The paper was produced as a background paper on labor issues for the UNDP study "Convergence to the European Union: Challenges and Opportunities." It first looks at the issue of how the labor market institutions of an acceding country like Macedonia should be shaped to further the integration of the acceding economy into the European economic space. The successes and the failures of the labor market reform efforts of the new member states are discussed to give some guidance to the discussion. Second, we briefly discuss the assistance programs provided by the European commission to help candidate states in this reform process. Macedonia is the country in Europe with one of the highest unemployment rates and a very large incidence of long-term unemployment. A third area of discussion in the paper is, therefore, the development and implementation of passive and active labor market policies that guarantee an equitable and efficient use of governmental resources given the stylized facts of Macedonian unemployment.