Effective employment policies are crucial for forging a solid economy and fostering economic development and social inclusion. This chapter aims to assess the regulatory framework and policies governing employment and the institutional capacity for implementation. The first sub-dimension focuses on inclusive labour market governance, specifically looking at the employment regulatory and policy framework, labour inspectorates, social dialogue and inclusive employment policies. The second sub-dimension, social protection and activation policies, analyses public employment services, the framework of mutual obligations, and active labour market programmes. The third sub-dimension, skills for adaptable labour markets, assesses the skills mismatches in the labour market and initiatives for developing digital and green skills. The fourth sub-dimension, expanding the skills pool, focuses on attracting highly skilled migrants and diaspora.
Western Balkans Competitiveness Outlook 2024: Bosnia and Herzegovina
9. Employment policy
Abstract
Key findings
Bosnia and Herzegovina’s performance in the employment policy dimension has slightly improved since 2021, although it remains below the regional average in all areas covered by the assessment (Table 9.1). Although some progress was made in updating employment policy frameworks, significant challenges remain in areas such as ensuring adequate capacities for labour inspectorates and employment services and addressing skills gaps, particularly for the green and digital transition.
Table 9.1. Bosnia and Herzegovina’s scores for employment policy
|
Dimension |
Sub-dimension |
2018 score |
2021 score |
2024 score |
2024 WB6 average |
|---|---|---|---|---|---|
|
Employment |
8.1: Inclusive labour market governance |
2.9 |
3.2 |
||
|
8.2: Social protection and activation policies |
2.3 |
3.1 |
|||
|
8.3: Skills for adaptable labour markets |
1.6 |
2.6 |
|||
|
8.4: Expanding the skills pool |
1.6 |
2.4 |
|||
|
Bosnia and Herzegovina’s overall score |
2.0 |
2.0 |
2.2 |
2.9 |
|
The key findings are:
Initiatives spearheaded by both entity governments and donors, including the new EU4Employment project (2023-26), aim to enhance the economy’s inclusive labour market policies, particularly those targeting women. However, despite these efforts, women’s employment rates remain low, at only 36.8% (or 26 percentage points below the EU average of 63.3%).
Bosnia and Herzegovina lacks an overarching strategic framework, both at the state and entity level, for addressing informality despite the relatively high rate within the economy (14% of employment). Moreover, the lack of ongoing efforts to develop such a policy reveals a distinct gap within the employment framework.
Despite the high youth unemployment rate of 29.8% in 2023 – nearly double the EU average of 15.8% – there has been limited progress in implementing targeted initiatives or tailoring active labour market programmes to young people. This highlights a significant opportunity for Bosnia and Herzegovina to engage better and strengthen support for unemployed and inactive youth, which could also curb the emigration of youth.
Due to consistently low funding levels and inadequate staffing, the public employment services in both entities face extremely high caseloads, reporting ratios of jobseekers to counsellors that exceed the recommended ratio by more than fivefold.
Social assistance coverage in both the Federation of Bosnia (FBiH) and Republika Srpska (RS) remains limited, primarily due to rigid eligibility criteria that do not effectively target the poorest citizens, as well as limited co-operation between employment and social services.
Both entities have advanced in promoting digital skills development by drafting new strategies that emphasise the importance of these skills. However, the lack of concrete, well‑defined mechanisms, particularly those incentivising employers to upskill their workers, hinders actual implementation in the labour force, leading to a “policy-practice” gap.
The submission of the Decision on the Adoption of the Framework Strategy for Cooperation with Emigration (2024-28) to the governments of the FBiH, RS and the Brčko District in October 2023 reflects a potential step forward in addressing deficiencies in cross-entity co-operation on effectively engaging with the economy’s substantial diaspora population.
State of play and key developments
The activity rate of the population aged 15-64 in Bosnia and Herzegovina increased from 42.1% in 2019 (Agency for Statistics of Bosnia and Herzegovina, 2020[1]) to 48% in 2021 (Agency for Statistics of Bosnia and Herzegovina, 2022[2]) but has since plateaued, remaining relatively constant through 2023. The employment rate has stayed consistent at around 40% between 2021 and 2023, surpassing the pre‑pandemic rate of 35.5% in 2019. Yet, despite these improvements, the economy’s employment rate significantly trails behind the EU average, which stood at 75.3% in 2023 (Eurostat, 2024[3]). A contributing factor to these low activity and employment rates could be the high level of personal remittance inflows, which have been shown to hurt employment and participation rates (OECD, 2022[4]). Indeed, in 2022, the economy received remittances amounting to 10.1% of its national GDP, worth an estimated EUR 2.28 billion (USD 2.47 billion) (World Bank, 2023[5]).
Sub-dimension 8.1: Inclusive labour market governance
Despite substantial room to expand its scope, no progress has been made towards strengthening the legal framework for employment. The legal framework at the state level is relatively comprehensive, establishing minimum standards for working time, paid holidays, and health and safety conditions. However, it does not encompass the protection of workers from discrimination. The entities – which possess the primary remit over employment policy – similarly have frameworks that cover these areas, although the framework in RS notably excludes standards governing working hours. The big gap in both the regulatory frameworks of RS and FBiH is that neither ensures that non-standard forms of employment, such as self-employed or platform and gig workers, are included in social protection frameworks. Moreover, in RS, employment protection legislation on workers’ rights and conditions only extends to self-employed individuals (excluding all other non-standard employment). At the same time, FBiH’s Labour Law does not even define non-standard employment.
Similarly, occupational safety and health (OSH) is regulated at the entity level.1 Neither entity’s regulations on OSH are fully harmonised with the EU acquis due to issues with incomplete enforcement and implementation of this legislation, particularly in the areas of inspection capacity, injury prevention, employer training, and risk assessment assistance (European Commission, 2023[6]). Moreover, in RS, the Ministry for Labour, War Veterans and Disabled Persons Protection has developed annual action plans. It runs programmes implementing current or new health and safety regulations at the workplace. The collection and dissemination of statistical data on work-related injuries and diseases still needs to be improved in both entities. Official data on reported accidents, fatalities, and the most affected sectors were not published for 2022 or 2023.
While advances in bolstering the regulatory framework on employment have been stagnant, slightly more has been achieved towards strengthening the policy frameworks for employment. In December 2021, RS adopted its new Employment Strategy 2021-27 and a related action plan. The FBiH’s policy framework has two main strategic documents: the new Employment Strategy 2023-30 and the Development Strategy 2021-27, which contains one measure for reducing inactivity and unemployment. These strategies are accompanied by the monthly collection of a diverse set of employment indicators in both the FBiH and RS, which in turn help to support the monitoring of programmes that promote equal opportunities and inclusive labour markets.
Neither entity has developed a separate policy framework governing informal employment despite the relatively high rate of informal employment of 14% (International Labour Organisation, 2024[7]). However, while there is no strategy aiming to combat informal employment in RS, the entity’s government has implemented some ad hoc measures, such as reducing taxes for low-wage salary earners through an increase of the non-taxable part of the salary, a reduction of the tax rate, and a reduction of social security contributions. Additionally, trade unions and employers’ associations periodically undertake efforts, such as campaigns or other measures, to reduce informal work.
Labour inspectorates play an active role in ensuring proper implementation of the employment regulatory framework, although the absence of a well-defined framework limits their operations. Both entities outline guidance for their respective labour inspectorates within broader strategies that address various aspects of employment policy, including labour inspectorates. Yet, despite this absence of a regulatory framework, these entities in both the FBiH and RS have comprehensive scopes overseeing all fields related to working conditions, ranging from wages and working hours to workers’ rights to strike. Labour inspectorates are established at various levels: at the entity level, in the Brčko District, and at the canton level within FBiH.
In both entities, labour inspectorates' inputs and outputs are monitored annually, and their operations are subject to regular public auditing. Such evaluations are important for promoting accountability, efficacy, and compliance with standards. However, neither entity has yet used the results of these audits to enhance the capacity of labour inspectorates through changes like increased staff or training opportunities. However, RS might implement such reforms depending on the findings of its ongoing analysis. While not the result of an annual audit, the FBiH plans to hire 30 new inspectors as part of the Federal Administration for Inspection Affairs’ 2024-26 work plan (Government of the Federation of Bosnia and Herzegovina, 2023[8]). Additionally, FBiH’s Ministry of Labour and Social Policy sent an official letter to both the entity-level labour inspectorate and cantonal inspectorates that urged them to increase the number of employed inspectors.
Collective bargaining in Bosnia and Herzegovina has moderately developed, and it has been marked by several advances since 2021. This bargaining mainly occurs at the federal and sectoral levels, with wage negotiations being a central matter in both entities. A significant development occurred in the FBiH in May 2023, when the Independent Trade Union of Civil Servants and Employees invited relevant government institutions and ministries to negotiate proposed amendments to the Branch Collective Agreement; these changes would raise salaries for administrative and judicial authorities’ employees. Regarding tripartite social dialogue, the government regularly consults social partners, including employers’ organisations and trade unions, on employment policies and related legislation. Additionally, both FBiH and RS have operational Economic and Social Councils that serve as dialogue on crucial employment policy issues, such as the minimum wage – although the final decision on setting this threshold rests with the entities’ governments.
While legal and institutional mechanisms for collective bargaining and social dialogue are relatively well established, there is still room for improvement, particularly regarding their use. In the FBiH, while efforts indicate progress towards updating the Branch Collective Agreement, stakeholders still have not reached a consensus on a new general collective agreement after the previous one was terminated in early 2018, resulting in a policy vacuum. In RS, collective bargaining agreements almost entirely exclude the private sector, which can lead to inequitable treatment due to disparities in wages, benefits and working conditions.
Regarding the development and implementation of inclusive labour market policies, these policies target a wide breadth of vulnerable groups, including Roma and other ethnic minorities, people living in extreme poverty, people with disabilities, and older unemployed individuals. However, both state and entity levels have devoted most of their efforts to promoting employment opportunities among women. At the state level, there is a national policy framework aiming to reduce gender inequalities, and the BiH Agency for Gender Equality co-ordinates studies on gender inequality policies and programmes, such as the recent 2020/21 survey on women’s recruitment and contract terminations.2 Additionally, awareness-raising campaigns, including the EU4Employment project (2023-26), aim to reduce gender discrimination in labour market access (Box 9.1).
Box 9.1. Increasing employment opportunities for vulnerable groups: Ongoing efforts by the EU4Employment initiative
Launched in February 2023, the EU4Employment programme was designed to address labour market challenges that disproportionately affect vulnerable groups in Bosnia and Herzegovina, such as women, youth, long-term unemployed individuals, those with disabilities, and members of the Roma communities. This initiative is envisioned to last three years and is financed with EUR 5 million from both the EU and the Swedish Government.
To accomplish this overarching objective, EU4Employment seeks to increase employment opportunities for these selected groups by offering grants and technical assistance. The ILO will deliver technical assistance with the support of experts from the public employment services (PES) of the EU, France, and Belgium. This financial and technical support will be used to develop and provide access to training and retraining opportunities for these traditionally “hard to employ” individuals. By the programme's conclusion in 2026, the aim is to secure employment for at least 625 individuals and engage 1 200 persons in activation and job search programmes.
Source: ILO (2023[9]).
Policy frameworks in both RS and FBiH complement these state-level measures. Namely, RS’s efforts to promote women’s employment were enshrined in its Strategy for the Development of Women's Entrepreneurship (2019-23), which focused on financial support, education, promotion, and support for women in various sectors. However, no action has been taken to develop a follow-up strategy since its expiration. In the FBiH, the Employment Strategy 2023-30 defines measures to increase the employment rate of women, and the Development Strategy 2021-27 prioritises promoting gender equality within families and society. The Federal Ministry of Education and Science has also implemented a programme to support training and professional development for adults – specifically women – to enhance their integration into the labour market.3
Yet, despite implementing various policy frameworks, significant positive outcomes have not been achieved. Indeed, in 2021, the employment rate of women only reached 36.8%, which was the second lowest rate in the region and far below the EU-27 average of 63.3% (Vienna Institute for International Economic Studies, 2024[10]). Additionally, a substantial gender employment gap persists, with the women’s employment rate in BiH 24.9 percentage points lower than that of men – nearly 2.5 times the gap observed in the EU (Eurostat, 2023[11]). Several reasons potentially explain this persistent gender employment gap. Firstly, the restricted availability of affordable childcare services might prevent women from returning or entering the labour market once they have children. Another potential explanation is that women tend to face more difficulties securing access to finance, as they either do not possess sufficient collateral or are approved for smaller loans than men (World Bank, 2017[12]). Finally, the negative impact of remittances – of which Bosnia and Herzegovina is a significant recipient – on employment and participation rates is notably pronounced among women (OECD, 2022[4]).
Sub-dimension 8.2: Social protection and activation policies
The unemployment rate in Bosnia and Herzegovina has significantly fallen in recent years, decreasing from 15.9% in 2019 to 11.8% in 2023 (World Bank, 2024[13]). This is approximately equivalent to the regional average (11.7%) but remains nearly double that of the EU (6.0%) (Eurostat, 2024[14]). Youth unemployment rates are even higher, registering 29.8% of the total labour force aged 15-24 years in 2023 – nearly double the EU average of 15.8% (World Bank, 2024[15]).
No progress has been made in improving public employment services (PES), which remain underdeveloped and poorly resourced in both entities. The services PES provides in both FBiH and RS are comprehensive, ranging from registering unemployed individuals and vacancies to organising outreach activities for employers. In both entities, PES use profiling tools to categorise jobseekers and prioritise support measures, but these are not closely tailored to jobseekers with different levels of employability. These broad mandates have not been met, and appropriate resources have not been allocated to support the staff. Indeed, PES in both entities struggle with a high caseload, averaging around 337 jobseekers per counsellor in RS and 1 160 jobseekers per counsellor in the FBiH.4 These insufficient human resources complicate PES’s ability to accomplish its mandate – particularly given the complicated employment landscape in the economy.
FBiH and RS have been trying to digitalise aspects of their respective PES. In FBiH, efforts to digitalise processes have been introduced to increase the efficiency of cantons’ PES, although full implementation remains outstanding. For instance, online registration for jobseekers has been introduced in some cantons. Still, only six of the ten cantonal employment services are integrated into an IT system that can match vacancies and job seekers. In RS, some PES services have been digitalised, as best evidenced by the introduction of online registration. However, the lack of sufficient digital skills constrains these processes and services in both entities.
Coordination between PES at all levels and key stakeholders, such as training organisations and local stakeholders, is lacking; coordination is mainly between public institutions, such as PES and ministries, and with social partners. Regarding monitoring and evaluation, performance measurement tools for PES have only been introduced in some cantonal PES in the FBiH, primarily as pilot projects financed with the support of the Swiss Government.
Although both entities have a well-defined legal framework outlining eligibility criteria for unemployment benefits, the effectiveness of these benefits is constrained by their modest amounts and the low percentage of jobseekers who qualify for them. Concerning the former, unemployment benefit levels are less than 50% of previous wages in both entities; specifically, they total 40% of the average net salary in the FBiH and 45-50% of previous earnings in RS (depending on years worked). Depending on previous work history, recipients in either entity are eligible to receive benefits between 3 and 24 months. The adverse consequences of the COVID-19 pandemic led to an increase in the number of individuals receiving unemployment benefits between 2019 and 2020, rising by 80.8% in FBiH and 65.2% in RS (Numanović, 2021[16]).5 However, while this number returned to pre-pandemic levels by 2022 in FBiH, it has remained elevated in RS, decreasing from 42 503 to 40 576 recipients. Yet, only an estimated 4-5% of registered jobseekers receive unemployment benefits, likely due to a relatively short duration of eligibility, the high incidence of long-term unemployment (meaning more than one year of job searching), and the exclusion of non-standard workers.
Like unemployment benefits, social assistance coverage in both FBiH and RS is very low due to rigid eligibility criteria. This difficulty is particularly evident in FBiH: while the entity-level law on social protection outlines beneficiaries’ rights to receive this assistance, the specific eligibility criteria and requirements are defined by each individual canton. The decentralised structure is likely a reason for the absence of available information regarding the share of registered jobseekers receiving social assistance in FBiH, indicating poor co-operation between employment and social services. The Development Strategy 2021-27 outlines an objective to improve the targeting of social protections, but this policy has yet to be met with concrete programmes or implementation measures. Even in RS, which possesses a more centralised system, co-operation between these services is weak. This poor level of co-operation presents a challenge to further bolstering the employability of hard-to-place jobseekers and placing them into jobs. Additionally, the social assistance scheme in both entities does not effectively target the poorest individuals in society. Indeed, studies have found that the poorest quintile of Bosnian citizens receives just 17.3% of all social assistance in the economy (Numanović, 2021[16]).
In both entities, active labour market programmes (ALMPs) are in place, primarily targeting vulnerable groups. Specifically, target populations include Roma and other ethnic minorities, women, people living in extreme poverty, people with disabilities, low-skilled individuals, older unemployed individuals, and victims of violence. Both entities outline their ALMPs in their respective employment policy frameworks: FBiH’s Development Strategy 2021-27 seeks to improve the position of vulnerable groups in the labour market,6 while the Employment Strategy 2021-27 of RS includes annual employment action plans with specific measures on ALMPs. Moreover, the FBiH has stipulated that its federal and cantonal PES must allocate a fixed proportion of ALMP funding annually (10% and 5%, respectively) to the Fund for Professional Rehabilitation and Employment of Persons with Disabilities, which implements incentive measures for this population to enter the labour market.
However, a clear exclusion from these programmes is that of young NEETs (those not in education, employment or training) – an issue given the high share of youth unemployment in the economy. However, Bosnia and Herzegovina is currently working on implementing the Youth Guarantee Scheme,7 a flagship project under the Economic and Investment Plan for the Western Balkans that aims to reduce youth unemployment. The first of the initiative’s four phases is the development of a Youth Guarantee Implementation Plan, which outlines specific measures for early intervention and activation and supports labour market integration. Bosnia and Herzegovina has not yet finalised its implementation plan; while RS and the Brčko District have prepared draft plans, FBiH has faced delays in its drafting process.
Regarding programmes, the FBiH utilises a few employment subsidy schemes that show preliminary indications of effectiveness. Namely, there are subsidies for jobseekers who are 40 years of age or older (“New Opportunity”), women (“Women’s employment”), and for the Roma population that are available at both the entity and canton level. One of the newer programmes was inaugurated in 2020, providing subsidies to employers who hire first-time jobseekers or young unemployed persons (“Your Opportunity”). RS has introduced several new measures since 2021 that emphasise IT skills training and professional practice programmes.
The PES in both the FBiH and RS collect yearly monitoring data on the implementation of ALMPs and conduct impact assessments (either independently or in co-operation with partners). The Employment Service of RS recently formed a new department that regularly evaluates individual employment plans and programmes. Moreover, RS has used the results from its 2018-19 assessments to redesign employment programmes offered in 2021-22. In FBiH, evaluations emphasise the sustainability of interventions 12 months after the end of an ALMP. In certain cases, these results are used to design new programmes. For example, the evaluation findings of the “Opportunity for All” initiative were used to design a new programme with the World Bank called “New Opportunity.”
Despite this proliferation of new and ongoing ALMPs, they have not been matched with generous financial support. Instead, funding for these programmes is low, accounting for only 0.14% of total GDP – slightly over one-third of EU levels (0.39%) (European Commission, 2024[17]). Moreover, while hiring subsidies are widely used, more proactive tools – namely, training programmes aimed at building human capital in the medium or long run – are less frequently utilised, representing a gap in the design of these ALMPs.
Sub-dimension 8.3: Skills for adaptable labour markets
In a trend consistent with the rest of the region, lower-skilled individuals in Bosnia and Herzegovina have the highest unemployment risk compared to medium- and highly skilled individuals. Indeed, in 2021, the unemployment rate among the portion of the labour force with a low skill level was 24.4%, compared to 17.9% among the medium-skilled and 12% among the highly skilled (Vienna Institute for International Economic Studies, 2024[10]).8 However, even across all skill levels, skills mismatch proves a substantial obstacle: in 2022, 42% of surveyed employees in Bosnia and Herzegovina reported unmet learning needs, and only 49% of respondents participated in skills development programmes (compared to the EU-27 average of 62%) (ETF, 2023[18]).
Since the last assessment cycle, several advances have addressed the skills mismatch in Bosnia and Herzegovina. In FBiH, the new Employment Strategy 2023-30,9 adopted in late 2023, includes several measures to promote adult learning in its operational plan. Moreover, the Development Strategy 2021-27 complements this objective with its measure aiming to establish a functional system of adult education and lifelong learning. Moreover, federal and cantonal PES are implementing the “New Opportunity” programme, which supports the employment of people with lower qualifications and skills as one of the target groups.10 Additionally, in 2023, the Federal Employment Agency launched the new “Training for the needs of the labour market” programme; vouchers are given to unemployed individuals to finance their participation in education or training to promote the development of relevant, in-demand knowledge and skills. Finally, to improve workplace-based learning and reduce skills mismatch, an Inter-Cantonal Focus Group for the Improvement of Secondary Vocational Education was formed in 2022 to create a platform for exchanging knowledge and experiences in connection with dual secondary professional education.
Similarly, the Adult Education Strategy 2021-31 and Action Plans were decided in RS. There is an institutional framework for co-ordinating activities between different ministries and, state agencies, and social partners to address skills mismatch, including for curricula revisions. Skills gaps analysis has advanced and uses different methods and sources, such as employer surveys, forecasts, web scrawling and big data, sector studies, and tracer studies. Revising and standardising occupations, in co-operation with social partners, was completed and aligned with the demands of the labour market. For example, some new occupations were introduced, while other outdated ones (not in demand by the labour market) were discontinued. Moreover, workplace-based learning elements are integrated into the VET system.
Efforts to promote skills development for the digital transition in Bosnia and Herzegovina are relatively new and would benefit from further development. The economy has a comparatively low share of individuals with basic or above-basic levels of digital skills, nearly 20 percentage points below that of the EU (Table 9.2). Moreover, the rates of use of computer devices in the workplace and participation in trainings for digital skills are below both the regional and EU averages, indicating the need to scale up efforts to bolster these skillsets (ETF, 2023[18]).
Table 9.2. Individuals with basic or above-basic overall digital skills in Bosnia and Herzegovina, the WB6 economies and the EU (2021)
Percentage of all individuals
|
BIH |
WB6 |
EU |
|---|---|---|
|
34.7 |
34.8 |
53.9 |
Note: The Kosovo data (used to calculate the WB6 average) were from the latest available year (2019).
Sources: Eurostat (2023[19]); Eurostat (2020[20]).
Most activities to address skills gaps in Bosnia and Herzegovina focus on strengthening the digital skills of young people in education institutions (Jahić, 2022[21]). As a result, less is done to promote the digital skills of those already participating in the labour market. The Development Strategy of FBiH 2021-27 includes a measure of strengthening digital skills, particularly those tailored to the needs of the labour market.11 However, while this explicit objective marks an important first step, it is not accompanied by concrete measures or mechanisms for incentivising employers and employees to develop these skills, such as subsidising reskilling or upskilling. In RS, policies and programmes are currently limited. However, future activities are expected to accompany the new Strategy for the Development of Science and Technology, Higher Education and Information Society (2022-27), which is still pending adoption. However, the entity has made progress in conducting studies on the current and future development of employment in key ICT occupations and identifying digital skills needs through consultations with key stakeholders, such as employers and sector associations.
There is significant room to strengthen Bosnia and Herzegovina’s efforts to promote skills for the green transition, particularly given the economy’s high reliance on coal mining for energy and income. The economy12 has one of the highest numbers of individuals employed in the coal sector in the Western Balkan region, and it has the highest subsidies for coal in the region (OECD, 2022[22]). However, given Bosnia and Herzegovina’s ambitions to become carbon-neutral by 2050, it is crucial that the economy prepare for this green transition – particularly through establishing policies and programmes that mitigate negative employment effects, such as retraining policies for the workforce.
Yet despite this importance, both entities have undertaken very limited efforts. There are no training or skills adaptation measures, VET training courses, employment incentives, or entrepreneurship programmes to promote employment in the green economy in either entity, reflecting a major gap in ensuring its workforce can seamlessly transition and have the appropriate skills to contribute to the activities of a green economy. That being said, the strategic documents in both entities do have references to this policy area. In FBiH, the Development Strategy of the FBiH 2021-27 includes raising awareness about environmental protection, climate change and the necessity of developing green skills and supporting small and medium-sized enterprises to improve energy efficiency and the principles of "green economy".13 In RS, the Strategy of Industrial Development 2021-27 includes a measure of transitioning to a green and circular economy. However, it does not explicitly mention mitigating the impact of this transition on employment outcomes.
Sub-dimension 8.4: Expanding the skills pool
Bosnia and Herzegovina’s approach to making the most of foreign talents is outlined in the state-level Migration and Asylum Strategy (2021-25) (Ministry of Security of Bosnia and Herzegovina, 2021[23]), which details key objectives on migration management, including support for legal migration, for integration of foreigners residing legally in the economy, and efforts for strengthening migration co-ordination mechanisms and asylum management. Complementing this strategy is the Action Plan on Migration and Asylum (2021- 25), thus completing the related strategic framework. Central to both the strategy and action plan is the overarching aim of encouraging the complete, seamless integration of legally residing foreigners into the social and economic fabric of Bosnia and Herzegovina. A co-ordination Body for Migration Issues14 ensures horizontal co-ordination across state ministries, with the Ministry of Security serving as the lead authority in migration matters. However, the Ministry of Civil Affairs also plays an active role, offering training for civil servants from various institutions at all levels of government to strengthen their capacities and co-operation on migration issues (although these training sessions were halted in 2023 due to financial constraints).
Regarding labour market access, domestic legislation treats European Union citizens and third-country nationals equally, requiring EU citizens to obtain work permits, as the Law on Foreigners outlines. A revised version of this law, adopted by the parliament in 2023, aims to enhance alignment with the EU acquis, facilitating freedom of movement for EU citizens. There is a need to ensure full harmonisation between the laws governing foreign employment in the state’s entities and the Brčko District with state‑level legislation, especially on issuing work-related residence permits. In 2022, 3 780 work permits were granted to third-country nationals, including 367 to EU citizens, primarily in sectors such as civil construction, trade, art, real estate, manufacturing, and services (European Commission, 2023[6])..
Migrants in Bosnia and Herzegovina might face several employment challenges. Firstly, the economy has a fragmented system for co-ordinating social security schemes due to its limited administrative capacity and a lack of formal co-operation among relevant authorities at all levels of government. This issue is compounded by the lack of bilateral agreements with EU Member States regarding social security co-ordination and healthcare insurance (European Commission, 2023[6]). Moreover, Bosnian legislation on the mutual recognition of professional qualifications is not aligned with the EU acquis. However, in October 2023, Bosnia and Herzegovina signed a memorandum of understanding (MoU) with the other Western Balkan economies for mutual recognition of professional qualifications; the agreement aims to improve professional mobility and align skills with labour market needs. Substantial efforts are also required to establish an effective institutional framework involving e-government facilities and national contact points to aid citizens in seeking recognition of their professional qualifications.
An estimated 2.0 million to 2.2 million people with origins from Bosnia and Herzegovina– over half of the economy’s total population – reside abroad (Prague Process, 2024[24]). In 2017, Bosnia and Herzegovina adopted a strategic document called Policy on Co-operation with Diaspora to draw from its diaspora ties for the socio-economic development of the economy and attract diaspora skills. This policy aimed at diaspora mapping, skills profiling, and capacity building in enhancing collaboration with the diaspora across sectors of women (OECD, 2022[4]). Subsequently, a Communication Plan with the Diaspora was implemented in 2018 to enhance connectivity and communication. The "Policy on Co-operation with Diaspora” guides sub-national governments, with both FBiH and RS possessing respective entity-level strategies. However, it also sought to establish the foundations for a state-level framework (Box 9.2).
Box 9.2. Efforts to develop a state-level framework for diaspora engagement
One of the main objectives of the “Policy on Co-operation with Diaspora” was developing a state-level framework strategy, the Strategy for Co-operation with Diaspora. This strategy’s overarching aim was establishing a legal framework for planning and regulating co-operation with the diaspora. A draft of the Framework Strategy for co-operation with emigration and the Action Plan on the web application eKonsultacije has been prepared for 2024-28, and public consultations were held between August and September 2023. At the beginning of October, the Decision on the Adoption of the Framework Strategy for Cooperation with Emigration for the Period 2024-28 and the Action Plan were sent for opinion to the competent bodies, including the government of FBiH, the government of RS, and the government of the Brčko District. The Ministry has not yet received all the opinions from the competent authorities, so this consultation process is expected to continue in 2024. Then, the draft strategy will be sent to the Council of Ministers of Bosnia and Herzegovina for consideration.
Source: Inputs provided as part of the CO 2024 assessment.
Currently, at the entity and district level, the FBiH has its Strategy on Co-operation with Diaspora and Action Plan (2020-24), while RS developed its Strategic Plan for Co-operation with Diaspora in 2020. Additionally, in 2020, Brčko District launched its Strategy on Co-operation with the Diaspora of Brčko District (2020-24), closely aligned with FBiH's strategy but tailored to its needs. These strategies are managed separately at the entity level, reflecting differing focuses and priorities, with FBiH and the Brčko District emphasising investment and skills transfer, whereas RS emphasises cultural identity.
Bosnia and Herzegovina is implementing various initiatives to attract diaspora skills. These include developing an interactive portal by the Ministry of Human Rights and Refugees and facilitating knowledge transfer and skills-sharing opportunities. Additionally, RS launched an entity-level diaspora registry in 2022 and an online portal inviting diaspora members to participate. Furthermore, international organisations such as USAID and UNDP have supported diaspora-related projects (Qaisrani et al., 2023[25])). USAID's "Diaspora Invest" project aims to encourage economic contributions from the diaspora through incentives like matching grants and technical assistance for investors. UNDP’s "Diaspora for Development" project focuses on mobilising diaspora support by fostering connections with public, non-governmental, and private economic sectors.
Overview of implementation of Competitiveness Outlook 2021 recommendations
Bosnia and Herzegovina has made mixed progress towards implementing past CO Recommendations. Some moderate advances were achieved in some areas, namely implementing adult learning programmes and increasing women’s employment. Conversely, the economy’s progress remained limited in most other areas, including its efforts to align labour laws with EU directives and strengthen the PES’s capacities. Below, Table 9.3 shows Bosnia and Herzegovina’s efforts to implement these previous recommendations on employment policy.
Table 9.3. Bosnia and Herzegovina’s progress on past recommendations for employment
|
Competitiveness Outlook 2021 recommendations |
Progress status |
Level of progress |
|---|---|---|
|
Continue efforts to align labour law and OHS regulation to EU directives |
Occupational health, safety, and labour laws do not meet EU minimum standards. Moreover, in FBiH, the legal framework on employment does not encompass labour standards and social protection for most non-standard workers, including platform workers and gig workers. |
Limited |
|
Implement adult learning programmes for low-skilled adults |
FBiH's new Employment Strategy 2023-30 includes several measures addressing adult learning. Additionally, the new ALMP, “New Opportunity”, specifically targets and co-finances the employment of individuals with lower skills or lower qualifications. Another new ALMP, “Training for the needs of the labour market”, offers financial support to jobseekers to cultivate in-demand skills and competencies to improve their employability. In RS, skills gap analysis is advanced, and surveys are conducted on the labour market's current and future needs and employee participation in training and education. There is a particular emphasis on developing and enhancing digital skills among these adults. However, there is no evidence of specific policies or programmes that encourage employers to upskill their workers’ digital competencies. |
Moderate |
|
Regularly conduct analyses of wages by sector, gender, educational level and occupation |
In FBiH, the Federal Bureau of Statistics publishes data on the number of employed and unemployed persons and wages in the entity every month. In RS, studies have been conducted on the gender wage gap. However, there is no data collected on non-standard forms of employment, and there is no evidence of progress towards collecting data on informal employment and working conditions. |
Limited |
|
Activate disability pension recipients who can work and include them in vocational rehabilitation measures |
There is limited evidence regarding concrete measures that either entity has undertaken to activate these individuals, although people with disabilities are defined as a target group for ALMPs. |
Limited |
|
Strengthen the capacities of the PES to align with EU and OECD good practices |
There has been no observed progress towards reducing the caseload of PES in either RS or FBiH. Moreover, there is limited evidence of enhanced co-operation with relevant stakeholders at the local level or improved employer services. However, the Chamber of Commerce has made efforts in RS to identify skills needs gaps, while in FBiH, federal and cantonal PES conduct annual employer surveys on skills and worker shortages. There has been an increased focus on activating vulnerable groups through new strategies and action plans, although evidence of direct improvements has yet to be provided. |
Limited |
|
Continue efforts to increase the employment rates of women |
At the state level, the BiH Agency for Gender Equality co-ordinates studies on policies and programmes to reduce gender inequalities. It also leads stakeholder consultations on policies targeting women’s employment. Additionally, the EU4Employment project was launched to reduce gender discrimination in accessing the labour market. At the entity level, RS adopted the Women’s Entrepreneurship Development Strategy 2019-23, but this expired last year. The FBiH has several policy measures and programmes to increase women’s employment rates, but no dedicated policy framework targets this population. |
Moderate |
The way forward for employment policy
Considering the relatively limited progress made in implementing the previous CO Recommendations, there are still areas in which Bosnia and Herzegovina could better address the key challenges facing its labour market and subsequently strengthen its employment policy frameworks. As such, policy makers may wish to:
Develop the regulatory framework for non-standard forms of employment, including self‑employment, temporary agency work, and platform and gig work. Ensuring that these forms of non-standard employment are incorporated under the legal framework helps to protect workers’ rights and extend social protection coverage. As such, the governments of both entities should update their regulatory frameworks to safeguard this subset of labourers best.
Establish and implement a comprehensive policy framework to combat informal employment. Bosnia and Herzegovina is the only Western Balkan economy that has neither developed nor actively developed a strategic framework against informality. Such a framework should include measures for building institutional capacity and infrastructure to detect and address informal activities, outlining specific programmes or mechanisms to facilitate individuals’ and businesses’ entrance into the formal market, and enhancing data collection and monitoring capacities to benchmark progress.
Continue strengthening the social dialogue framework, particularly in the private sector. Well-designed collective bargaining systems can promote labour market stability by facilitating adjustments in wages and working time (OECD, 2018[26]). As such, the entities should better engage stakeholders from the private sector and involve them in general collective agreements to ensure their formalised participation and engagement in social dialogue processes.
Implement vocational guidance in a “life cycle” perspective. This “life cycle” approach recognises career development as a lifelong process that requires career guidance and counselling services and considers an individual’s entire life span, from childhood to retirement (Box 9.3). RS and FBiH should consider introducing vocational guidance starting in secondary school; offering early career exploration – and allowing young people to explore different career options and understand their interests and strengths – would be an important factor for reducing skills mismatches. This vocational guidance should emphasise lifelong learning and continuous skills development to respond to skills shortages and the changing needs of labour markets.
Box 9.3. Lifelong vocational guidance: A Croatian approach
Croatia has developed and implemented a holistic “life cycle” approach to delivering career guidance, counselling and information services to its citizens, irrespective of age or employment status. From primary and secondary education, students can access guidance services provided by teaching and non-teaching staff (including psychologists, librarians, and principals). Additionally, many schools extend career guidance to Grades 7 and 8 students, marking Croatia's final two years of compulsory education. As students transition to higher education, there are initiatives to enhance existing faculty and university-based career centres – and establish new ones – to provide insights on job search strategies and labour market trends and cultivate networking skills.
For adults in the labour force and those who are unemployed and actively searching for jobs, the National Croatian Employment Service and Lifelong Career Guidance Centres offer accessible guidance services. These services encompass a range of offerings from printed materials, like brochures and leaflets, to interactive measures, such as online counselling, group activities, and workshops. Unemployed individuals can access specialised career guidance from trained counsellors. In contrast, those facing additional barriers to employment – such as individuals with health or learning challenges or those from marginalised groups – can access individual counselling services.
Source: Euroguidance Network (2023[27]).
Reduce the caseload of PES counsellors. Studies have found that reducing the casework-to-clients ratio in PES can lead to a decrease in the rate and duration of unemployment through enhanced monitoring and intensified search efforts (Hainmueller et al., 2016[28]). As such, given the high incidence of unemployment, PES in Bosnia and Herzegovina should strive to hire more staff to decrease each counsellor’s caseload, bringing it closer to the ILO’s recommended ratio of 1:100 (Kuddo, 2012[29]). A reduced caseload will also help counsellors to better co-operate with social and health services at the local level to overcome complex employment barriers.
Strengthen support for young jobseekers. Given the high rate of youth unemployment compounded by the exclusion of young NEETs from ALMPs, it is vital that the governments of RS and FBiH further develop mechanisms for assisting young jobseekers. These efforts should focus on increasing these individuals’ employability and fostering practical skills through work experience. To this end, Bosnia and Herzegovina should establish and implement a Youth Guarantee Plan, as the other regional economies are doing.
Strengthen measures aimed at upskilling and reskilling the workforce, particularly regarding skills for the digital and green transitions. Both the state and entity governments should develop policy frameworks and programmes that specifically aim to support the development of skills for the digital and green transitions among both employed and unemployed individuals. Instilling these skillsets will likely reduce skills mismatches by ensuring individuals have the competencies to contribute to and thrive in the evolving labour market.
References
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[8] Government of the Federation of Bonia and Herzegovina (2023), Three-year Plan 2024-2026, https://fuzip.gov.ba/wp-content/uploads/2024/01/trogodisnji-plan-2024-2026.pdf.
[28] Hainmueller, J. et al. (2016), “Do lower caseloads improve the performance of public employment services? New evidence from German employment offices”, The Scandinavian Journal of Economics, Vol. 118/4, pp. 941-974.
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Notes
← 1. In the FBiH, the main regulation on OHS is the Law on Occupational Safety. In RS, the main regulation is the Law on Occupational Health and Safety.
← 2. Results of this survey were published in the report, “Women in the Labour Market 2020/21”.
← 3. For additional information, please see http://www.fmon.gov.ba/Upload/Ostalo/69c42975-90ff-4bd1-85e9-90c0b7221d1c_REZULTATI%20RASPODJELE%20PODRSKA%20ZENAMA07112022.docx.
← 4. These data came directly from FBiH and RS government stakeholders under the framework of the CO 2024 assessment.
← 5. Between 2019 and 2020, the number of unemployment beneficiaries in FBiH increased from 10 238 to 18 512 individuals. In the same period, the number of RS increased from 25 721 to 42 503 individuals.
← 6. For additional information, please see https://fzzpr.gov.ba/files/Strategic%20documents%20of%20FBiH/Development%20Strategy%20of%20the%20FBiH%202021-2027-summary_ENG.pdf.
← 7. For the European Commission’s guidance on establishing a Youth Guarantee, please see: https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:120:0001:0006:EN:PDF.
← 8. The International Standard Classification of Education (ISCED) determines skill level. Low-skilled workers fall between ISCED 0 and 2, obtaining a maximum of lower secondary education. Medium-skilled workers constitute those with a level of either ISCED 3 (upper secondary education) or ISCED 4 (post-secondary non-tertiary education). Finally, highly skilled workers must have completed either a short-cycle tertiary education (ISCED 5) or a Bachelor’s degree or above. See: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_Standard_Classification_of_Education_(ISCED)#Implementation_of_ISCED_2011_.28levels_of_education.29.
← 9. For more information on the strategy, please see:: https://fzzpr.gov.ba/files/Strategije/Strategija-zaposljavanja-u-FBiH-2023-2030.pdf.
← 10. For additional information, please see https://www.fzzz.ba/ckFinderFiles/files/Programi/2023/Program%20sufinansiranja%20zapo%C5%A1ljavanja%202023(1).pdf?csrt=4843736886757033822.
← 11. For additional information, please see: https://parlamentfbih.gov.ba/v2/userfiles/file/Materijali%20u%20proceduri_2021/Strategija%20razvoja%20FBiH%202021-2027_bos.pdf.
← 12. Primarily in the Tuzla canton, Srednjobosanski canton, Zeničko-Dobojski canton, Ugljevik region, and Gacko region.
← 13. For additional information, please see: https://parlamentfbih.gov.ba/v2/userfiles/file/Materijali%20u%20proceduri_2021/Strategija%20razvoja%20FBiH%202021-2027_bos.pdf.
← 14. Representatives of the Coordination Body for Migration Issues in Bosnia and Herzegovina are from the Ministry of Security, the Service for Foreigners, the Border Police, the Ministry of Human Affairs, the Ministry of Human Rights and Refugees, and the State Agency for Investigation and Protection.