Skills development is a key driver of long-term growth and convergence, strengthening human capital and boosting productivity. This chapter benchmarks the progress of the Western Balkan economies against the EU, exploring how effectively the six economies develop and utilise skills to improve education, employment and innovation outcomes. It highlights the role of quality education throughout individuals' lives – from early childhood education to lifelong learning once in the labour force – in shaping the skills and competencies needed to meet market demands. The chapter further explores how these skills contribute to enhanced employment outcomes and productivity gains, while emphasising the importance of innovation in adapting and enhancing capabilities to ensure regional competitiveness and resilience.
Economic Convergence Scoreboard for the Western Balkans 2026
Abstract
With an average score of 36 in 2023-2024, Skills ranks as the lowest-performing cluster of the six. Convergence has also been slow, with the regional average rising by only 3 points since 2014-2016. Overall, the regional average is only half that of EU neighbouring economies (71). Serbia leads the region, followed by Montenegro, while Kosovo records the lowest score (Figure 4.1).
Notes: “EU neighbours average” is the average cluster score of Bulgaria, Croatia, Greece, Hungary, Romania and Slovenia. For more information on score calculation and the overall methodological approach, please consult the Methodology section.
The region's main strength ostensibly rests in educational attainment: the share of the labour force having achieved tertiary education is the only indicator in the cluster to have broadly converged to the EU average (Figure 4.2). These attainment levels, however, mask shortcomings in the quality of education. The region’s average PISA mathematics performance stands around 80% of the EU average, with no significant convergence over the decade, constrained by insufficient public education spending and low enrolment in early childhood education and care (ECEC). These gaps in learning outcomes can hinder the school-to-work transition, contributing to a youth not in employment, education or training (NEET) rate that, despite recent declines, remains twice the EU average.
In turn, these obstacles within the education system have weighed on labour productivity, which remains slightly below 40% of EU levels and has not converged over the last decade. This reflects, amongst other things, training systems that often fail to equip individuals with foundational competencies aligned with labour market demands. Lifelong learning could help address these imbalances, yet participation reaches only 20% of the EU average. The region's limited innovation activity, the weakest indicator in the cluster, similarly weighs on productivity, with patent applications at just 2% of the EU average.
Employment outcomes have nonetheless improved. The employment rate is the cluster's fastest-converging indicator, though part of this trend reflects high emigration, which has reduced the working-age population and drained skills from the region. Progress remains uneven across the workforce: women's labour force participation remains around 20 percentage points below men's, a gap more than twice the EU average, reflecting an underdeveloped social infrastructure.
Notes: Scores are rounded to the nearest whole number. “EU neighbours average” is the average indicator score of Bulgaria, Croatia, Greece, Hungary, Romania and Slovenia. For more information on score calculation and the overall methodological approach, please consult the Methodology section.
Labour productivity captures the extent to which rising employment translates into sustained improvements in living standards.
With a regional average of USD1 26.2 per hour worked in 2023-2024, the Western Balkan economies reach only 38% of the EU average (USD 69.0), and 54% of the EU neighbouring economies' average (USD 48.5) (Figure 4.3). Overall, no convergence with the EU has taken place since 2014-2016, with the regional average unchanged at around 38%. This absence of convergence reflects, among other factors, skills gaps that contribute to both the concentration of employment in low-value-added activities2 and the limited adoption of productivity-enhancing technologies, including artificial intelligence.3
North Macedonia leads the region at 46.9% of the EU average (USD 32.4 per hour worked), while Albania ranks lowest at 25.6% (USD 17.6).
Source: (ILO, 2026[1]). Data are imputed for Kosovo. For more details on imputations, please refer to the Technical Annex, published separately from this report.
The employment rate captures how much of an economy's human capital is in productive use, with higher rates bringing more skills into the labour force and lifting aggregate output.
It represents the Skills cluster's most significant area of convergence over the last decade: the regional average rose from 49.6% in 2014-2016 to 62.2% in 2023-2024, reaching 80.7% of the EU average (77.1%) (Figure 4.4). This progress largely reflects more active labour market policies targeting vulnerable groups, particularly women but also youth and the long-term unemployed, supported by efforts to improve the quality and relevance of vocational education and training (VET) while gaps remain.4 However, part of this progress likely reflects the impact of high emigration, estimated at 23.6% of the native population in 2024, together with low birth rates.5
Albania leads the region with an employment rate close to the EU average at 73.8%, while Kosovo records the lowest rate at 41.6%, half the EU average, reflecting the particularly low participation of women.
Sources: (Eurostat, 2026[2]). Data for Albania (2014-2018) from (European Commission, 2020[3]), (2019-2022) from (European Commission, 2024[4]), (2023) from (European Commission, 2025[5]) and (2024) was sent by INSTAT to the OECD. Data for Bosnia and Herzegovina (2014-2018) from (European Commission, 2020[6]) and (2019-2020) from (European Commission, 2024[7]). Data for Kosovo (2014-2018) from (European Commission, 2020[8]), (2019-2022) from (European Commission, 2024[9]) and (2023) from (European Commission, 2025[10]). Data for Montenegro (2021-2024) from (MONSTAT, 2026[11]). Data for Kosovo (2024) sent by KAS to the OECD.
The gender gap in labour force participation6 captures the extent to which women remain outside the labour market relative to men, leaving human capital underused.
At 18.1 percentage points in 2023-2024 (Figure 4.5), down from 22.6 in 2014-2016, the regional average gender gap remains more than twice the EU average, a ratio that has stayed broadly unchanged over the last decade. Despite gradual progress in aligning gender equality frameworks with the EU acquis, women's engagement in the labour market remains constrained by underdeveloped child and elderly care infrastructure, unequal care responsibilities, unpaid care within households7 and limited availability of flexible work arrangements.
Albania, Montenegro and Serbia record a gap of around 11 percentage points in 2023-2024, broadly in line with the EU neighbours' average (10.4), while Kosovo registers the widest gap at 34.2 points, more than four times the EU average.
Sources: (ILO, 2025[12]). Data for Kosovo from (KAS, 2025[13]).
The quality of foundational education shapes the skills base of the future workforce, determining its capacity to adapt to evolving labour market demands and contribute to economic growth.
Assessed through the PISA mathematics score, student performance in the Western Balkan economies averaged 390 points in the 2022 assessment, the most recent available, reaching 83% of the EU average (472 points), compared to 81% in 2014-2016 (Figure 4.6), indicating the absence of meaningful convergence over the decade. This stagnation reflects persistent weaknesses in the region's education systems, notably insufficient public education spending8 and low participation rates in ECEC,9 which limit students' development of foundational skills before entering primary school.
Serbia leads the region at 440 points, or 93.3% of the EU average, while Kosovo records the lowest at 355 points (75.3%). Albania has seen the steepest decline, from 84.8% to 78.0% of the EU average since 2014-2016.
Notes: The economy and regional average for the 2014-2016 period reflect data collected in 2015. This figure was finalised before the publication of the 2025 PISA results on 8 September 2026 and therefore does not incorporate them.
Source: (OECD, 2024[14]). Data are imputed for Bosnia and Herzegovina (2015, 2022), Serbia (2015) and all economies (2023). For more details, please refer to the Technical Annex, published separately from this report.
The youth NEET rate captures the efficiency of the school-to-work transition and reflects gaps in the quality and relevance of education.
Although down from 25.0% in 2014-2016, the regional average of 19.5% in 2023-2024 (Figure 4.7) remains more than twice the EU average (8.9%) and well above the average of EU neighbouring economies (10.7%). The decline in the regional NEET rate reflects the roll-out of Youth Guarantee schemes across most economies,10 as well as efforts to improve the quality and relevance of VET programmes. The gap with the EU nonetheless persists, mainly reflecting the inadequate quality and labour market relevance of VET programmes,11 as well as a misalignment between the skills of higher education graduates and labour market demand.
While Serbia has reduced its NEET rate to 12.7%, the lowest in the region, Kosovo is the only economy in which the rate has risen since 2014-2016, now at 32.4%, more than three times the EU average.
Sources: (Eurostat, 2026[15]). Data for Albania from (INSTAT, 2026[16]). Data for Bosnia and Herzegovina (2014-2020) from (ILO, 2024[17]). Data for Kosovo from (KAS, 2026[18]). Data for Montenegro (2021-2024) from (MONSTAT, 2026[11]).
Advanced educational attainment, reflecting completion of tertiary education, helps to equip the labour force with the skills required to adapt to evolving labour market demands and technological change, supporting productivity growth.
The share of the labour force with advanced education is the only indicator in the Skills cluster for which the Western Balkan economies have achieved broad convergence with the EU: at 78.5% in 2023-2024, the regional average matches the EU average (78.8%), a level maintained since 2014-2016, when it already reached 95.6% of the EU average (Figure 4.8). While these high attainment levels should be interpreted with caution, as they may reflect the high unemployment rates across the region, which can incentivise individuals to pursue advanced education as an alternative to job-seeking rather than in response to genuine labour market demand, as evidenced by the high prevalence of over-education in the region.12
Overall, Montenegro records the highest share at 87.0% in 2023-2024, while the remaining economies cluster around the EU average.
Note: Data are unavailable for North Macedonia (2023).
Source: (World Bank, 2026[19]).
Lifelong learning is essential to enable workers to adapt to the evolving demands of the labour market, supporting both employability and broader productivity gains.
Lifelong learning participation is one of the weakest indicators in the Skills cluster, with the regional average standing at only 3.0% in 2023-2024, reaching 20% of the EU average (15.0%) and 34% of the EU neighbouring economies average (8.7%) (Figure 4.9). The gap has widened over the last decade: while the regional average has remained broadly unchanged at around 3%, the EU average has risen from 10.6% to 15.0%. This divergence reflects the limited availability of training programmes for adults that are designed in view of labour market demand13 and insufficient financial incentives, such as vouchers or tax breaks, to encourage participation, particularly among low-skilled workers. Persistent informality across the region further compounds this challenge, as workers operating outside the formal economy are less likely to benefit from government-led skills development initiatives or employer-supported training.14
Overall, Serbia leads the region at 5.8% and is the only economy to have made meaningful progress since 2014-2016, while Albania records the lowest lifelong learning participation rate at 1.2%, unchanged from 2014-2016.
Notes: Data are unavailable for Bosnia and Herzegovina (2014, 2015) and Kosovo (2014). Due to data availability constraints, the Albania figure is based on a 12-month reference period rather than the 4-week reference period used for other economies, pushing the estimate upward relative to comparable figures.
Sources: (Eurostat, 2026[20]). Data for Albania from (INSTAT, 2026[21]). Data for Bosnia and Herzegovina (2017-2020) from (European Commission, 2025[22]). Data for Kosovo sent by KAS to the OECD, (2023) from (European Commission, 2025[10]). Data for Montenegro (2021-2024) from (MONSTAT, 2026[11]). Data are imputed for Bosnia and Herzegovina (2016). For more details, please refer to the Technical Annex, published separately from this report.
Innovation underpins long-term productivity growth and sustains economic convergence by enabling firms to develop and commercialise new products and processes, with patent applications15 serving as a direct outcome.
With a regional average of 3.5 applications per million inhabitants in 2023-2024, the Western Balkan economies reach only 2.4% of the EU average (145.6) and 17% of the EU neighbouring economies' average (20.1) (Figure 4.10). Patent activity remains negligible across all economies, reflecting low research and development (R&D) expenditure,16 gaps in innovation infrastructure and weak absorptive capacity of firms.17
Montenegro records the highest rate in the region at 9.6 applications per million inhabitants, though this still amounts to only 6.6% of the EU average, while Kosovo records the lowest at 1.1.
Note: Data are unavailable for Bosnia and Herzegovina (2019, 2020, 2021), Kosovo (2014) and Montenegro (2023).
Source: (Eurostat, 2026[23]). Data are imputed for Kosovo (2023). For more details, please refer to the Technical Annex, published separately from this report.
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← 1. Unless otherwise stated, USD refers to 2021 USD PPP throughout the chapter.
← 2. Employment in the region remains concentrated in low-productivity activities (World Bank, 2026[26]). Tourism, a labour-intensive and comparatively low-value-added sector, illustrates this pattern: it accounted for an average of 14.2% of employment in the region in 2023 (13.9% in 2019), peaking at 21.5% in Albania and 25.6% in Montenegro (OECD, 2024[31]).
← 3. On average, only 35.8% of the population possesses at least basic or above basic digital skills in 2023-2024, compared to 57.6% in the EU (see Digital Transformation chapter).
← 4. See indicator SK05 on youth NEET rate.
← 5. Across the Western Balkan economies, the working-age population (aged 15-64) contracted by around 13.5% between 2014 and 2024, from 12.1 million to 10.5 million, with declines recorded in all six economies, including Kosovo, where the contraction has set in since 2022 (World Bank, 2026[30]). Between 2015 and 2024, the total number of emigrants from the region grew by more than 635 000, rising from 3.8 million to 4.4 million, resulting in modest increases in emigration rates across most Western Balkan economies, from 3.1 percentage points in Serbia to 5.2 percentage points in Albania (United Nations, 2024[33]).
← 6. This indicator is introduced for the first time in the 2026 edition of the Scoreboard.
← 7. Women in the Western Balkan economies carry a disproportionate burden of unpaid care and domestic work, spending on average one to three hours more per day on unpaid work than men (UNDP, 2026[32]).
← 8. A critical factor in this issue is insufficient and inefficient public spending on education, which in the Western Balkan economies amounts to 3.9% of GDP in 2023 (OECD, 2024[27]), approximately 20% lower than the EU average of 4.7% in 2023 and 4.8% in 2024 (Eurostat, 2026[35]).
← 9. Available data indicate that, in 2024, 48.3% and 79.5% of children aged 3 to the starting age of compulsory education are enrolled in pre-primary education in North Macedonia and Serbia, respectively, while the EU average is 94.9% (Eurostat, 2026[29]).
← 10. North Macedonia and Serbia remain the only Western Balkan economies to have deployed a Youth Guarantee nationally (European Parliament, 2025[36]; 2026[39]). Montenegro launched a Youth Guarantee pilot for the period 2025-26, implemented in three municipalities (European Commission, 2025[25]).
← 11. VET programmes in the Western Balkan economies are frequently characterised by outdated curricula, obsolete technologies and inadequate equipment, which constrain the development of labour-market-relevant skills, and they remain both underfunded and under-enrolled. Dual education models promoting work-based learning (WBL) have nonetheless gained momentum, with Kosovo and North Macedonia showing the clearest progress, while efforts elsewhere remain largely confined to donor-funded projects. Employer engagement, though still uneven across the region, is growing: for example, in North Macedonia, the number of companies offering a WBL placement rose from 16 in 2020-21 to around 650 in 2024-25 (RCC, 2025[28]).
← 12. Skills mismatch is widespread across the region's labour markets, with 22% of respondents holding qualifications higher than their job required in 2023 (ETF, 2024[37]).
← 13. Most existing initiatives focus on cultivating digital skills among the unemployed, with employment agencies in Albania and Kosovo, for example, training jobseekers in programming and coding. While targeted efforts are important given the high incidence of long-term unemployment across the region, the limited availability of training restricts workers’ adaptability to evolving skills demands and thus their ability to maintain relevant competencies (OECD, 2024[27]).
← 14. See indicator BE06 on estimated informal employment.
← 15. This indicator replaces R&D expenditure in the 2026 edition, providing a more direct measure of innovation output rather than input.
← 16. Available data indicate that Gross Expenditure on Research and Development has reached 0.29% of GDP in Montenegro, 0.37% in North Macedonia (2023), and 0.93% in Serbia, while 2.24% in the EU (Eurostat, 2026[34]). The R&D expenditure also remains limited among businesses, with business expenditure on research and development reaching 0.04% of GDP in Montenegro, 0.1% of GDP in North Macedonia (2023), and 0.43% of GDP in Serbia, while it is 1.49% of GDP in the EU (Eurostat, 2026[38]).
← 17. Evidence suggests that absorptive capacity among businesses remains a key constraint: for example, in the ICT sector, firms in the Western Balkan economies have struggled to absorb and apply cluster-based technological spillovers from European enterprises operating in the region (Kacani and Shaqiri, 2023[24]).