Our analysis shows that, for many people in Bosnia and Herzegovina1 (BiH), having employment does not guarantee a way out of poverty. By applying the EU at-risk-ofpoverty methodology for the in-work poverty risk2 (IWP) to Household Budget Survey (HBS) income data from 2015, we determined the monthly at-risk-of-poverty threshold in BiH to be EUR 104.60. This threshold was equal to about half the level of the minimum wage in the Republika Srpska (RS) (EUR 225.60), and rather more than half of that in the Federation of Bosnia and Herzegovina (FBiH) (EUR 168-193). It was also approximately equal to the absolute poverty threshold estimated several years earlier using the World Bank methodology based on minimum consumption levels. Despite a very low at-risk-of-poverty threshold, our estimate for 2015 shows a very high IWP rate of 24.5%, which is staggering by European standards.
Our analysis points not only to an apparent problem of low wages but also, as indicated by other studies, to low work intensity on the part of individuals, and a problem of people being in employment but not receiving wages. A number of factors contribute to IWP in BiH. One is labour market segmentation: not only between secure public employment and more insecure private employment, but also between permanent and temporary work and between formal and informal work, in addition to expected differences by industries. The privilege of access to public sector employment is controlled and guarded by political networks (Weber 2017; Blagovcanin and Divjak 2015): conversely, in the private sector employment is precarious, and legal protections are poorly enforced, blurring the line between formal and informal employment. Because of extensive labour market informalities, minimum wages generally serve as the base for calculating taxes and social contributions. The tax burden on labour in BiH (and especially in the FBiH) is considered to be high. Studies suggest that labour taxation is characterised by progressivity for those earning below 50% of the average wage, which deters low-wage earners from entering the formal labour market and traps them in informal work or even inactivity. Measures such as in-work benefits, which could help ameliorate IWP as well as promoting labour market inclusion, are absent in both parts of BiH.
Many years of active labour market policies (ALMPs) implemented by the public employment services have done very little to generate new good-quality employment or improve labour force employability. Given the prevalence of low educational attainment among workers who are at risk of poverty, the absence of good-quality education and training provision (needed to allow people to secure better-quality jobs) represents a particular obstacle. Various shortcomings in the education and training systems in BiH have been identified over the years, and persist today, including weak links between the education system and the labour market. Moreover, workers are constrained by a lack of access to good-quality childcare and other types of care services that would allow them to increase their work intensity. This aggravates women’s position in private sector employment, where labour legislation is poorly applied and women’s employment position is particularly vulnerable. Childcare and pre-school education absorb a significant portion of household income. This deters parents, and especially women, from using such services, usually at the expense of women who decide to take care of children and who end up outside the labour market, often on a low family income.
Policies that would explicitly tackle IWP have been completely missing from the agenda of successive governments, and IWP has also not been the focus of projects supported by international donors. Generally slow progress in implementing reforms, coupled with governments’ reluctance to publish IWP estimates and wage levels based on survey and administrative data, illustrate governments’ lack of interest in ameliorating the situation of the most vulnerable in the labour market.
Full report: ESPN_BA_TR1_2018-19 on in-work poverty_final
Other publications and documents: https://ec.europa.eu/social/main.jsp?advSearchKey=ESPN_iwp2019&mode=advancedSubmit&catId=22&policyArea=0&policyAreaSub=0&country=0&year=0