Labor productivity in Albania declined last year, remaining at the lowest level in the Western Balkans Region. According to data from the International Labor Organization (ILO), Gross Domestic Product per hour worked in Albania last year was estimated at 18.7 international dollars. This indicator has shrunk by 4.1% compared to 2024 and the gap with neighboring countries in the region has further deepened.
Labor productivity is usually measured as the ratio of the value of output to the time spent producing it. Comparative statistics use the international dollar as the unit of measurement, a hypothetical monetary unit used in purchasing power parity.
Among the countries in the region, Albania is preceded by Bosnia and Herzegovina, with $26.3 per hour, Serbia, with $29.8, Montenegro, with $31.1, and North Macedonia, with $34.
ILO statistics do not provide information for Kosovo. Albania also ranks below the global average, which is estimated by the ILO at $23.3 per working hour.
The main factors that determine the level of productivity are investments in technology and automation, innovation, and the quality of human capital or the skills of the workforce.
However, the structure of the economy and the weight in production of those sectors that usually enable greater value added per unit of working time also have a major impact on this indicator.
The countries with the highest labor productivity in the world are Ireland, with $164.7 per hour, followed by Luxembourg, with $159.5 per hour.
ILO data show that economies that use a lower-cost labor force generally have lower labor productivity. In Albania, too, low labor costs and high informality have created little incentive to increase productivity in the decades after the fall of communism. Because of low wages, enterprises have felt little pressure to invest in automation, which would allow for increased production without increasing labor costs.
The decline in the share of tailoring in the economy and employment could be a prerequisite for orienting the economy towards sectors with higher productivity.
Low labor productivity limits opportunities for real wage growth, so improving this indicator is essential for increasing a country's well-being.
On the other hand, pressure from the labor market to increase wages (as has happened in Albania in recent years) may create more pressure for the need to increase labor productivity, so that businesses can maintain competitiveness.
However, ILO comparative data show that our country has not achieved significant improvements in labor productivity./ Monitor
