| World Bank Experts Present Labor Market Study to BH Partners SARAJEVO, Bosnia and Herzegovina, March 2, 2006 – World Bank experts today at the Sarajevo Economic Faculty presented Labor Market Study to key BH partners, including representatives of governments, trade unions and employers’ associations. The purpose of this study was to review in depth the industrial relations system in Bosnia and Herzegovina and its impact on labor market outcomes. The study also proposes concrete labor market policy directions to make labor markets in BH more dynamic. A separate study on Poverty and the Labor Market, exploring the links between labor markets outcomes and poverty, was also presented. “High unemployment and a large and growing informal sector remain key challenges in Bosnia and Herzegovina,” said Dirk Reinermann, World Bank Country Manager in Bosnia and Herzegovina. “The purpose of this study was to identify ways in which more and better jobs can be created in BH. This will require the involvement of all social partners in the country.” The studies find that while employment rates have increased in the growing BH economy in the past years, the vast majority of jobs have been created in the informal economy. At the same time, informality has been found to be associated with higher incidence of poverty. Official unemployment rates have remained stubbornly high and have even increased for young people. BH continues to face barriers to formal sector job creation, including high formal sector wage growth and rigidities in the labor regulations, appearing to fuel informality. In particular, the study finds evidence of non-enforcement of current labor market regulations such as minimum wage and wage determination rules across the economy. This suggests that, while labor market regulations are often rigid on paper, the labor market in practice is more flexible than often believed. However, flexibility through non-enforcement of labor regulations is undesirable, as it leads to greater informality, creates uncertainty and undermines worker protection. The analysis also identified a number of policy directions to promote a more dynamic labor market. These policy directions include: wage restraint, introduction of a youth minimum wage, creation of a leaner but more enforceable set of labor regulations; revision of the system of payroll contributions; revision of systems of collective bargaining and wage determination; facilitation of labor adjustment and halting the flow of new “fictitious” workers; and improvement of the statistical basis for labor market analysis. |
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