POSAO NARODU Policy Brief ENG.cdr

POLICY BRIEF
Analysis Summary: Active employment policies in Bosnia and Herzegovina
august/2016.
Reform Agenda and Active Employment Policies in Bosnia and Herzegovina
Do Public Employment Services Deceive
or Employ the Unemployed?
Reform Agenda and Employment
The government in Bosnia and Herzegovina in its accession to the European Union process has accepted the obligations to
conduct broad economic, social and other reforms such as stabilization of public finances, taxation and fiscal sustainability,
improvements of the business climate, increasing efficiency of public administration, and strengthening of the rule of law. The
most important goal of these reforms is to speed up economic growth, decrease unemployment and increase the active labor
force rate, a just distribution of social welfare etc.
In this process, the Reform Agenda of Bosnia and Herzegovina 2015 – 2018 was created. The agenda was adopted by the Council of
Ministers, and Entity Governments by mid-2015. All the governments have committed themselves to the Agenda and streamlined
the Agenda into measurable action plans. These action plans have been adopted at the state and entity levels as well as by the
majority of Cantonal Governments in the federation between August and October 2015.
The purpose of the action plans is to set specific aims such as legislative and other measures in order to ensure the enforcement of
the principles and goals of the Reform Agenda, which should lead to a reversal of the negative economic trends, stimulation of
economic growth, give incentive towards a sustainable, efficient, and just distribution of social welfare, ensure creation of new
jobs, and strengthen the rule of law and ensure zero tolerance policy towards corruption.
Centers for Civic Initiatives (CCI) stance is that the Reform Agenda is a very comprehensive and important reform package which
could have direct consequences on the standards of living of citizens of BiH, therefore, CCI has decided to monitor the
enforcement and the impact on efficiency of the Reform Agenda. The purpose of the monitoring efforts is to contribute towards
the implementation of the measures from the Reform Agenda and more importantly to ensure that the effects of the Agenda
cause improvements of the standards of living of the citizens.
One of six areas of the Agenda is the Labor Market which aims to reduce the chronically high unemployment in BiH The institutions
that are in charge of conducting employment programs and policies in BiH are often seen as inefficient, inadequate and
incompatible with the real needs of the labor market. Some of the key shortcomings of the current policy and practice of
employment in BiH is the poor legal framework which determines the role of the public employment services (PES), shortage of
capital allocated for active policies, administrative costs which use up a large chunk of the budget which could be allocated for
active employment policies, etc. However, the unemployment in BiH is very high and chronic. It can be said that this is a twodecade old structural problem which can only be amended with structural reforms.
Unemployment is the most Stable Anomaly in BiH
The employment and unemployment trends have been stagnating over the last years. Before we go into details of the current state and
trends of employment and unemployment in BiH, it should be noted that the structural problem of high unemployment rate is actually due
to low participation in the labor market of working age population. The participation in the labor market of the working age population
worryingly low, where only 48% of the working age population participates in the labor market. This means that more than half of the
population that is of working age is not legally participating in the labor market. This means that a large portion of the population is either
receiving veteran protection welfare or is employed in the grey economy, or perhaps is completely excluded from any social welfare. This high
rate of inactive population remains the highest in Europe. Figure 1 gives a representation of the share of labor force in the working age
population.
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REFORM AGENDA AND ACTIVE EMPLOYMENT POLICIES IN BOSNIA AND HERZEGOVINA
Share of Labor Force in the Working-age population
2.500.000
2.565.000
2.000.000
1.500.000
1.231.984
48%
1.000.000
500.000
Total labor force
Source(s): BHAS
Working-age population
Figure 1: Share of Labor Force in the Working-age Population
Figure 2 shows a comparative overview of the most of EU member states, the average in EU and OECD and the countries in the region and BiH,
based on the activity rate, i.e. the share of labor force in the working age population. The European average is around 65%, which is by 18%
higher than in BiH.
Active Labor Force in the Selected European Countries
80%
70%
60%
BiH, 48%
Hungary, 55%
Croatia, 55%
Greece, 56%
Serbia, 55%
Belgium, 56%
Bulgaria, 56%
Poland, 59%
Slovenia, 59%
Romania, 59%
EU, 59%
Finland, 61%
Czech Rep., 61%
Slovakia, 61%
OECD, 61%
Germany, 61%
Portugal, 62%
Ireland, 62%
UK, 63%
Austria, 62%
Estonia, 63%
Denmark, 63%
Sweden, 64%
Russia, 63%
Holland, 64%
Switzerland, 68%
40%
Norway, 64%
Iceland, 74%
50%
30%
20%
10%
0%
Source(s): BHAS
Figure 2: Active Labor Force in Selected European Countries
When we take a look at the number and the rate of employment and unemployment over the last six years (2010 to 2016), we can see a slight
improvement in last two to three years. Figures three and four show employment and unemployment trends for entities between 2010 and
2016, where it can be seen that there have not been significant changes.
Relationship: Number of Employed and People Seeking Employment in FBiH
REFORM AGENDA
600.000
Forma on of
FBiH government
500.000
473.807
400.000
426.297
367.185
436.543
375.495
435.709
387.335
483.221
499.113
436.415
394.355
393.787
390.822
377.926
300.000
200.000
100.000
0
Source(s): FZS, FZZ, PUFBiH
Number of employed (FBiH)
Number of employed (FBiH) - Tax authori es
Number of people seeking employment (FBiH)
Figure 3. Relationship: Number of employed and unemployed in FBiH 2010 to 2016
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POLICY BRIEF
Relationship: Number of Employed and People Seeking Employment in RS
350.000
REFORM AGENDA
Forma on of RS
government
300.000
278.156
272.718
250.000
259.852
255.868
255.240
255.204
215.633
200.000
150.000
155.155
154.850
147.912
150.193
143.707
140.133
133.041
100.000
50.000
Source(s): ZZRS, ZSRS, PURS
Number of employed (RS)
Number of employed (RS) - Tax authori es
maj.16
jan.16
mar.16
nov.15
jul.15
sep.15
maj.15
jan.15
mar.15
nov.14
jul.14
sep.14
maj.14
jan.14
mar.14
nov.13
jul.13
sep.13
maj.13
jan.13
mar.13
nov.12
jul.12
sep.12
maj.12
jan.12
mar.12
nov.11
jul.11
sep.11
maj.11
jan.11
mar.11
nov.10
jul.10
sep.10
maj.10
mar.10
0
Number of people seeking employment (RS)
Figure 4. Relationship: Number of employed and unemployed in RS 2010 to 2016
Since the adoption of the Reform Agenda, i.e. from July 2015 to June 2016, the number of the registered unemployed in the Federation of BiH
is lower for about 12, 900, while the number of the employed is higher for about 15,900. For the same time frame, in the Republika Srpska the
number of registered unemployed is lower for 3,208, while the number of employed is higher for about 5,438. Percentage wise these changes
reflect minimal improvement, therefore, the unemployment rate in the Federation of BiH and in the Republika Srpska has decreased by two
percent (Figures 5 and 6).
Relationship: Number of Employed and People Seeking Employment in FBiH 2016
510.000
REFORM AGENDA
Forma on of
FBiH government
499.113
490.000
486.804
483.221
480.335
470.000
473.807
476.171
395.133
391.663
450.000
430.000
410.000
390.000
390.822
390.738
390.281
370.000
373.548
350.000
jan.15
feb.15
mar.15
apr.15
maj.15
jun.15
jul.15
avg.15
sep.15
Number of employed (FBiH) - Tax authori es
Source(s): PUFBiH, FZZ
okt.15
nov.15
dec.15
jan.16
feb.16
mar.16
apr.16
maj.16
jun.16
Number of people seeking employment (FBiH)
Figure 4a. Relationship: Number of employed and unemployed in FBiH 2015 to 2016
Relationship: Number of Employed and People Seeking Employment in RS 2016
400.000
REFORM AGENDA
Forma on of RS
government
350.000
300.000
250.000
273.379
267.790
278.156
274.675
200.000
150.000
143.707
140.294
140.133
133.041
100.000
50.000
0
jan.15
feb.15
Source(s): ZZRS, PURS
mar.15
apr.15
maj.15
jun.15
jul.15
avg.15
Number of employed (RS) - Tax authori es
sep.15
okt.15
nov.15
dec.15
jan.16
feb.16
mar.16
apr.16
maj.16
jun.16
Number of people seeking employment (RS)
Figure 4b. Relationship: Number of employed and unemployed in RS 2015 to 2016
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REFORM AGENDA AND ACTIVE EMPLOYMENT POLICIES IN BOSNIA AND HERZEGOVINA
It is important to explain the issue of the so called “recorded unemployment.” The recorded unemployment does not necessarily reflect the
real state of unemployment in BiH. Given the definition of an unemployed person¹ by the domestic laws, many register themselves with the
public employment services as unemployed when in reality they are not seeking any employment. They only do so to acquire some other
benefits such as health insurance which is acquired through the unemployment status. For this reason, it is important to distinguish those
who are really unemployed, i.e. people who are actively seeking employment from those who are only unemployed for purposes other than
seeking employment. The latter may be engaged in the informal sector (grey economy), agricultural production, may be receiving social
welfare, may be a student without a full time status, or may not be willing to work (e.g. housewives) etc. This way of keeping records and
presenting numbers of the unemployed has a number of negative economic, social and psychological implications. To sum up, the
individuals who are actively seeking employment make up around a half of the total recorded unemployment, which is confirmed by the
Labor Force Survey which concludes that the unemployment rate in BiH is between 25% and 28%² .
Having said this, BiH has the worst unemployment rate in all of Europe. To make things even worse the youth unemployment is extremely
high at almost 60%, while a large portion of those seeking employment can be defined as permanently unemployed (part of the reason
behind this is because more than 60% of the unemployed are low skilled, unskilled or unqualified workers), and there is also a worryingly high
percentage of inactive people in the labor market (52%).
Figures five and six show a six-year trend of unemployment and employment rates in BiH. It can be said that over the last six years they have
not been significant changes where unemployment remains very high and employment remains low, which indicates that the labor market
has been stagnating. The worst state is between 2010 and 2013 due to the lasting impact of the global economic crisis. Afterwards, we can see
that there has been some modest progress of the labor market where unemployment declined while employment increased slightly.
Speaking percentage wise, employment rate grew by three percent and likewise, unemployment decreased by three percent (figures five
and six).
Unemployment and Employment Rate FBiH
REFORM AGENDA
70%
Forma on of
FBiH government
65%
60%
57%
55%
54%
54%
55%
55%
53%
52%
50%
45%
47%
45%
48%
46%
45%
45%
43%
40%
Unemployment rate
Source(s): FZS, FZZ, PUFBiH
Employment rate
Figure 5. Unemployment and Employment Rates in FBiH 2010 to 2016
Unemployment and Employment Rate RS
REFORM AGENDA
90%
Forma on of RS
government
80%
70%
65%
60%
63%
65%
65%
35%
35%
66% 66%
68%
62%
58%
50%
40%
38%
38%
35%
37%
30%
34% 34%
32%
20%
Source(s): ZZRS, ZSRS, PURS
Unemployment rate
Employment rate
Figure 6. Unemployment and Employment Rates in RS 2010 to 2016
According to Interntional Labor Organization, an unemployed person is “a person of at least fifteen years of age and a) had actively sought employment at some time during the previous
four weeks.; c) were available to start work within the next two weeks”
Agencija za statistiku BiH, Demografija i socijalne statistike, Jul, 2016.
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POLICY BRIEF
We can conclude that the short term effects of the implemented reforms so far in the area of Labor Market are almost unfelt, especially when
we look at a six-year trend. The positive changes which have occurred in the last year could be credited to the general trend of slow growth
over years, and some ad-hoc measures which will be discussed later in the paper. If we consider that employment growth is one of the
priorities of the Reform Agenda, this modest progress in the past 18 months since the government has formed and 12 months since the
Reform Agenda has been adopted is not something to be commended. Even when observed in the absolute numbers and percentages, the
progress made in the labor market is merely symbolic and insufficient, which suggests that either the measures which are conducted are
inadequate to revitalize the labor market or perhaps that the aims set by the Reform Agenda are unrealistic. Employment rate needs to grow
at a much faster rate annually in order to prove the effectiveness of the measures conduced so far.
Do Public Employment Services Deceive or Employ the Unemployed?
According to the constitutions and laws in BiH the jurisdictions in the sectors of labor and employment are given to the three government
levels: state, entities, cantons in the Federations of BiH and Brcko District (BD). In this manner the state institutions are obliged to coordinate
and harmonize the plans and activities of the lower government levels and to maintain the international cooperation. The main laws such as
the Labor Law and Law on Mediation in Employment exist at entity level and in some cantons in the Federation of BiH. Likewise, BD also has its
own Labor Law, and Law on Employment and Rights during Unemployment.
In Bosnia and Herzegovina there are 14 Public Employment Service (PES) agencies. The Labour and Employment Agency of Bosnia and
Herzegovina has narrow jurisdiction, and besides this agency there are 13 more Public Employment Service agencies (one in each entity and
one in the Brcko District and one in each canton). The role of the PES agencies in the labor market in all developed and market oriented
economies is very important. PES agencies manage employment and unemployment insurance, act as mediators between the supply and
demand functions of the labor market, and disseminate information about the labor market while providing counseling and other free
services for the unemployed. However, the PES agencies of BiH in practice have a very different role, which for the most part focuses on
passive record keeping of the unemployed and administering their rights. The rights of the unemployed and administrative activities include:
the right to unemployment benefits, the right to healthcare, the right to purchasing of additional years of service, and issuing over 20
credentials for achieving other unemployment rights, etc.
The average annual expenses of all PES agencies in BiH are around 180 million KM, and the revenues are for the most part acquired through
the contributions from salaries of the employed paid by the employers to the PES agencies. On the other hand, PES agencies' expense
components are broken down into 20% for administrative needs, 60% for servicing of health insurance for the unemployed and passive
measures, and at least 20% for means of active measures.
Administering healthcare for the unemployed is one of the key activities hence, it uses up the most financial, human and other resources. The
right to healthcare was achieved by 416,911 or 80.48% unemployed people in BiH in June 2016. Each person had to individually prove that
they fulfil the criteria for achieving this right via PES agencies which means that each unemployed person had to be individually processed or
administered in order to achieve the right to healthcare.
Unemployment benefits in form of monetary compensations for the unemployed is only utilized by around two to three per cent of the
unemployed in the past years. This is the lowest utilization rate in all of the region. To put things in perspective the monetary compensation
for the unemployed was only utilized by 11,928 or 2.3% of the registered unemployed people in June 2016.
These tasks are performed by around 900 employees at all PES agencies in BiH. The ratio of staff which directly works with the unemployed
compared to the total number of the staff at any PES in BiH differs by entity and cantons but on average is over 50%. In the Federation of BiH
for every staff at PES agency there is around 1,300 unemployed people, where in Republika Srpska and Brcko District this number is around
830. The EU standard is that each staff member at a PES should be responsible for 300 unemployed people.
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REFORM AGENDA AND ACTIVE EMPLOYMENT POLICIES IN BOSNIA AND HERZEGOVINA
Number of Employees at PES Agencies
700
594
600
500
400
300
261
200
100
30
15
0
Republika Srpska
Federa on of
Bosnia and Herzegovina
Labour and Employment Agency
of Bosnia and Herzegovina
Brcko Dis ct
Figure 7: Employees in PES Agencies in BiH
The PES agencies of entities spent 90 million KM between 2013 and 2015 on active employment policies. They spent roughly 30 million KM
annually.
From the total amount spent FBiH PES agency spent around 60 million KM (which is around 44% of the total amount spent) encompassing
almost 31,000 people which is only 8% of the unemployed in the FBiH. The average amount spent per unemployed person was about
2000KM.
The PES of RS spent around 29 million KM in these three years encompassing around 11,000 people or less than 8% of the unemployed in RS.
The average amount spent per unemployed person was about 2,700KM. Tables one and two give a comparative overview in BiH as well as
comparison with the selected countries from the region. Tables indicate the weakness of the policies conducted in BiH.
Table 1: Comparative overview of active employment policies in BiH – 2013 to 2015
PES FBiH
PES RS
Total Budget 2013 to 2015
133.800.000 KM
303.900.000 KM
Values and percentages of active
60.200.000 KM
29.200.000 KM
employment policies
(44%)
(10%)
31.180
10.980
Number and percentage of reached
unemployed people
(8%)
(7%)
Expense per unemployed person
155 KM
200 KM
2.013 KM
2.660 KM
Expense per person reached by the
conducted policy or program
Table 2: Regional and comparative overview of active employment policies – 2013 to 2015
Average
Value of active
Number of
unemployment employment policies
reached
unemployed people
FBiH
RS
Slovenia
Montenegro
389.579
145.558
114.221
36.397
30.775.023 €
16.029.455 €
242.784.772 €
7.045.000 €
31.184
10.980
84.078
44.731*
Total / average
437.700.000 KM
89.400.000 KM
42.160
177 KM
2.336 KM
Average expense
per unemployed
person
79 €
102 €
2.126 €
193 €
* the program directed at employing seasonal workers during the summer tourism season the PES of Montenegro managed
to reach over 30% of the unemployed people in Monenegro.
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POLICY BRIEF
The data in the analysis also encompasses the programs from the PES agencies of Brcko District and cantons in the Federation of BiH, and
these values are very small.
The above facts give a clear picture of why it is difficult to expect a more active role of PES agencies in BiH.
(Non)Systemic Employment Policies – Regulation on Employment Incentive in FBiH
In 2016 we were faced with a new practice where the government passed a bylaw regulation, and not a PES agency program in order to
incentivize employment. The government of the FBiH enacted the “Regulation on Employment Incentives,” which defined who the target
group is, which enterprises could apply, the length and the value of the co-financing, and what the agreement procedures are.
Even though, this program was not listed within the Budget of the Federation of BiH for 2016, the Federal Ministry of Development,
Entrepreneurship and Crafts was deemed responsible for its enforcement and financing from their own budget with the value of 50 million
KM!
However, by 30 July 2016 no agreements with a single enterprise have been signed (the regulation had been amended twice by 30 June
2016). Meanwhile 2,248 people, 1,735 enterprises offering 4,818 job vacancies applied for co-financing. This led to reducing the recorded
unemployment by more than 7,000 people who were reached by the Regulation, which implies that this is a practically government
sponsored temporary employment.
There is a dilemma whether or not this Regulation can be defined as an active employment policy. The dilemma is as follows:
1. Active employment policies by their definition should not be directed at subsidizing the wages or contribution, (however, this
program actually reimburses the minimum wage along with all of the tax burden and employee contributions of the people who are
covered by the program);
2. The key role in the enforcement and monitoring of the Regulation has been given to two more ministries where the competent
Ministry of Labor and PES agency should be the only body that employs Active Employment Policies. This practice derogates the legal
framework and the institutions which are dedicated for employing Active Employment Policies;
3. By increasing the complexities of managing this Regulation i.e. introducing two ministries to manage operations and administrative
role and missing out further instructions on how to implement the Regulations the satisfaction of the end users of the regulations was
very low. Furthermore, this led to poor processing of the applications, bad preparations and poor monitoring of spending of the
funds;
4. Financing of wages in the real sector from the government budget is contrary to the moratorium on new employment and austerity
measures which have been declaratively employed by the public sector which the Government of FBiH publically stated as one of the
goals of the Reform Agenda.
Conclusions and Recommendations
1. Even though the Reform Agenda defines opening of new jobs as one of its key priorities in the last year there have not been significant
changes on the labor market, and the trend of slow growth of employment and decline in unemployment has continued. When
expressed empirically, employment rate increased by three per cent in both entities or by around 25,000 in FBiH and 10,000 in the RS.
The number of unemployed decreased by less than 22,000 in FBiH and by around 10,000 in RS for the same period, which percentage
wise is between two and three per cent.
2. The active employment policies give only modest results and only reach a small portion of the unemployed people. So far their focus
has been to co-finance the undertakings which open up job vacancies to the unemployed people which is a poor long term strategy.
When compared to the countries from the region BiH's active employment policies reach the lowest number of the unemployed.
Furthermore, PES agencies in BiH allocate the least amount of funds per unemployed person.
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REFORM AGENDA AND ACTIVE EMPLOYMENT POLICIES IN BOSNIA AND HERZEGOVINA
3. The active employment policies to a lesser extent stimulate retraining, additional training or other vocational educational programs
for adults which allows the unemployed people to adjust to the needs of the labor market or enable them to become self-employed.
However, this should become the strategic aim of the active employment policies, i.e. increasing the labor activity rate and creating
more abundant labor force on the labor market
4. Non-systemic employment measures such as the Regulation on Employment Incentives of the Government of FBiH have attracted
around 7,000 applicants but have caused more dilemmas than positive outcomes. Funding of wages for the newly employed from the
Government budget cannot be consider an active employment policy, and it is contrary with the Reform Agenda aims to reduce
public spending, while the Regulation itself is conflicted with the current institutional and legal framework. If we were to leave out the
short term statistical optimization of the recorded unemployment these measures do not lead toward a permanent structural
improvement of the labor market in Bosnia and Herzegovina.
5. The activities of removing the administrative role of healthcare insurance for the unemployed people from the PES agencies should
continue. Currently, administering the healthcare insurance for the unemployed people as well as administering of the social security
for the unemployed make up a huge administrative burden for the PES agencies. The estimate is that nearly half of the staff at PES
agencies deals with administrative tasks.
6. A distinction between those who are actively seeking employment and those who are only registered at PES agencies in order to reap
unemployment benefits must be made. In this context the right to healthcare insurance must become administered by department
that deals with healthcare insurance.
7. Even though, the labor market is an important segment of the Reform Agenda there is still no clear labor market strategy at the state
level, nor at lower levels, nor are there any long term plans for ensuring an increase in employment. Furthermore, there are no
comprehensive or detailed analyses of the labor market which could allow more precise and effective active employment measures to
be implemented in the near future.
8. The reform of the employment processes in Bosnia and Herzegovina needs to be focused towards implementing new practices and
stopping the implementation of the current ones which do not breed positive outcomes. The focus should be completely shifted
towards the implementation of the laws which allow the PES agencies to stimulate retraining, additional training or other vocational
educational programs for adults which allows the unemployed people to adjust to the needs of the labor market or enable them to
become self-employed. It is also important that PES agencies start practicing their important role of counselling.
9. Laws on Adult Education need to be enacted by all cantonal government who have not done so yet. So far Reublika Srpska, Una-Sana
Canton, Zenica-Doboj Canton, Tuzla Canton, Gorazde Canton, Western Herzegovina and Sarajevo Canton have adopted this law,
however, it is not being enforced to its full capacity due to a lack of many bylaws which still need to be enacted. Likewise, it is necessary
to adopt the relevant strategies in for Adult Education at all government levels. It is especially important to for Adult Education to
become a topic of active employment policies, and to adopt programs of life-long learning.
10. We recommend carrier orientation for full time students at elementary and secondary schools, where we see the role of PES
agencies, Ministries of Education and other educational institutions as an important one. This type of work needs to become a
common practice in all of Bosnia and Herzegovina and it needs to encompass a wide base of students and not only those who are in
their graduating year.
***
This document is a part of the “Posao Narodu” campaign.
More information about the campaign available at: www.posaonarodu.ba
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