conference on employment growth- on a road to recovery sarajevo, july 1, 2014
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THE WORLD BANK COUNTRY OFFICE BOSNIA AND HERZEGOVINA
CONFERENCE ON EMPLOYMENT GROWTH-
ON A ROAD TO RECOVERY
Sarajevo, July 1, 2014
Based on “BACK TO WORK: Growing with jobs in Europe and Central Asia (ECA)” by Omar Arias & Maria DavalosThe World Bank
The jobs challenge is the most daunting in Bosnia and Herzegovina
Employment Rate (population aged 15+, first quarter 2013)
Source: ILO and ECA Regional Jobs Report (2013).
Notes: *denotes data for 2012. Data is not seasonally adjusted.
Kaza
khst
anSw
eden
Russ
ian
Fed.
Azer
baija
n*Ky
rgyz
Rep
ublic
*Ne
ther
land
sUk
rain
eTa
jikist
an*
Finl
and
Unite
d Ki
ngdo
mDe
nmar
kAu
stria
Germ
any
Luxe
mbo
urg
Geor
gia*
Esto
nia
Uzbe
kist
an*
Turk
men
istan
*Cz
ech
Repu
blic
Cypr
usAr
men
ia
Alba
nia*
Latv
iaIre
land
Bela
rus*
Fran
ce*
Slov
akia
Slov
enia
Lithu
ania
Rom
ania
Port
ugal
Pola
ndBe
lgiu
mM
alta
Hung
ary
Bulg
aria
Turk
eyIta
lySp
ain
Mon
tene
gro*
FYR
Mac
edon
iaGr
eece
Serb
iaCr
oatia
Mol
dova
B&H*
Koso
vo*
0
10
20
30
40
50
60
70
Perc
enta
ge o
f the
wor
king
age
pop
ulati
on
Two contextual factors:(1) Transition legacy and speed of modernization
Strongest reform record among middle income regions…
… with significant variation in implementation speed of reforms
across ECA countriesDoing Business Indicator (Gap to Frontier) Transition Index (EBRD 2012)
3
Notes: ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; EAP = East Asia and Pacific.
2006 2007 2008 2009 2010 2011 2012 201350.0
55.0
60.0
65.0
70.0
75.0
80.0
85.0
90.0
ECA LAC EAP OECD (EU)
OECD (Non-EU) SEE Bosnia and Herzegovina
Two contextual factors:(2) Impact of demographics on the labor force
Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).
Bulg
aria
Ukr
aine
Geo
rgia
Mol
dova
, Rep
ublic
of
Latv
iaLi
thua
nia
Bela
rus
Russ
ian
Fede
ratio
nCr
oatia
Rom
ania
Esto
nia
Bosn
ia a
nd H
erze
govi
naH
unga
ryPo
land
Serb
iaSl
ovak
iaCz
ech
Repu
blic
Slov
enia
Mac
edon
ia, T
FYR
Arm
enia
Mon
tene
gro
Alba
nia
Azer
baija
nKa
zakh
stan
Turk
eyKy
rgyz
stan
Turk
men
istan
Uzb
ekist
anTa
jikist
an
-20
-10
0
10
20
30
40
50
Perc
ent
Older workers will outnumber youth due to:Aging + Low
Fertility + Out-Migration
ECA Countries: Change in 15+ Population 2010 - 2030 (%)
Younger countries also face
demographic pressures:
Out-Migration, youth bulge, and long-run
aging
Resuming Sustained Growth: Ensure macro fundamentals for economic recovery
and regain the pre-crisis reform momentum
Enabling Private Sector-led Job Creation: Enable business creation and expansion, tap on
entrepreneurship
12
Preparing Workers for Jobs: Helping workers acquire skills for the modern
workplace Making (formal) work pay by removing disincentives
and eliminating barriers to the labor market Removing obstacles to internal labor mobility
3
Meeting the Jobs Challenge in ECA:Three policy goals
Enabling Private Sector-led Job CreationA small segment of “super star” firms (Gazelles) account for
most job creation almost everywhere
As % of all firms and all jobs created during 2004-08
Notes: The number above each country represents the average growth rate of employment per yearSource: Back To Work: Growing with Jobs in Europe and Central Asia (2013).
5.2
2.8
1.1
2.6
5.0
4.5
1.4
-0.3 7.7
-1.0
Bul-garia
Czech Repub-
lic
Es-to-nia
Poland B&H Croatia
Ro-mania
Serbia Russia Ukraine
Advanced Intermediate Late
2214 10 13 18 13
19 17
42
12
72 72
54 50
71
51
7367 66
73Share of Enteprises Share of Jobs Created
Preparing Workers for New Jobs - Skills
But inadequate response from education and skills training systems
7Source: Based on OECD PISA 2009.
Kyrg
yz R
epub
licAz
erba
ijan
Kaza
khst
anAl
bani
aM
onte
negr
oBu
lgar
iaRo
man
iaSe
rbia
Russ
ian
Fede
ratio
nTu
rkey
Lith
uani
aCz
ech
Repu
blic
Croa
tiaSl
ovak
Rep
ublic
Slov
enia
Latv
iaH
unga
ryPo
land
Esto
nia
Mex
ico
Chile
Aust
riaIs
rael
Luxe
mbo
urg
Gre
ece
Ital
yFr
ance
Spai
nG
erm
any
Uni
ted
King
dom
Belg
ium
Port
ugal
Uni
ted
Stat
esSw
eden
Irel
and
Icel
and
Switz
erla
ndD
enm
ark
Nor
way
New
Zea
land
Net
herla
nds
ECA OECD, non-ECA
0
10
20
30
40
50
60
70
80
90Too many youth fall behind in basic cognitive skills
% of 15-year olds who are functionally illiterate, scoring “below level 2” on PISA reading test 2009
Preparing Workers for New Jobs– Incentives and barriers
There is still room to improve work incentives: Labor taxation remains relatively high in Bosnia and Herzegovina and,
critically, not very progressive
Source: World Bank based on OECD Tax and Benefit Models.
BEL
BGR
CZE
DNK
DEU
EST
IRL
GRC
ESP
FRA
ITA
LVA
LTU
LUX
HUN
MLT
NLD
AUT
POL
PR SVN
SVK
FIN
SWE
GBR
ISL
USA
JPN
NOR
MDA
ARM
ROUBiH(Fed)
BiH(RS)
MKD
MNE
SRB
05
1015
Pro
gres
sivi
ty o
f tax
wed
ge (p
erce
ntag
e po
ints
)
10 20 30 40 50Tax wedge for single at 50% of average wage
Gap in tax wedge between high and low wage earners, 2012
Key policy directions of a diverse Jobs-centered policy agenda - sequencing
• Combination of short and long term policies– Short term:
• Macro/fiscal policy to ensure fundamentals for economic recovery
– Longer term:• Growing superstar firms – Eliminate barriers to business
expansion and entrepreneurship• Making workers more adaptable - Generic skills and market-
driven, life-long learning• Making (formal) work pay – Removing disincentives and
barriers to work• Making workers more mobile – Removing impediments to labor
mobility9
What does this mean for Bosnia and Herzegovina?
10
• Continue strengthening macro-economic stability and policies that foster economic growth
• Business climate reforms to facilitate firms’ growth and tap into world markets:– Business climate reform for private sector development. Priorities are:
• Make it easier to start a business, including entry into and exit out of entrepreneurship
• Rationalizing regulations and rethinking the overall structure of taxation• Improving infrastructure, especially electricity
– Deepening economic integration, regionally, with the EU and globally
• Skills: Equipping workers with market-relevant and adaptable skills– Ensuring strong generic skills foundations (from ECD to quality basic education)– Market-driven VET and quality assurance in higher education– Revamp adult training systems, life-long learning and on-the-job training to make
them market-driven
What does this mean for Bosnia and Herzegovina?
11
• Better balancing worker protection and job creation, with regards to
– Collective agreements, minimum wages and severance costs that can affect disproportionately women, youth and older workers
– Disincentives stemming from labor taxation and the design of social benefits, particularly for low-wage earners, to make (formal) work pay
– Barriers to employment that affect women, youth and older workers, e.g., provision of child and elderly care services and options for flexible work arrangements
• Strengthening the social dialogue on jobs - government, employers, trade unions, youth and civil society at large
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