Riinvest Blog

on: 06 Jul 2026

By Alma Bajramaj

Regional Labour Market Integration as a Prerequisite for Economic Growth

The economies of the Western Balkans remain relatively fragmented and insufficiently integrated with one another, preventing the region from fully unlocking its shared potential for productivity, competitiveness, and investment attraction. To address this challenge, the Common Regional Market (CRM) was launched in 2020. Inspired by the European Union's four fundamental freedoms—the free movement of goods, services, capital, and people—the CRM aims not only to facilitate regional economic cooperation but also to gradually prepare the Western Balkans for participation in the EU Single Market.

Building on this foundation, the 2025–2028 Common Regional Market Action Plan (CRM 2.0) takes regional integration a step further. Beyond consolidating the four freedoms, it focuses on creating the conditions for long-term economic growth, accelerating the green and digital transitions, and advancing alignment with EU rules and standards. At the same time, CRM 2.0 constitutes the second pillar of the EU Growth Plan for the Western Balkans. The economic rationale behind this approach is straightforward: more integrated markets generate economies of scale, strengthen the competitiveness of domestic businesses, and make the region more attractive to foreign investors. According to World Bank estimates, full implementation of the CRM could increase the region's GDP by up to 6.7%.

Despite these ambitious macroeconomic objectives, implementation remains the greatest challenge, particularly in the area of human capital development and labour mobility. Over the past decade, approximately 20% of the Western Balkans' population has emigrated outside the region, significantly reducing the available labour force. As a result, businesses increasingly struggle to recruit and retain qualified workers. According to the 2024 Balkan Barometer, 70% of businesses support public policies aimed at retaining the workforce, while 25% are already considering recruiting workers from neighbouring Western Balkan economies.

For Kosovo, these challenges are particularly significant. As the country with the youngest population in the region, Kosovo should, in theory, enjoy a demographic advantage. Yet this advantage is increasingly under pressure. Continuous emigration and shortages of skilled professionals in key sectors are undermining the country's human capital potential. According to the Riinvest Institute Business Survey (2025), labour shortages and emigration continue to rank among the most significant barriers to business development in Kosovo. Businesses also identify the shortage of qualified workers and the persistence of informality as major constraints on labour market performance.

These challenges are rooted in the structural characteristics of Kosovo's economy. While a large number of young people enter the labour market each year, job creation has not kept pace with labour supply. Youth unemployment remains disproportionately high, and a considerable share of young people are neither employed, nor in education or training (NEET). Consequently, the value of regional labour market integration for Kosovo extends beyond simply addressing labour shortages. It lies in creating a broader economic space where skills, qualifications, and employment opportunities can circulate more freely across borders.

The full implementation of CRM 2.0 would create the conditions for a more integrated labour market serving over 18 million people across the Western Balkans. Greater labour mobility would help sectors already facing structural workforce shortages, including construction, tourism, agriculture, information technology, and healthcare, meet their labour demand within the region. At the same time, formalising cross-border employment would reduce reliance on informal labour, strengthen workers' rights, and increase tax and pension contributions. Moreover, the geographical, cultural, and linguistic proximity among Western Balkan economies would lower recruitment costs and facilitate faster integration of workers into local labour markets.

To address the region's persistent skills gap, where performance continues to lag behind the EU average, CRM 2.0 foresees the harmonisation of vocational education and training systems, the development of common STEM education policies, greater investment in digital and green skills, and the establishment of shared occupational standards across the region. These reforms are particularly important as technological change and the green transition continue to reshape labour market demand.

Another important innovation under CRM 2.0 is the focus on social rights portability and closer alignment with EU social security standards. The Action Plan envisages the establishment of a Regional Social Security Network and discussions on the portability of pension rights. These measures are essential for creating a functioning cross-border labour market, as people do not relocate based solely on wages; they also seek long-term social protection and security for themselves and their families.

Some argue that a more integrated regional labour market could accelerate an internal "brain drain" towards the larger economies of the Western Balkans. However, this concern overlooks a more fundamental reality: the region's real competition for talent comes not from neighbouring countries, but from the European Union. Without a sufficiently integrated regional market capable of attracting higher value-added investment and creating better-paid jobs, the Western Balkans will continue to lose its skilled workforce permanently to EU labour markets.

Free movement and mutual recognition of qualifications are not simply technical reforms—they are fundamental principles upon which the European Union itself is built. For Kosovo, and for the Western Balkans as a whole, demonstrating tangible progress in these areas, while insulating technical cooperation from bilateral political disputes that too often delay implementation, will be critical for advancing the EU accession process.

As access to the EU Growth Plan is increasingly linked to measurable progress in regional integration, implementing CRM 2.0 is no longer merely a policy choice—it has become a development imperative. By investing in human capital and enabling legal, rules-based labour mobility, the region has an opportunity to transform mobility into a driver of productivity, competitiveness, and sustainable economic growth, while providing businesses with the skilled workforce they need to thrive.

This opinion piece was prepared as part of the Riinvest Institute's contribution to the Civil Society and Think Tank Forum (CSF), the annual civil society platform of the Berlin Process.

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