Unemployment as the Cause of Social Exclusion

BY: M.Sc. Ajka Rov?anin, Institute for Youth Development KULT

The Report on Social Inclusion of BiH for 2016, published recently y the Directorate for Economic Planning of the Council of Ministers of BiH, states that employment is one of the basic conditions of social inclusion. The BiH labor market was rated as one with “high levels of inactivity, unemployment and long term unemployment” for the period spanning the past decade. There are some mildly encouraging data about a decrease in unemployment and an increase in employment in 2016 and 2017, dampened by the growing trend of employment abroad, i.e. economic migration.

The lack of work, economic and socio-cultural space results in social exclusion. Not participating on the labor marker is detrimental to an individual’s economic status and can lead to poverty and social isolation. Youth are particularly vulnerable to this. The European Union is aware of this problem, which is why their goals include addressing youth social exclusion, in addition to improving the youth employment rate, providing high-quality education, equality, and training that will allow them to participate on the labor market. 

What does the BiH labor market look like though? Does it encourage youth to participate and work? Does it take into consideration all the specific features of that populations segment? Is it accessible or it just a path to other countries’ labor markets? How does a regulated labor market contribute to the sustainability, growth and development of the real sector? Unfortunately, domestic economic and demographic data shows that the BiH labor market is not youth friendly, and is becoming increasingly unfriendly to the general population as well.

The World Economic Forum developed a very interesting approach to evaluating the efficiency of the labor market, and published the data for each individual country in their annual Global Competitiveness Report, along with other 11 components of competitiveness. The efficiency of the labor market is evaluated by using 10 indicators. In 2017, BiH was ranked at 123 out of 137 countries (rated with 3.49 out of 7). 

The quality of cooperation between employers and employees was rated as 3.76 out of 7, flexibility of employers in setting salary amounts was rated as high, with 5.46 out of 7. The existing regulations allow employers some flexibility in employing and firing employees (3.33). In terms of severance pay, BiH is ranked very low (123^rd out of 137 countries). The ratio of salary and productivity was rated with 3.05. Current competencies of employees in management positions was rated with 2.98.

The capacity of BiH to retain highly qualified workforce is very low (1.80), which places it at the bottom of the list (135^th place). The capacity to attract and select foreign highly qualified workforce is also low (1.59, i.e. 136^th place). The ratio of men and women in the workforce places BiH as 109^th. It is therefore clear that the labor market can be made a lot friendlier to job seekers. When it comes to salary taxes and its effect on policies intended to generate jobs, BiH is rated 2.95. These indicators discourage youth from starting their own business and employing others. With additional burdens, such as having to pay VAT by the 10^th day of the month, numerous parafiscal taxes, other fees, etc.