Structural imbalance at the labor market of BH

Changes in the economic structure itself, that were caused by transition to market economy, by privatization and by emerging of SME’s, were identified as the main causes to the present state of imbalance, while, on the other hand, the market itself was not ready institutionally to respond to the changes.

Labor market structural imbalance is characteristic for almost all economies in transition. It represents structural disorders or discrepancy between labor force offer and demand in terms of vocation, education, qualifications or regional disposal. Discrepancy appears when demand for one type of work increases while demand for other type of work decreases simultaneously, in conditions when, due to various reasons, work offer cannot be adapted rapidly. In that case, new jobs differentiate from the abolished ones in terms of important characteristics such as qualifications, vocational skills and knowledge, location preferences.

In developed economies with flexible labor markets, opening of new jobs goes simultaneously with closure of the existing so the new firms in expansion can absorb sacked work force from the firms with decreasing business activity. Development level of the existing labor market and its effectiveness, determines whether that kind of discrepancy will have long or short-term character. In other words, if the labor market in question is ready for transition processes that emerge, then discrepancy problems relating to education, job qualifications or location of labor market offer and demand will be solved more rapidly and effectively. At the same time, it is very important to recognize causes of labor market structural balance disorders and, by doing so, to identify limiting factors for development and for opening of new jobs.

In that sense, changes in the economic structure itself, that were caused by transition to market economy, by privatization and by emerging of SME’s, were identified as the main causes to the present state of imbalance. On the other hand, labor market was not ready institutionally to respond to the emerged structural changes, and structural imbalance or mismatch was additionally stimulated by war legacy, undisputed political affairs and insufficiently harmonized regulations concerning this area.

Adaptation of the labor market to structural changes is unavoidable and every delay will only worsen the already difficult position. Countries that have started and implemented economy restructuring processes and processes of reforms of labor and product market earlier, have already achieved direct results (lower unemployment rates, greater engagement of highly educated work force, decreased gender gap of employed/unemployed persons).

Some of the important pre-conditions for the revitalization of the market, of course not including the ending of public firms privatization process and government subventions to public sector which contribute to delay in serious approach to the economy restructuring problem, is stimulating the competitive environment for growth and development of SME’s, removal of input barriers for investments both in terms of internal product market and the country itself.

The thing that follows development of SME’s is the need for reeducating the existing work force that labor market institutions should actively deal with, along with a simultaneous reform of the system of education, in order to enable as best as possible accordance between offer and demand at the labor market. Good practice can be found in the surrounding countries and in the region as well, above all there are possible modules of action for the institutions responsible for reeducation of the existing work force whose vocational skills no longer meet the needs of a modern work profile and examples of that can be found in Slovenia, although Croatia made significant steps forward in that field as well. Educational system should also be adapted to new market trends because it is “the main instrument for decrease in structural unemployment”. More emphasis should be placed upon universal skills (foreign languages, computer literacy, communication skills, mathematics, etc.) that enable flexibility and quick adaptation to new vocations. Also, more concern should be put on lifelong education and measures of active employment policy. Necessary action to be taken include improvement in quality of educational institutions, increased financing of education but more effective spending as well, and greater participation of private sector in the overall education reform.

Finally, additional efforts should be taken so that entrepreneurship could become the main driving force, especially bearing in mind the lack of entrepreneurship tradition and culture, which is a characteristic not only to B&H, but the surrounding countries as well.