result, relocation to Belgrade is not a 
possibility for most citizens, limiting 
opportunities to break out of a cycle of poverty 
in the countryside. 
 
THE CHANGING FACE OF LABOR: PUBLIC VS PRIVATE 
ENTERPRISE 
 
¶9. There is a distinct difference between 
employees who work for the public sector and those 
who work for the private sector.  As of June, 
2005, state-owned and socially owned enterprises 
still had a decisive influence on economic 
activity; they employ 11.7% of total employed 
persons, earn 16.8% of income, and account for 
13.4% of net profits in the economy.  During 
Serbia's socialist regime, within state- or 
socially-owned enterprises there was always a 
surplus of employees, low productivity, and a 
hierarchical system that made no sense.  Social 
ownership gave low-level employees the power to 
make important production, sales, and purchase 
decisions that would normally be left to 
management professionals and company directors in 
a market economy.  Loss of employment was avoided 
at all costs - if the enterprise did shut down, 
employees were often redistributed to other 
enterprises.  These hiring practices made going to 
work senseless for many.  The system did not 
motivate people to work or to get the most out of 
resources.  It sapped the incentive to work 
efficiently and develop enthusiasm for one's job. 
 
¶10. Privatization in the context of the ongoing 
transition to a market economy, though, has 
inspired many citizens to start up their own small 
businesses, which is in turn starting to change 
attitudes toward work.  The idea of customer 
service - non-existent in public enterprises - 
plays an important role in the private sector. 
Enterprises no longer protect everyone, even those 
who are not contributing properly.  Bankruptcy and 
liquidation of non-functioning companies are more 
common.  Competition is transforming previously 
monopolized industries.  All of these factors 
require a tougher and more efficient workforce. 
Small business owners identify with their 
occupation and look for ways to keep up with the 
competition.  The private labor force is working 
toward achieving goals, showing dedication to the 
job and the company, professionalism, and respect 
for other members of their team. 
 
¶11.  Younger generations and employees that 
primarily worked in private companies are thus 
more open to change, more dedicated to their 
occupation, and more understanding of the need for 
new mechanisms to keep operations running 
efficiently.  Unfortunately, many of those who 
best understand the need for these institutional 
changes flee the country at the first opportunity. 
This "brain drain" did not abate with the 
imposition of travel restrictions during the 
Milosevic regime (indeed, it may have 
intensified), and the trend continues even today. 
 
UNEMPLOYMENT DOESN'T EQUAL POLITICAL PRESSURE 
 
¶12. Sonja Cagronov, the director of the Serbian 
Government Agency for Public Administration, 
recently conducted interviews with public sector 
employees and found no public employees to be 
proud of their occupation.  Employees of public 
enterprises do not identify with their occupation. 
Rather, they maintain their employment simply out 
of a desire for job security.  The dismissal of 
employees that are unqualified or non-performing 
is rare, so, as a result, employees do not see the 
need to be productive or to emotionally "buy in" 
to their jobs.  Yet despite this lack of respect 
and identity, as privatization reorganizes 
socialist enterprises, employees are upset that 
"their" company and job are being taken away. 
Many of those who invested time in the context of 
the old system now feel betrayed by their 
leadership. 
 
¶13.  It would be logical to conclude, then, that 
continued unemployment and the transitional pains 
of privatization would cause political tension 
among the grumbling proletariat.  Oddly, this is 
not happening.  The reasons for this appear to be 
threefold.  First, official unemployment figures 
do nothing to capture those employed in the 
informal economy.  A brief glance down Belgrade's 
main "walking street" shows a plethora of 
nominally unemployed youth lazily sipping 
cappuccinos and chain smoking while dialing 
expensive cell phones clad in the latest fashions. 
A visit to the robust nightlife scene similarly 
shows a youth that is dressed to the nines, wired 
with all the latest technology, and unafraid of 
spending on a night out.  The sources of this 
unexplained disposable income are myriad - they 
include parental support, but also side jobs, 
remittances from relatives abroad, and 
unregistered businesses, mostly service-oriented 
but also including supplemental "family farming" 
and the like.  They also undoubtedly include some 
criminal activity, but the more usual scenario is 
a family member with unreported income from a more 
"normal" line of work. 
 
¶14.  Second, the state still supports, though only 
minimally, many of the workers deemed redundant. 
A trip to the Zastava auto plant in Kragujevac in 
2004 revealed a company deep in crisis that had re- 
assigned thousands of workers to a company-owned 
(read: government-owned) retraining facility.  Yet 
the then-mayor of the city complained that no one 
shows up for training, only to pick up their 
"training" pay equal to 50 percent of their 
previous wages.  He said "help wanted" notices 
routinely go unanswered, despite the healthy 
population of unemployed in the city, because the 
government support checks (combined with informal 
income) are more than enough to keep people 
satisfied with their lot in life. 
 
¶15.  Finally, despite the fact that jobs are 
scarce, wages are low, and future prospects are 
modest at best, life is still far better in Serbia 
now than it was 10 years ago, or even five years 
ago.  The hyper-inflation of the Milosevic years 
and the barter economy that ensued left deep scars 
on people here - especially on the young, who are 
the ones just now coming into the labor force and 
thus most affected by unemployment problems today. 
For many of them, even today's modest prospects 
are a far cry from the deprivation of their youth. 
This in itself blunts somewhat the urgency for 
dramatic change and leads to complacency with the 
current pace of marketization in the country. 
 
COMMENT 
 
¶16.  People are neither incompetent nor lazy in 
Serbia, but low productivity and mobility of 
labor, mass unemployment, long-term unemployment, 
low wages, and high wage disparities among the 
employed with similar qualifications  have eroded 
the will and the incentive to work.  Moreover, the 
rapid build-up of wealth by SAM's criminal and 
quasi-criminal classes has created a set of poor 
role models for younger citizens.  This is not in 
itself a recipe for unrest.  A bustling informal 
economy and continued (though minimal) state 
support for redundant workers have maintained a 
minimal standard of living for people, at least in 
comparison to the "bad old days" under Milosevic, 
thereby staving off political activism.  That 
said, savvy populists, including the Radical 
Party, have already begun to use standard of 
living issues and comparisons to a Titoist "golden 
age" to entice economically disaffected but 
politically unsophisticated voters into their 
camp. 
 
POLT