RURAL EMPLOYMENT IN BOSNIA AND HERZEGOVINA – AN OVERVIEW AND

OUTLOOK

SABAHUDIN BAJRAMOVIĆ Faculty of Agriculture and Food Science University of Sarajevo,

Zmaja od Bosne 8, 71000 Sarajevo, Bosnia and Herzegovina Tel. +387 33 225 727 Fax: + 387 33 667 429

e-mail: s.bajramovic@ppf.unsa.ba

Paper prepared for presentation at the I World Bank Conference on

Poverty and Social Inclusion in the Western Balkans WBalkans 2010

Brussels, Belgium, December 14-15, 2010

Copyright 2010 by Bajramovic Sabahudin. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

Abstract

Unemployment is still the greatest economic and social problem in Bosnia and Herzegovina (BH)

having the same importance in both its rural and urban areas and an annual rate between 31.1%

(2006) and 24.1% (2009). The structure of rural employment as well as the basic characteristics

of the labour force is similar to those in the other countries in transition in the region. This means

that the age and educational structure of the population is unfavorable compared to that of the

urban areas, the unemployment rate of the active population is higher, agriculture is the dominant

economic activity (participation in total employment is around 35%) and the share of the tertiary

sector in employment is very low. The labour market in BH is burdened with numerous problems.

It is still fragmented and does not ensure mobility of the labour force. Actual legislation on work

is harmonized with the market economy, but, in practice, discrimination on ethnic, age or gender

grounds still sometimes takes place. The political situation also contributes remarkably to the

insufficient mobility of the labour force. Factors that could influence changes in the rural labour

market in BH in the coming years are: the implementation of the main orientations set out in the

entity’s strategies of employments; carrying out the reform of the educational system; the

improvement and modernization of existing professions; harmonized development of all regions

within the country; and harmonization of laws in BH with those of the EU in order to create better

conditions for foreign capital investment, the land market and changes in size structure of family

farms and changes in structure of farm production.

Key words: Bosnia and Herzegovina, employment, labour force, rural areas

1. INTRODUCTION

Bosnia and Herzegovina (BH) is still facing a major deficit of productive employment and decent

work. While the labour market situation improved somewhat in the past decade owing to the

relatively high rates of economic growth, the results were somewhat lost as the global economic

and financial crisis did not stop at BH’s borders (Ministry of Civil Affairs of Bosnia and

Herzegovina [MCABH], 2010). Unemployment rates are still notably high and among the highest

in Europe and the countries in the region1. This is mainly a consequence both of the low share of

the labour force in economically active age groups, and of very high unemployment rates,

particularly among young people. Employment rates for women are notably low, which indicates

significant gender inequalities in the labour market. Employment in the informal economy is high

and has increased as a consequence of the crisis. Human resources development poses a particular

challenge for BH. Overall educational attainment of the population is low, with major gender

differences, and there is also a gap between skills and labour market requirements. Furthermore,

vulnerable groups and persons with disabilities face special challenges in terms of social inclusion

and integration into the labour market (MCABH, 2010).

The assertions above are especially relevant in the case of the rural areas of BH, which are

normally particularly important for the country because they account for 88.9% (45,547.5 km2) of

the BH territory, with 70.4% (2.37 million) of the total population living there (Bajramovic et al.,

2010). The structure of employment and the main characteristics of the labour force in rural areas

are similar to other transitional countries in the region. This means that the age and educational

structure are less favorable than that in the urban areas of the country; the unemployment of the

1 In 2009, the unemployment rate in BH was 24.1%, and in Croatia 8.7%, Serbia 15.6%, Montenegro 18.3% and Bulgaria 6.4% (Agency for Labour and Employment of Bosnia and Herzegovina, 2010).

economically active population is higher; agriculture is the dominant economic sector, while the

share of tertiary sector in total employment is very low.

The situation of current rural (un)employment should be viewed in the broader context of BH’s

circumstances. Above all, what should be pointed out are the large demographic movements and

population migrations2 caused by the 1992-1995 war, the exodus from the country, particularly of

more educated people, the major damages that occurred in industrial and other economic plants,

the weak and slow privatization process, the relatively low level of investment, particularly

foreign, caused by poor economic policy, and also by the political instability in the country over

the past years (Bajramovic & Custovic, 2006). Adding to this a poor social policy without any

significant employment programs and budget allocations at the level of both BH entities, and

almost non-existing rural development policy until 2007, and bearing in mind the increasingly

difficult position of agriculture, a crucial economic sector, as a result of market liberalization and

low and uncompetitive domestic production, it is evident that the position of the rural population

in BH is very difficult.

This paper provides an overview of the current labour market situation in Bosnia and

Herzegovina, particularly emphasizing the rural employment situation. In this sense, particular

reference is made to agricultural employment and employment outside agriculture in rural areas,

the educational and gender structure of the employed in rural areas, youth participation, mobility

and the role of the informal economy, and other factors affecting the overall rural employment

situation in BH. All this will serve to give an overview of the future labour market trends in the

country rural areas.

2 According to the United Nations Development Programme data ([UNDP], 2009) the emigration rate for BH in 2007 was 25.1%.

2. THE LABOUR MARKET SITUATION IN BOSNIA AND HERZEGOVINA

2.1. Labour force structure

According to the last 1991 census, the population of Bosnia and Herzegovina was 4.377 million.

The population decreased drastically as a consequence of the war: the death toll was 250,000,

while around 1.2 million people emigrated, most of who were of working age. Naturally, this has

led to an increase in the relative size of the dependent population. Regardless of the relative

stabilization of the demographic situation in the past 10 years, the share of the working age

population shows a 5% decrease since 2006 (Table 1), when the first analysis of labour market

was carried out (Agency for statistics of Bosnia and Herzegovina [ASBH], 2009). Although the

gender representation in the working age population is balanced, there are many more men than

women in the labour force.

Table 1: Major indicators of the labour force in Bosnia and Herzegovina for the period

2006-2009

According to the 2009 Labour Force Survey (LFS) data (ASBH, 2009), the working age

population makes up two-thirds of the total population. One-half is aged 25-49, while 30% is

aged 50-64. However, despite the current favorable age structure consisting of two-thirds of the

population of working age, the existing dependency ratio is high because of the very low

employment rate, where a family income provider supports 2.6 other persons (Table 1). The

unemployment rate for the persons in their most productive age, between 25 and 49 years, is

notably high and amounts to 25% and even higher for women. The somewhat lower

unemployment rate for the people aged 50-64 seems to be related to the low rate of labour force

participation – persons aged over 50 are prone to withdraw from the labour force.

The 2009 employment rate was 33.1% (Table 2), with around a 10% employment rate for

women, which was lower than for men. The employment rate in BH amounts to one-half of the

average EU-27 rate (65.9% in 2008), and it is much lower than the EU goal of 70% (MCABH,

2010). Almost one-quarter of the economically active population is unemployed: only two out of

five working age persons are actually employed. Gender differences are particularly notable with

regard to labour force participation and employment rates – the rates for men are twice as high as

those for women.

Table 2: Employment rate, unemployment rate, inactivity rate in Bosnia and Herzegovina, by gender

This problem has not been sufficiently analyzed in BH; however, such high inactivity levels may

certainly be ascribed to a low education level, as well as to cultural factors and unequal access to

the labour market.

The labour markets in BH are heavily affected by emigration: both skilled and unskilled persons

of the most productive age leave the country to seek more profitable employment. Migration has

two sides – on the one hand, migration impoverishes the human resource base in the country,

while on the other hand the remittances sent by migrants to their families at home make a

significant contribution to the home country economy3. A large number of BH citizens work

abroad, and it is estimated that the remittances from abroad to BH account for 17-20% of gross

domestic product (GDP) on average (MCABH, 2010). The remittances from abroad are an

alternative source of income and may partially explain the high inactivity rates in the country.

 

 

 

3 According to UNDP data (2009), the remittances to BH were USD 2.52 billion in 2007, that is, USD 640 per capita.

2.2. Labour market structure by sectors

Among the employed, little less than one-third is employed in the secondary sector (mining,

processing industry, building industry), around one-half in various service activities in the public

and private sectors, while the remaining 20% found employment in agriculture (Table 3).

Table 3: Breakdown of employment by sectors in Bosnia and Herzegovina 2.3. The Informal economy

The lack of options for decent and productive employment results in a large informal economy,

which is reflected in a 21% difference between recorded and actual employment under the

International Labor Organization (ILO) definition presented in the “Labour Force Survey”

(LFS).4 Research based on the 2006 LFS shows that one-third of all the employed (34%) did not

pay contributions for pensions and/or health insurance, which indicates the size of the informal

economy in the country. Depending on the data source and methods applied, the grey economy in

BH is usually estimated to be around 30-50% of GDP (MCABH, 2010).

Figure 1: Breakdown of informal employment by sector and gender in Bosnia and Herzegovina, 2006

Agriculture is an important employment source for informal activities (Figure 1) and the workers

in this sector have the least chance of making the transition from informal to formal activities.

Therefore the workers in rural areas face a higher probability of remaining much longer in

informal employment than the workers in urban areas. The informal economy provides short-

4 According to the definition of the 13th International Conference of Labour Statisticians (Geneva, 1982), the term unemployed person means a person above a specified age who was out of work in the reference period, currently available for work and seeking employment. The recorded unemployment rate is distorted because of persons who register in order to obtain unemployment benefit, regardless of whether they are informally employed or inactive.

term social support to vulnerable population groups and helps them to get out of poverty.

However, due to its non-regulated nature, it often offers insecure employment, poor working

conditions, and does not provide social security. While over 90% of workers in the formal

economy are in paid employment, less than one-half in the informal economy receive regular

salaries. Although there is a small difference in the weekly working time (those in formal

employment work a little longer), the formal economy has significantly higher earnings – around

30% higher – compared with the informal economy (MCABH, 2010). Nevertheless, it seems that

a large number of workers are caught in a trap of informal employment (Krstic & Sanfey, 2007),

probably because of difficult access to labour markets, slow job creation in the formal economy,

and a lack of the skills demanded in the labour market. The share of women and youth in total

informal employment is higher than the share of unskilled persons. Those with two-year

university or a university degree have a better chance of leaving the informal economy and

moving to formal employment (Krstic & Sanfey, 2007).

2.4. Unemployment

 

According to the 2009 LFS data (ASBH, 2009), unemployment in BH was 24.1% (Table 1). This

is notably high and even twice as high as the average rate of 9.5% in the EU-27. By the end of

2008, the unemployment rate had decreased to 7% in BH, without major differences between the

entities, which may be ascribed to moderate economic growth by 2008. The smaller increase in

unemployment noted in 2009 may be ascribed to the global economic crisis. Furthermore,

unemployment in the country is long-term: one-half of all the unemployed were unemployed for

at least 5 years, one-quarter of whom were unemployed more than 10 years, so they can hardly be

considered to be economically active (MCABH, 2010).

As noted earlier, there is a significant discrepancy between the recorded unemployment rate and

the unemployment rate as defined by the ILO, because the number of registered unemployed

persons is almost twice as high as the number actually unemployed. According to the data of

Agency for labour and employment of BH (2010), 510,580 persons were registered as

unemployed on 31 December 2009, which accounts for 46% of the labour force. As for women,

this number was higher than 50% (Table 4). The social security system that entitles the

unemployed to health insurance encourages the unemployed to register with the bureaus in order

to obtain the status of unemployed to exercise certain rights during unemployment (that is, health

insurance and benefits corresponding to years of service).This creates large concerns, particularly

in a country with limited public and social security resources. On the other hand, it should be

noted that the LFS unemployment data underestimate underemployment – many people are

employed in the informal economy with temporary work, or people may be self-employed with

jobs that do not require their full engagement.

Table 4: Unemployment rate by gender (actual and recorded) in Bosnia and Herzegovina

2.5. Other labour market characteristics in Bosnia and Herzegovina

Most young people of working age (aged 15-24) are economically inactive, probably because

they are in education. The employment rate of 17% among young people is notably low and is

significantly lower than the rate in other countries in the region and the EU average (37.6% EU-

25; 41% EU-15; 38.4% Slovenia; 28.8% Croatia) (MCABH, 2010).

In 2009, the employment rate for the elderly, aged 50-64, was 34%, which is almost 10% lower

than the EU average. Such a situation is mostly the consequence of the post-war dissolution of

public enterprises, which was not followed by the vocational education and training programs or

other forms of reintegration into the labour market. This group is largely excluded from the

labour market and needs particular attention to reintegrate it into the labour market. This is

particularly important as the BH population is aging rapidly.

Poor labour force mobility is also a characteristic of the labour market in Bosnia and

Herzegovina. The causes of poor mobility should be looked for principally in poor job creation,

the inflexibility of labour market, and insecurity of incomes, as well as in the traditional

immobility of the labour force within the country in terms of the population not being ready to

leave their places of residence for the purposes of work. Other reasons for poor labour force

mobility within the country relate to differences between the entity social security laws and

regulations, such as different contribution rates, qualification criteria, computation of allowances

and their duration. Furthermore, low salaries are also an obstacle in terms of finding

accommodation in another place and related to the increased living expenses in cases of separated

families.

One of the labour market specifics and a present adverse development in BH is ethnic

discrimination in employment. Although there has not been any significant research in this field,

numerous reports (above all, those of nongovernmental organizations) point to this problem. An

example is the report of Amnesty International tittled “Bosnia and Herzegovina Behind closed

gates: ethnic discrimination in employment” (2006), which broadly elaborates this issue, with the

following standing out: lack of equal access to employment in BH has its roots in the war, when

mass dismissals of workers belonging to the “other” ethnic group, coupled with the illegal

expropriation of their businesses and other assets, featured typically as one of the early stages of a

process, eventually resulting in the forcible transfer or deportation of members of minority

groups. While efforts have been made to create multi-ethnic employment in government

institutions, this process has been painfully slow and cumbersome and has not always proven to

be sustainable. The situation is similar outside public administration, in state-owned enterprises

and in the private sector, where ethnic discrimination continues to be widespread, negatively

affecting the sustainability of returns. Provisions in the entities’ labour laws aimed at ensuring

that unfairly dismissed workers (including those cases where a worker was dismissed on the

grounds of his/her ethnicity) either receive compensation or are reinstated in their old job, remain

largely unimplemented and do not provide effective reparation. Moreover, in those cases where

previously state or socially owned enterprises were privatized, the manner in which privatization

was carried out has often cemented past ethnic divisions, allowing members of the majority ethnic

group to gain greater economic power and to continue discriminatory employment practices.

One rare piece of scientific research on ethnic discrimination in employment was conducted in

Sarajevo Canton5 by Vukelic et al., (2009). The research has shown that an applicant will most

likely (statistically significant) be ethnically discriminated against while applying for a job.

Among the total number of employers who advertised job vacancies and were included in the

sample, only 10% invited the members of all three constituent nations (Bosniaks, Serbs, Croats)

to interview. It turned out that the employers mainly discriminate against one “less/the least”

desirable nation, so they mostly invited the members of other two nations to interview. As for the

duration of employment, the research has shown that a higher percentage of Bosniaks than Croats

were interviewed for permanent jobs, while Serbs were interviewed more often than the other two

nationalities in the case of occasional and part-time jobs. The size of a firm measured by the

number of employees is also a factor that determines ethnic discrimination. The research results

have shown that firms with 1-10 employees invite members of all three nations less frequently

than firms with 10-100 employees. Finally, it should be pointed out that the Law on

5 According to the data from the Federation Office of Statistics, the total population in Sarajevo Canton was estimated at 401,696 on 31 December.2003. Of this, 319,752 (79.60%) were Bosniaks; 26,912 (6.70%) Croats; 44,915 (11.18%) Serbs, and 10,117 (2.52%) others.

Discrimination Ban passed in September 2009 in BH definitely provided the mechanisms for

efficiently combating discrimination in employment, and set out the measures that the judicial,

legislative and executive authorities should take in such cases. The only question is to what extent

this law will be applied.

3. RURAL EMPLOYMENT IN BOSNIA AND HERZEGOVINA

3.1. Agricultural employment

Agriculture has always been an important sector for the BH economy. In the pre-war period,

agriculture contributed 12-14% to national GDP. Just after the war, the role of this sector was

even greater considering the destruction of the greater part of the country’s economic

infrastructure. In the period 2000-2008, the importance of agriculture as an economic branch is

still evident, though its share of total GDP tended to decrease slightly. In 2000, the share of this

sector in total GDP was 9.9%, and eight years later it amounted to 7.4%. Such a tendency can be

explained mainly by a strengthening of other economic activities rather than by a weakening of

the agro sector. Agriculture does not have the same importance at the level of entities. Thus, in

the Republika Srpska in 2000, one-fifth (20.2%) of total GDP was derived from agriculture, while

in the Federation of BH it was three times less (7.2%). Considering the state level as well as the

entity level, the decreasing tendency to participate in this sector is evident (Bajramovic et al.,

2008).

A large proportion of labour is in rural areas where agriculture plays a crucial role. With job

destruction in non-agricultural activities, the war destruction and the associated economic decline,

a large proportion of employees in industrial activities have been transferred into unemployment

or into (hidden) agricultural and rural unemployment. This labour shift into farming is more

significant in less developed Central East European countries, as it is the case for Bosnia and

Herzegovina without any serious budgetary social transfers or pension system delivering cash

flows into rural areas. As unemployment is high, the unemployed are pushed to accept any

possible job. As jobs in Bosnia and Herzegovina are limited, self-employment or hidden

employment in agricultural households has grown rapidly (Bojnec, 2005).

Although the recorded employment in agriculture is only 3%, the LFS data indicate that it is

much higher, and its share was 21.2% in total employment in BH in 2009, and 54% in informal

employment (2006). For the BH rural areas only, the employed in agriculture make up 34.8% of

the total employed (Figure 2), which is computed on the basis of the only valid data up to now,

obtained through LSMS and own computations (Bajramovic & Custovic, 2006).

Unfortunately, there has been no census in BH since 1991, so there cannot be certainty in

estimating the number and structure of farms and agricultural employment itself. The only

estimation of post-war farm structure can be found in the study by DG-AGRI (2006). According

to that study, the estimated number of agricultural farms in BH is 515,000. It is assessed that over

50% of this number (over 250,000) belongs to production units with an area less than 2 ha, and

more than 80% (over 400,000) is smaller than 5 ha. Just a few more than 20,000 farms, or 4% of

the total number, are larger than 10 ha. It is obvious that agricultural farms in BH are still small

(the average is 3.3 ha) and fragmented (divided into 7-9 smaller plots), which causes low

productivity and efficiency. Small and divided land properties, poor technical equipment on

farms, old production technologies, the low use of inputs, the token use of irrigation systems, and

the continued dominant presence of extensive and natural production are just some of the factors

that lead to low agricultural production. The level of agricultural yields in BH places the country

at the bottom of the European scale (Bajramovic et al., 2008).

What may be said is that since the end of the war there have not been any significant agrarian

reforms that would lead to major structural changes in the sector and improve the BH farmers'

position. Although the amount of budget support is increasing continuously (Table 5), this

support is still insufficient and is far from the support provided to farmers in the EU and most

countries in the region (Erjavec et al., 2010). For example, the budgetary transfers to agriculture

in BH account for Euro 22 per ha of agricultural land, Euro 31 per ha of equivalent arable land

and 6% of the gross value added in the agricultural sector. This is lower not only in comparison to

the EU-27, whose allocations are seven to fifteen times bigger depending on the measurement

indicator, but also in comparison to the other candidate and potential candidate countries (Erjavec

et al, 2010). This particularly pertains to the support to structural changes and rural development,

which became practically more significant as late as 2007 and 2008.

Table 5: Budgetary support to Bosnia and Herzegovina agriculture for period 2000-2008

Until 2006, the rural development policy in BH was mainly limited to increases in food

production competitiveness, and allocations for its implementation were rather low, never

exceeding EUR 10 million (Table 5). Only since 2007, when the allocations were doubled, did

the establishment and implementation of the rural development measures begin. In addition to an

increase of food production competitiveness, these measures include the improvement of the

environment and quality of life in rural areas. Still, strengthening the competitiveness of the food

and agriculture sector remains a primary goal. The budget transfers for this part of agricultural

policy have a continuous trend of growth, and were increased from 2% of the total agricultural

budget in 2001, to one-quarter of the budget support to the sector in 2008 (Bajramovic et al.,

2010).

As stated above, the major part of budget support to rural development is being spent on

improving competitiveness. A major part of this was directed at investment in farms, i.e. support

of their modernization. Thus, in 2007 and 2008, this support, on average, was approximately 80%

of the total support provided to this axis of the rural development policy. The implementation of

this support was labelled as capital investment in both BH entities. As a consequence of having

separate rural policies in BH entities, it became obvious that the approach to supporting

investment in farms varies a great deal, both in terms of amounts and types of measures.

In 2007 and 2008, the amounts provided for the implementation of this group of measures in the

Federation of BH doubled and encompassed a much larger number of individual support

measures. Among the measures supporting investment on farms, investment in orchards and

vineyards, the procurement of machinery, procurement of the basic herd, investment in

greenhouse production, investment in irrigation systems, and investment in the construction of

storage facilities should be highlighted. Another important measure was aimed at subsidizing

interest rates for investment credits. In the Federation of BH, such support was only able to be

obtained by registered agricultural producers (farmers). The funds for other groups of rural

development measures were considerably smaller and were aimed at modernizing the processing

industry, supporting farmers through training and other related activities, as well as the cultivation

of land.

Support related to the quality of life in rural areas and diversification of the rural economy is

relatively small and had an insignificant share of total support to rural development until 2008,

when it amounted to 15.6% (Table 5). This is a concerning fact given the current issues in BH

related to rural poverty and the surplus of labour in rural communities. A major part of this

moderate support was earmarked for developing rural infrastructure, and a smaller portion was to

support diversification of the rural economy. Support to local capacity-building is also moderate

and mainly aimed at preparing studies and strategies for rural development.

At the end of this brief analysis of the agricultural policy in BH, it should be pointed out that the

issue of society-owned land has still not been resolved, and that the land market barely exists.

Another factor is the high price of capital, that is, very unfavorable conditions for taking loans in

agriculture. From all the above, it may be said that agriculture in BH still has the task of ensuring

food security, whereas this economic activity is a real business and an opportunity to make profits

for only a small number of farmers.

3.2. Non-agricultural employment in rural areas

The employment structure of the rural population in BH displays the characteristics of the

transitional countries in the region, that is, most of the employed are engaged in agriculture.

Based on LSMS data (ASBH, Federal Office of Statistics, Statistical Institution of the Republika

Srpska, 2001), every third employed person is in this sector. Beside agriculture, the rural

population is employed in the processing industry (14.21%), building industry (12.98%) and in

trade (12.08%). In total employment of the rural population, the service sector accounts for

9.65%, finances 6.35%, transport 5.03%, mining 2.85% and utilities 2.05% (Figure 2).

Figure 2: The structure of rural employment in Bosnia and Herzegovina by sector, 2001

Such an employment structure by economic activities is above all a reflection of the gender and

educational structure of the employed rural population. That is, since the economic sectors with

the largest shares (building industry, traffic, and somewhat processing industry) require

manpower and relatively lower educational qualifications, the rural labour force finds jobs more

easily in these sectors than in other activities.

Figure 3: The structure of rural employment in Bosnia and Herzegovina by educational level, 2001

The very poor educational structure of the employed rural population can be seen in Figure 3 and

it consists of the following: 18.23% has no formal education, 29.19% of the employed have only

primary school, 46.58% have secondary school, and only 2.32% have a two-year university

diploma, while 3.68% have a university diploma.

The problem of employment in the rural areas of BH is, above all, the result of the modest budget

allocations for this purpose from all government levels (state, entity, canton, municipality). The

significance of rural development and the need to create job possibilities in rural areas through

agricultural and non-agricultural activities has drawn the attention of the governments in both BH

entities only in the last few years. This confirms the fact that the divisions dealing with rural

development have been established in both BH entities within the ministries of agriculture. In the

current agricultural strategies in both BH entities, much attention is given to rural development

and the concept of an integrated approach, consideration of the rural population members and

their role in the local economy development. This role may be through the multifunctionality of

the farms that earn combined income from agricultural products, crafts, trade, tourism or outside

farms in non-agricultural activities, such as small business, small and medium enterprises, trade,

services, etc (Federal Ministry of Agriculture, Water Management and Forestry, 2006, Ministry

of Agriculture, Water Management and Forestry of the Republika Srpska, 2006).

3.3. Other labour market characteristics in the rural areas of Bosnia and Herzegovina

The labour market in Bosnia and Herzegovina is burdened with many problems. Above all, it is

still fragmented and does not ensure labour force mobility. Existing labour legislation is adapted

to the market economy requirements, but in practice there is discrimination based on ethnicity,

age and/or gender. Political disagreements also significantly affect the inadequate labour force

mobility. In addition, the labour force is inflexible. This is reflected in the very poor mobility

from profession to profession, which is mainly the result of the socialist practice of an education

system not adapted to labour market requirements, as well as of inflexibility related to the amount

of minimal salaries. That is, employers have not been adequately involved in collective

bargaining, resulting in the minimum salary not stimulating the employment of the young, highly

productive labour force.

A particular and already emphasized problem is the youth position in the labour market,

characterized by the notably higher unemployment rate and notably lower employment rate in

relation to the total working age population, which is particularly evident in rural areas. Because

of poor demand in the labour market not only in the rural, but also in the urban areas of Bosnia

and Herzegovina, there is an increasing number of young people who leave or are considering

leaving the country.

Particularly worrying are the data at the BH level, showing that only 73% of the people aged 15-

18 are enrolled in secondary education, which is far below the average in most European

countries, where net enrolment in secondary schools varies between 85 and 95% (Bajramovic &

Custovic, 2006). Because of more notable poverty in the rural areas of BH, it is to be assumed

that the negative connotations of this indicator are even more noticeable. It should be added that

40% of the students remaining in secondary education attend job-oriented programs that,

according to labour market analysis, have the highest unemployment rates and whose earnings are

much lower than those with general secondary education. It should also be pointed out that one of

the problems in employing young people is that the main employers' criterion is work experience,

followed by qualifications. This is a consequence of the lack of mechanisms that would

encourage employers to enable young people to gain experience through volunteer (probationary)

work during and after schooling

It is obvious that the existing qualifications structure, particularly for the youth, is not favorable

with regard to current labour skill job offers. On the other hand, there is still no major action at

state, entity and lower levels to enable training and retraining of the unemployed labour force. For

now, everything usually ends with individual programs funded partly by the local authorities, but

mainly by international governmental and non-governmental organizations.

The general situation regarding the employment of women in BH is much more unfavorable. This

situation is certainly even worse in rural areas. One of the reasons for this is that women in rural

areas still have a traditional role, and after marriage they perform home duties and raise children.

They mainly carry out most of their work activities in agriculture. Beside, the very low education

level and very poor qualifications structure do not leave many employment options for women. In

addition, the fact that the share of economy sectors where women are mainly employed (services,

trade, finances) is very low, and that a general characteristic of the BH rural areas is a lack of

social infrastructure; these are additional factors causing very high unemployment for women in

the rural areas of BH.

There is a significant gender gap in salaries.6 The analysis of the difference in salaries shows

significant inequality between the genders in all salary scales, except in the highest (over EUR

1,250 per month) and the lowest (up to EUR 100 per month) salary scale, where the number of

male and female staff is approximately the same, with no significant differences between the

entities (MCABH, 2010).

In conclusion, the human resource base in Bosnia and Herzegovina is inadequately developed and

insufficiently utilized. Varying levels of education that is also often of inadequate quality

represent the main obstacle to employability and thus to the sustainable economic development of

the country. Although the educational system has undergone a moderate reform in the past

decade, it is still exposed to challenges such as an extremely complex institutional framework and

administrative fragmentation.

The funding and coordination of the education in BH is performed at the levels of entities and

cantons. The state-level budget funds intended for education barely exist. Republika Srpska and

the Federation of Bosnia and Herzegovina spend around 4% and 6% of their GDP on education,

while the budget of the Education Division in District of Brcko is 11.2% of the District budget

(MCABH, 2010).

Finally, it should be pointed out that the significance of employment in economic and social

policies is identified in the three key BH strategies: “Employment Strategy of Bosnia and

Herzegovina (2010-2014)”; “Mid-term Development Strategy”; and “Social Inclusion Strategy

(2010-2013)”. These three documents clearly identify the link between poverty reduction and

6 The gender gap in the case of incomes is the difference between the average monthly income of an employed woman and an employed man, expressed as a percentage of monthly income for men. Average gross income refers to the amount, usually in cash, that is paid to the full-time employed and it should be computed as gross amount (MCABH, 2010).

employment growth. Employment is one of the strategic goals in the proposal of the Development

Strategy. Priority is given to the development of small and medium enterprises, a functioning

labour market and labour market active policies, and human resources development. To achieve

these priorities, there are 23 measures selected in total. Employment is also a priority in the Social

Inclusion Strategy, with another of its priorities involving socially excluded categories in the

labour market through, inter alia, adequate targeting of active measures of the labour market,

enhancing social dialogue, and better targeting of social transfers to poor and vulnerable

categories (MCABH, 2010).

4. CONCLUSIONS AND OVERVIEW

The labour market in BH is characterized by high unemployment levels, particularly among the

younger population. Even with the significant decrease in the employment rate in the period

2006-2008, the estimated unemployment rate was 23.4% in 2008 and 24.1% in 2009.

Furthermore, unemployment is highest among the youth aged 15-24 and was 48.7% (46.4% for

men and 52.7% for women) in 2009. The labour market is also characterized by a low

employment rate (33% in 2009) and high inactivity, mostly as a result of the non-participation of

women in the labour market. Although precise data on the size of the informal economy are not

available, numerical estimates in the LFS indicate 33.6% of informal employment (data for

2006). Other labour market challenges relate to the high rates of long-term unemployment and

poor labour force mobility. In addition, social partners are weak and participate little in the

shaping of employment programs. It should be pointed out that the gender differences are still

particularly acute and pose the main challenge that should be dealt with in the social and

economic policy. Under the “Employment Strategy of Bosnia and Herzegovina 2010-2014”, the

key challenges in the labour market come down to the following:

Insufficiently strong growth rich in employment.

Poor results of the labour market, particularly for vulnerable groups: low levels of

activity and employment (particularly for women); high unemployment (particularly

for the youth and unskilled labour force).

Low level of mobility of the labour force.

High employment rate in the informal economy.

Inadequate development of human resources.

Limited capacities of labour market policies and institutions.

Insufficient social dialogue in the field of employment.

There are three priority goals resulting from these challenges, whose achievement would enable

the attainment of the general goal of employment in Bosnia and Herzegovina – increased quality

and quantity of jobs and the concurrent promotion of social inclusion, and combating gender

inequality. These defined priority goals in the above strategy are: first, fostering the economy’s

capacities to enable sustainable and strong growth rich in employment, and improvement of the

quality of jobs; second, increasing the relevance of education and training in order to gain skills,

and improving the approach to human resources development for more women and men. This

may significantly contribute to higher productivity, employment growth and increase in incomes;

and third, the improvement of the institutional framework and capacities. This is of key

importance in ensuring the creation, monitoring and evaluation of appropriate employment

policies, as well as their efficient implementation.

The rural areas of Bosnia and Herzegovina, where around 70% of total population lives, face

numerous social and economic problems. One of the most noticeable is certainly the problem of

unemployment. As in most transitional countries, agriculture is still the leading economic sector,

where more than one-third of the rural population finds work. The role of this sector is above all

to provide food security. Strong rural communities are essential for future political and economic

stability and will not emerge without balanced support for both farm and non-farm income

generation, and full access to high quality health and education.

It is an encouraging fact that the significance of rural development and the need to create

employment possibilities in rural areas through agricultural and non-agricultural activities have

begun to attract the attention of both BH entity governments. This is confirmed by the fact that

the divisions dealing with rural development have been established in both BH entities within the

ministries of agriculture. In the current agricultural strategies in both BH entities, much attention

is also given to rural development and the concept of the integrated approach, consideration of the

rural population members and their role in the development of the local economy. The quite

modest funds envisaged for these purposes are of concern, which indicates that the development

of this field will still depend significantly on the presence of the international community, where

the EU is expected to take a leading role.

Factors that could influence changes in the rural labour market in BH in the coming period of

time are: implementation of main orientations that are set in the entity’s strategies of

employments, carrying out the reform of the educational system, the improvement and

modernization of existing professions, harmonized development of all regions within the country,

and harmonization of laws in BH with those of the EU in order to create better conditions for

foreign capital investment, the land market and changes in the size structure of family farms, and

changes in structure of farm production.

An undeveloped market and a poor, insufficient and inadequate employment policy are the main

characteristics of the labour force in the rural areas of BH. They are reflected in the low

unemployment rate for the rural population, in undeveloped and uncompetitive agriculture as the

dominant sector of economy, whose principal role is to provide food security, in weak

diversification of other economic activities and reduced employment options out of farms. The

poor educational structure, low mobility and the present discrimination based on gender, age and

ethnicity are additional specifics of the rural labour force in BH. It is evident that the labour

market and rural employment in BH will face major challenges in the future, looking for the

solutions that will keep the rural population in the villages and make their life appropriate for a

human being. There are numerous outstanding issues arising from this paper, some of which may

be singled out:

How to increase total employment of the population, particularly in rural areas?

How to increase women's participation in total employment?

How to increase youth participation in total employment and deter younger people

from leaving the country?

How to improve agriculture in rural areas and make it more competitive?

How to diversify the rural economy and enable the generation of substantial income

outside of farms?

How to decrease various forms of discrimination in employment, including age,

gender and ethnicity?

Solving these issues requires the participation of all stakeholders, from government (entity,

cantonal) institutions to the academic community and including local actors themselves.

References:

Agency for Labour and Employment of Bosnia and Herzegovina (2010). Overview on

situation in market labour in Bosnia and Herzegovina IV quarter 2009, Statisticki

informator No 14, Sarajevo, p7.

Agency for statistics of Bosnia and Herzegovina (2009). Labour Force Survey (publication

2006-2009), Sarajevo.

Agency for statistics of Bosnia and Herzegovina, Federal office of statistics, Statistical

Institute of the Republika Srpska (2001). Living Standard Measurement Survey

(LSMS) in Bosnia and Herzegovina, Sarajevo.

Amnesty International (2006). Bosnia and Herzegovina Behind closed gates: ethnic

discrimination in employment, http://www.amnesty.org/en/library/info/EUR63/001/2006,

7-9

Bajramovic, S., Ognjenovic, D., Nikolic, A. (2010). Review of agriculture and agricultural

policy in Bosnia and Herzegovina, in: Agriculture in the Western Balkan Countries, Draft

version, IAMO - Leibniz Institute of Agricultural Development in Central and Eastern

Europe, Halle (Saale), Germany, 63-92.

Bajramovic, S., Ognjenovic, D., Nikolic, A., Selak, V., Bogucanin, H. (2010). The

assessment of development level of agro-food sector in Bosnia and Herzegovina with

respect to its European integration, in Agriculture in the process of adjustment to the

Common Agricultural Policy, 3rd Inter-department meeting of agricultural economists,

Ohrid, FYR of Macedonia, 20-21.

Bajramovic, S., Ognjenovic, D., Nikolic, A. (2008). Challenges faced by the agro-food

sector in Bosnia and Herzegovina as regards to its integration with the EU, in: Agriculture

in Western Balkans and EU integration, DAES, Ljubljana, 9-31.

Bajramovic, S., Custovic, H. (2006). Rural employment in the context of rural development

in Bosnia and Herzegovina, Country report, FP6 project CEEC Agri Policy, 6-10.

http://www.europartnersearch.net/agripolicy/reports/ruraldev

Bojnec, S. (2005). Agriculture in post-war Bosnia and Herzegovina: Social buffer vs.

development, 11th EAAE Congress, Copenhagen, Denmark.

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Herzegovina country report, Final draft, European Commission, Brussels.

Erjavec, E., Rednak, M., Bajramovic, S. (2010). Common agricultural policy of European

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agriculture and food sciences University of Sarajevo, Volume LV, No 60/1, Sarajevo,7-26.

Federal ministry of Agriculture, Water Management and Forestry (2006). Strategija razvoja

poljoprivrednog sektora Federacije BH od 2006. do 2010. godine (Strategy of agricultural

sector development of Federation of BH since 2006 to 2010), Sarajevo.

Krstic, G., Sanfey, P. (2007). Informal employment in Bosnia and Herzegovina in Beyond

Transition, www.cefir.ru/download.php?id=1532

Ministry of Agriculture, Water Management and Forestry of the Republika Srpska (2006).

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development of the Republika Srpska to 2015), Banja Luka.

Ministry of Civil Affairs of Bosnia and Herzegovina (2010). Strategija zaposljavanaja u

Bosni i Hercegovini 2010.-2014. (Employment strategy of Bosnia and Herzegovina 2010-

2014), Sarajevo, 3-41, www.mcp.gov.ba/zakoni_akti/strategije/?id=1530

Vukelic, A., Kosar, M., Custovic, M. (2009): Diskriminacija pri zaposljavanju po

nacionalnoj osnovi? (Discrimination in employment on ethnic base?), Friedrih Ebert

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Herzegovina, http://hdr.undp.org/en

Tables and figures:

Table 1: Major indicators of the labour force in Bosnia and Herzegovina for the period

2006-2009

Indicators 2006 2007 2008 2009 Total population (in 000) 3,372 3,315 3,211 3,129 Working age population (in 000) 2,733 2,725 2,649 2,594 Dependency ratio, current 3.2 2.9 2.6 2.6 Dependency ratio, age 0.2 0.2 0.2 0.2 Activity rate (%) 43.1 43.9 43.9 43.6 Employment rate (%) 29.7 31.2 33.6 33.1 Unemployment rate (%) 31.1 29.0 23.4 24.1 Registered unemployment rate (%) 44.6 43.1 41.6 45.9 Source: Labour Force Survey in BH 2006-2009 Note: Actual dependency ratio: Total unemployed population divided by employed population

Dependency ratio, based on age: Non-working age population (aged under 15 and over 65) divided by working age population Activity rate: Labour force divided by working age population * 100 Employment rate: The employed divided by working age population * 100 Unemployment rate: The unemployed divided by labour force * 100

Table 2: Employment rate, unemployment rate, inactivity rate in Bosnia and Herzegovina, by gender

Rate and gender 2006 2007 2008 2009 Employment rate

Total 29.7 31.2 33.6 33.1 Men 39.9 42.3 44.9 43.2 Women 20.0 20.8 23.1 23.7

Unemployment rate Total 31.1 29.0 23.4 24.1 Men 28.9 26.7 21.4 23.1 Women 34.9 32.9 26.8 25.6

Inactivity rate Total 56.9 56.1 56.1 56.4 Men 43.8 42.3 42.9 43.8 Women 69.2 69.0 68.4 68.1

Source: Labour Force Survey 2006-2009

Table 3: Breakdown of employment by sectors in Bosnia and Herzegovina Economy sector 2006 2007 2008 2009 Agriculture 20.6 19.8 20.6 21.2 Industry 30.7 32.6 32.5 31.5 Services 48.7 47.5 47.0 47.3 Total 100 100 100 100 Source: Labour Force Survey 2006-2009

Table 4: Unemployment rate by gender (actual and recorded) in Bosnia and Herzegovina

Source: Labour Force Survey 2006-2009. *Administrative data on unemployment are based on the statistics on recorded unemployment in December each year, published by the Agency for labour and employment of BH.

Table 5: Budgetary support to Bosnia and Herzegovina agriculture for period 2000-2008

(in EUR million)

Type of measures 2000 2001 2002 2003 2004 2005 2006 2007 2008Market and direct producer support measures

4.5 9.6 8.9 10.9 17.8 23.2 32.4 44.6 53.8

Market support measures 0.0 0.0 0.0 0.0 0.0 1.2 0.9 1.8 2.8Direct producer support measures 4.5 9.6 8.9 10.9 17.8 21.9 31.4 42.5 50.1Structural and rural development measures

0.0 0.3 1.2 2.0 4.2 7.0 9.8 19.8 23.8

Improving the competitiveness of the agricultural sector

0.0 0.3 1.2 2.0 2.7 7.0 9.6 15.7 19.6

Improving the environment and the countryside

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.5

Supporting rural economy and population

0.0 0.0 0.0 0.0 1.5 0.0 0.1 3.4 3.7

General measures related to agriculture

0.4 1.1 1.1 1.7 1.9 2.7 3.5 4.7 7.4

Miscellaneous measures 2.1 3.2 4.1 4.1 0.9 0.2 0.7 0.8 1.1Total budgetary support to agriculture

7.0 14.2 15.4 18.6 24.7 33.1 46.4 69.9 86.1

Note: Assessment based on publicly available data and internal documents of Federal Ministry of Agriculture, Water Management and Forestry, Ministry of Agriculture, Water Management and Forestry of the Republika Srpska and Cantonal Ministries (departments) for Agriculture of Federation of BH and Department of agriculture of District Brcko Government (Bajramovic et al., 2010).

2006 2007 2008 2009 Actual unemployment (ILO)

Total 31.1 29.0 23.4 24.1 Men 28.9 26.7 21.4 23.1 Women 34.9 32.9 26.8 25.6

Recorded unemployment* Total 44.6 43.1 41.6 45.9 Men - 52.1 49.1 49.8 Women - 47.9 50.9 50.2

Figure 1: Breakdown of informal employment by sector and gender in Bosnia and Herzegovina, 2006

Source: Labour Force Survey 2006

Figure 2: The structure of rural employment in Bosnia and Herzegovina by sector, 2001

Source: Own computations based on Living Standard Measurement Survey (LSMS) in BH in 2001.

Figure 3: The structure of rural employment in Bosnia and Herzegovina by educational level, 2001

Source: Own computations based on Living Standard Measurement Survey (LSMS) in BH in 2001.