Flexible Labor in an Inflexible Environment - Reforms of Labor Market Institutions in Bosnia and Herzegovina in a Comparative Perspective
Flexible Labor in an Inflexible Environment - Reforms of Labor Market Institutions in Bosnia and Herzegovina in a Comparative Perspective

Author(s): Amar Numanović, Mirna Jusić
Contributor(s): Mihail Arandarenko (Editor), Ulvija Tanović (Translator)
Subject(s): Labor relations, Economic policy, Socio-Economic Research
Published by: Analitika – Centar za društvena istraživanja
Keywords: BiH; labour market; institutions; reforms; flexible labour;
Summary/Abstract: The labor market in Bosnia and Herzegovina (BiH) faces serious problems: in 2014, the employment rate was at a very low 31.7%, and the unemployment rate for persons 15 and above was as high as 27.5%. Wartime destruction of industrial infrastructure, loss of business networks due to the dissolution of Yugoslavia, inadequate adaptation to the new business and technological environment, as well as unsuccessful privatization processes in the post-war transition period are some of the factors that have negatively impacted both the creation of new and the maintenance of existing jobs. The consequences of this state of affairs include a low labor force participation and high structural unemployment, migration of the working age cohort to other countries, the unresolved status of workers “lost in transition,” as well as social insecurity and a high poverty rate. Although there is consensus in BiH that the status quo is unsustainable, labor market reforms to date have been slow and partial, lacking a clear vision of the labor market model to be pursued. Recently, labor market reforms have found their way onto the agenda of decision-makers, primarily due to the obligations BiH undertook towards the International Monetary Fund (IMF) within the standby arrangement, as well as commitments under the “Reform Agenda,” which is “closely aligned with the aims of the EU’s new approach to economic governance in the Western Balkans.” The Agenda has been adopted by entity and state-level governments in the context of acquiring candidate status for membership in the European Union (EU). Reform proposals in this area have also been articulated within the “Compact for Growth and Jobs” (CGJ) initiative of the European Delegation to BiH, as well as the BiH Council of Ministers’ National Economic Reform Programme (NERP) for BiH for 2015. To encourage employment and creation of new jobs, reform proposals primarily focus on increasing the flexibility of working conditions by improving the labor law and changing collective agreements , but also by reducing the tax burden on labor. The proposed reforms are primarily concerned with increasing labor market flexibility, but to a lesser extent pertain to issues of protecting workers and their income security in the event of unemployment, and are only marginally concerned with the issue of employability (e.g. through lifelong learning, active employment measures, etc.), even though these are important aspects of the “flexicurity” policy in the European Union. In other words, the current discourse on policy change in the field largely disregards important elements of the labor market. This begs the question to what extent reform proposals have taken into account the existing institutional environment of the BiH labor market and how the flexibility of working conditions, as the key aspect of reforms, would affect labor market performance in interaction with the institutional environment. Concerning the above, this study rests on the assumption that different reform options should be considered in their wider institutional context. This would mean focusing not only on the impact of labor legislation on labor market performance, but also on the impact that institutions, such as collective bargaining mechanisms, policies, programs and the institutional framework for employment, social insurance policies, minimum wage, labor taxation and making work pay policies, as well as existing configurations of institutions, have on labor market performance. Based on insights into policies and practices in the labor market realm in other European countries, particularly the European Union, this study aims to contribute to an understanding of available reform needs and options, and their possible implications for BiH. In order to assess the state of the labor market and the reform path in BiH, the analysis is situated within a wider conceptual framework that defines the basic terminology, indicates important elements of the labor market and provides an overview of the main discussions and their implications for public policies in this field. A more detailed analysis is performed with respect to employment protection legislation, labor cost and taxation, collective bargaining mechanisms, and employment policies. Comparative experiences from other European countries are taken into account in order to consider possible reform paths, but also to understand the impact of different institutional and other contextual factors on labor market performance. European countries are used as points of comparison, not just because of their similar institutional environments and the European perspective of BiH, but also because current reform proposals heavily rely on EU standards and practices in this domain. In terms of methodology, this is a comparative study that combines multiple methods of data gathering: a review of secondary literature and available statistical indicators, an analysis of the institutional and legal framework in BiH and EU countries, and semi-structured interviews with representatives of organizations and institutions in BiH involved in different aspects of the BiH labor market or in labor market reforms. Given that this research is limited by the dearth of important statistical indicators about the BiH labor market, and also given the fact that it was conducted for the purposes of a study that aims to inform an expert debate in the context of public policy making in this domain in BiH, it is important to note that it does not aim to explain the impact of various contextual factors on the performance of the labor market in BiH. Such analyses would certainly be useful for a better understanding of the BiH labor market, but they fall outside the scope of this study. An overview of conceptual debates in the domain of the labor market and its institutions is given below. This is followed by an overview of BiH labor market dynamics and trends, various BiH labor market institutions in comparative perspective, and concluding remarks.

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