Implications of Unregistered Employment in Kosovo’s Pension System

Governments give substantial importance towards retirement. Pension spending accounts for one of the largest spending items of public expenditure. The importance of pensions is going to increase in the future, as demographic trends reflect the greying of the population, in which a decreasing number of working people will need to support an increasing amount of retired people. At the same time, informal employment is a pressing economic issue as is apparent when comparing its size to the general economy. Kosovo is a country that faces both problems, ageing and high informal employment. This study explores the relationship between these two topics, specifically analyzing the ways in which informal employment affects the pension system and reviewing the attitudes of working age people as they pertain to pensions and work contracts. Informal employment is analyzed through various filters such as age, gender, educational attainment, living situation, and type of work. This study finds that informal employment has a substantially negative effect on the Kosovo pension system by affecting both the tax-funded component and the individual savings fund of the pension system. Lastly, the study offers recommendations related to the relationship of informality and pensions.