Job Creation and Emplozment in a Time of Crisis

Serbian economy has been severely affected by the latest global economic crisis. After salient slowdown in the last quarter of 2008, the national economy went into recession that was followed by gradual reductions in GDP and employment, transient fall in the rate of inflation and sustained rise in unemployment. Despite the fact that the corporate sector has even slightly enlarged during the observed period, it is evident that this sector has experienced significant contractions too. These contractions are evident due to permanent decline in firm size, owing to the negative employment growth, and due to deterioration in key business performance indicators. The dynamic of the growing number of enterprises was driven by micro and to some extent by small firms, which have narrow potentials for further growth of employment without significant enlargement of the number of enterprises. The Serbian economy is a vulnerable transition economy that strongly reacts to shocks. In regular conditions, before the global economic crisis, expansion of the corporate sector was not sufficient to absorb majority of workers. Following the background facts, in this chapter we have examined potentials for job creation and destruction by size of enterprises and main sectors of economic activity. For this purpose we have used the nationally representative survey of firm-level data collected during May 2011. We have found that Serbian economy creates 7.6% of new jobs per year. Almost the same percentage of jobs has been destroyed, meaning that job destruction in contracting firms contributes in almost the same proportion to the excess job reallocation as creation of new jobs in expanding firms.