10. Fostering social cohesion in Bosnia and Herzegovina
Over the past decades, Bosnia and Herzegovina has made remarkable progress in improving the well-being of its citizens. Employment rates have been rising and, thanks to fiscal surpluses, there is considerable fiscal space for financing social protection. To sustain the progress in building a socially cohesive society, this chapter puts forward key policy priorities to foster social cohesion through labour market and social protection. Ensuring women’s employability is of particular importance as it can unleash the full potential of the labour force. To this end, key priorities include improving the availability and quality of early childhood education and care, ensuring the flexibility of maternity leave and providing good quality elderly care. Low labour market participation among women and citizens from vulnerable groups, coupled with high long-term unemployment rates, also calls for well-targeted active labour market policies. While Bosnia and Herzegovina has in place a comprehensive set of social protection programmes, gaps in coverage and generosity need to be addressed to provide adequate social security to all. Building on recent policy efforts, further reductions of social security contributions in combination with in-work benefits would help reduce the tax burden for low-wage earners. To provide the most vulnerable with additional pathways to integrate into society, it would be important to improve the delivery of social services.
The Initial Assessment of the Multi-dimensional Review of the Western Balkans highlighted the strategic importance of social cohesion as a key policy priority to fight poverty, exclusion and marginalisation, as well as offering opportunities to people of Bosnia and Herzegovina. A socially cohesive society is one that creates the ability and willingness of its members to undertake collective action for the improvement of societal well-being of all its members. Building on the Initial Assessment, the “From Analysis to Action” phase of the project provides suggestions to foster social cohesion in Bosnia and Herzegovina and in other economies of the Western Balkans. The peer-learning workshops on social cohesion (Box 8.1 of Chapter 8), an integral part of the project’s second phase, served three complementary processes: to identify issues hampering social cohesion; to identify key policy challenges; and to put forward policy priorities for Bosnia and Herzegovina and for the region (Figure 10.1).
Bosnia and Herzegovina has achieved significant success across various dimensions of social cohesion over the last decades. Employment rates have been steadily rising in Bosnia and Herzegovina – from 31.5% in 2012 to 40% in 2020 (World Bank, 2021[1]). Labour market performance has been improving for women, who traditionally trailed behind men in terms of labour market participation. Given its level of gross domestic product (GDP), Bosnia and Herzegovina performs relatively well in terms of adult literacy, life expectancy and security. Thanks to fiscal surpluses throughout most of the past decade, public debt has declined to about 33% of GDP in 2019, thereby providing considerable fiscal space for stimulus to deal with the negative impacts of the COVID-19 crisis (OECD, 2021[2]).
To continue building a socially cohesive society, Bosnia and Herzegovina must now tackle a set of important problems that remain. Many groups, including women, young and ethnic minorities, are excluded in terms of economic opportunities. Many jobs do not provide enough income to escape poverty, as evident by very high (24.5%) in-work poverty rates in 2015 (Obradović, Jusić and Oruč, 2019[3]). Access to pensions, social assistance and health insurance favours the employed and war veterans rather than those most in need. For instance, early retirement for war veterans and exclusion of informal workers from the public pension system have led to a situation in which one-third of all pensioners are younger than age 65, while approximately 38% of elderly adults (65 or above) collect no state pension (World Bank, 2020[4]).
Six priority actions have a great potential to foster social cohesion in Bosnia and Herzegovina and in the Western Balkans (Figure 10.1):
Increasing employability of women through family-friendly policies (peer-learning priority)
Create equal opportunities for vulnerable groups to participate in the labour market
Strengthen targeting, equity and adequacy of social assistance for those most in need
Of these, participants in the peer-learning workshop from Bosnia and Herzegovina identified increasing the employability of women through family-friendly policies as the key priority.
This chapter is divided into three sections. Sections 10.1 and 10.2 provide policy implications across the six policy actions through a prism of challenges specific to Bosnia and Herzegovina. Section 10.3 provides indicators against which policy progress in implementing all the policy priorities can be measured. This chapter is complemented by the regional chapter on social cohesion (Chapter 8), which offers more specific policy options for the policy priorities based on international practice that may be applied, with necessary adaptations, also to Bosnia and Herzegovina.
10.1.1. Further strengthen women’s role in society by supporting their integration into the labour market
Women constitute about 40% of the workforce in Bosnia and Herzegovina; ensuring equal conditions for labour market participation between women and men is critical for growth and for social cohesion. Bosnia and Herzegovina has adopted legal frameworks that prohibit discrimination in the workplace,1 yet women’s labour market outcomes lag behind international benchmarks. Female labour force participation stood at 36.7% in 2020, below the Western Balkan average of 40.7%. Women’s participation is about 23 percentage points below that of men in Bosnia and Herzegovina (compared to 20 percentage points on average in the Western Balkans) (Figure 8.4 of Chapter 8). Participation is much lower among poor households: only 15% of women from households in the bottom 40% of income distribution engage in formal work, compared with 42% of men (Brookings Institute, 2015[5]). The third Gender Action Plan 2018-2022 (adopted in 2018) proposed a range of very relevant measures to promote female employment, including (among others) collection and analysis of gender-disaggregated data on different variables, training targeted at women, improvements to maternity leave and paid parental leave for both parents (OECD, 2021[6]).
Early childhood education and care2 (ECEC) was put forward by peer-learning participants from Bosnia and Herzegovina as a key policy area that can improve the employability of women. Lack of access to affordable and quality ECEC is a major issue in Bosnia and Herzegovina. In 2017, only 5.2% of children under 3 years attended ECEC (Agency for Statistics of Bosnia and Herzegovina, 2021[7]), compared to 35.3% in the European Union in 2019 (Eurostat, 2021[8]). While costs for ECEC vary across Bosnia and Herzegovina, and are generally lower in rural areas, childcare and preschool is generally expensive. In some parts, including in Sarajevo and Tuzla, the cost can be as much as 49% of the minimum wage (Table 10.1). Responsibilities for funding ECEC facilities lie with municipalities, which often do not have adequate financial capacities (an issue that concerns social care services more broadly, see Section 10.2.3). To improve the affordability and quality of ECEC, peer-learning participants from Bosnia and Herzegovina put forward five potential actions with corresponding activities and indicators (Box 10.1).
Bosnia and Herzegovina should consider improving the flexibility of maternity leave to improve the likelihood of women’s labour market participation, while at the same time ensuring adequate income security during pregnancy. Women in Bosnia and Herzegovina have the right to paid maternity leave of 12 consecutive months, which can be extended to 18 months in the event of multiple births (CoE, 2020[10]). Interviews with focus groups and employment agency officials in six communities reveal that young women often face poor employment prospects and discrimination when applying for a position (World Bank, 2016[11]). Once pregnant, employed women face an uncertain situation when it comes to their maternity leave payments. Additionally, maternity leave payments vary across different regions and are often inadequate, particularly in the Federation of Bosnia and Herzegovina (FBiH). In the FBiH, cantonal legislation governs conditions, calculation methods, procedures, powers and funding arrangements, and payment of maternity benefits depends on funding dedicated to cantonal budgets. In some cantons, including Una-Sana, Central Bosnia, Sarajevo and Herzegovina-Neretva, statutory maternity benefits of less than 70% of the minimum wage are paid to women (CoE, 2020[10]). Women working in the public sector in the FBiH usually receive full salary compensation during maternity leave because the benefit is stipulated by collective agreements. The Republika Srpska (RS) provides full salary compensation during maternity leave for women in registered employment. The participants from Bosnia and Herzegovina also suggest to adjust entity laws on labour, which regulate maternity leave provisions, to include paternity and parental leave and other flexible leave arrangements for families with children (Box 10.1).
Ensuring good quality elderly care can also improve the employment prospects of women. As in the case of childcare, it is often women who take care of the elderly. With the rapidly ageing population, institutional care will become an important concern in Bosnia and Herzegovina. Migration, together with other factors (such as low fertility rates), is expected to create significant demographic pressures in the future as the working-age population is projected to shrink from 67.6% in 2020 to 57.9% in 2050, and the population above 65 to increase (United Nations, 2020[12]). Considering that poverty levels among isolated elderly (one-person households, aged 64+) is 30.4% in the FBiH and 23.8% in RS (Government of Bosnia and Herzegovina, 2017[13]), many elderly cannot afford institutional care and need to count on their family support, especially that of women. The peer-learning participants stressed two actions to improve women’s employabiliy in relation to elderly care. First, increase the number of elderly care facilities and their affordability and, second, provide financial support for elderly care (Box 10.1).
To increase women’s employability in Bosnia and Herzegovina, participants of the peer-learning workshops held as part of the MDR of the Western Balkans suggested an action plan to complement current policy efforts in Bosnia and Herzegovina (Table 10.2). Representing the Directorate for Economic Planning, Labour and Employment Agency of Bosnia and Herzegovina, the University of Mostar, the University of Sarajevo and the Federal Institute for Development Programming, participants suggested seven actions across three policy areas, with corresponding indicators to monitor policy progress.
To support implementation of the proposed action plan, participants stressed the importance of having in place certain conditions. First, various legal adjustments will need to be made across all policy areas mentioned above. Second, it will be important to involve municipalities (and cantons in the case of the FBiH) end ensure their full support. Although the provision of these services is the competence of municipalities, higher levels of government may also provide financial support.
In addition to the above, peer-learning participants stressed the need for several requirements to implement the action plan. First, more funding will be required. An example of an alternative funding mechanism comes from elderly care in Sarajevo, where centres were created and are used for social activities for elderly during the day and rented to businesses during evening hours. Second, it is important to build skills in municipal and cantonal administrations to help them seek funding, including from the European Union and other donors, especially by training staff to write project proposals for funding. As stressed by the peer-learning participants, because of limited capacity, many municipalities are currently not looking proactively for funding. Third, it would be important to strengthen communication efforts across municipalities and cantons to demonstrate how such policy measures can improve labour market prospects for many, especially women. Finally, creating a co-ordination group on the issue of women’s employability within local structures would be beneficial and should involve municipalities and other stakeholders. Such structures already exist, but mainly in areas of infrastructure and agriculture.
Source: OECD peer-learning workshops.
Beyond peer-learning priorities, strengthening women’s role in asset ownership could boost their entrepreneurship. In 2019, only 25% of businesses in Bosnia and Herzegovina included female participation in ownership, substantially lower than the regional average of 32% (World Bank/EBRD/EIB, 2019[14]). Often, small- and medium-sized enterprises (SMEs) in particular do not meet the relatively stringent bank-lending requirements, including high-value collateral (over 200% of the loan value) with a strong preference for land and real estate (World Bank et al., 2021[15]). As women are less likely to own such assets, this represents an important constraint for women-owned businesses. The financing gap for women-owned businesses (over 60%) is significantly larger than for male-owned businesses (34%) (World Bank, 2018[16]). From a legal perspective, men and women are equally entitled to own assets; local customs and traditions, however, often favour male ownership. As a result, men represent over 70% of landowners in Bosnia and Herzegovina (World Bank et al., 2015[17]).
Cultural norms also play a role in women’s low labour market participation and should be addressed through awareness raising, both in the education sector and among the general public. Discriminatory social norms can explain women’s lack of access to economic opportunities. These include women’s unpaid work responsibilities, discrimination in the workplace and traditional gender roles. Women were engaged in about 70% of all unpaid care work for family members in 2016 (Ortlieb et al., 2019[18]) while virtually no men report staying home to take care of their families in Bosnia and Herzegovina (Agency for Statistics of Bosnia and Herzegovina, 2017[19]).
10.1.2. Make active labour market policies more effective
High long-term unemployment and lack of employment opportunities for people who have no prior job experience both call for well-targeted ALMPs. In 2019, 76% of the unemployed in Bosnia and Herzegovina were long-term unemployed, among the highest rates in the region (Figure 8.2 of Chapter 8). At 93.4%, long-term unemployment among the unemployed aged 55-64 years is particularly high (Table 8.2 of Chapter 8). Among young persons (15-24 years), about one in five was not participating in employment, education or training (Figure 8.3 of Chapter 8 – Panel A). Poor labour market integration across these groups can potentially lead to loss of skills and long-term reliance on welfare assistance, jeopardising productivity growth and leading to emigration. About 27% of young persons in Bosnia and Herzegovina report a strong or very strong desire to migrate, which is high in comparison to benchmark economies such as Bulgaria, Croatia and Romania (Figure 8.3 of Chapter 8 – Panel B).
To increase the impact of ALMPs in Bosnia and Herzegovina, it would be imperative to increase coverage among the most vulnerable groups and improve participation in training and start-up programmes. The low share of registered unemployed participating in ALMPs (7.6% in 2018) indicates significant scope to increase coverage. Most participants (90.4%) were placed in sheltered and supported employment and rehabilitation whereas only 5.6% participated in training and 3.0% in start-up incentives (Table 8.3 of Chapter 8). Increasing participation in training, especially to provide job-relevant experience to young and boost their employability, would be especially important (Obradović, Jusić and Oruč, 2019[17]). Missing work experience in the labour force is a major or severe obstacle for business expansion according to 47.8 % firms in Bosnia and Herzegovina, the highest share in the region (World Bank/WIIW, 2020[20]).
Effective implementation of ALMPs requires adequate capacities in the public employment agencies in Bosnia and Herzegovina. The ratio of job seekers per counsellor is about 620:1 in FBiH and 970:1 in RS (Table 8.4 of Chapter 8). The client-staff ratios are very high in comparison to international benchmarks such as Slovenia (137:1), which hampers agency efforts to connect people with jobs. Recent estimates in FBiH show the effectiveness gap (measured in terms of connecting people with jobs) between an average employment agency and the best-performing one stood at 33% in 2016. Improvements to close the effectiveness gap could increase job placements by 25% (Table 8.5 of Chapter 8).
ALMPs should ensure faster labour market integration by introducing – and better monitoring – job-search requirements. In RS, beneficiaries of social protection schemes (including social assistance and unemployment benefits) have a job-search requirement. In the FBiH, only those eligible for unemployment benefits are obliged to report monthly to an employment agency, participate in information sessions and engage in job-search training (OECD, 2021[6]). In absence of more comprehensive job search requirements, few incentives exist to encourage social assistance recipients to actively look for a job. Beneficiaries of permanent social assistance have low incentives find work, as relatively strict rules link additional earnings of a household with their eligibility to social assistance, and may lead to a loss of social assistance. At the same time, relatively generous status-based benefits for veterans provide them with few incentives to find paid work (Numanović, 2016[21]). The new Employment Strategy 2021-2027 of FBiH is aiming at higher inclusion of the people at risk of poverty, exclusion and marginalization, especially through diversifying ALMPs and strengthening implementation capacities, including of the PES.
Beyond ALMPs, Bosnia and Herzegovina should work towards matching unemployment benefits with obligations in the unemployment benefits system. In Bosnia and Herzegovina, registration with employment agencies is linked to a range of social benefits, including basic health insurance coverage. This generates high incentives to register as unemployed, including for workers in the informal economy and those not actively looking for work (ILO/Council of Europe, 2007[22]; ETF, 2006[23]). Based on the labour force survey from 2019, many (43.8%) of the registered unemployed were inactive and a considerable share (23.7%) were informally employed while receiving free health insurance and other social benefits (European Commission, 2020[24]). With entry of the new Law on Health Insurance, RS started to delink public employment services from administrating health insurance for job seekers in 2020. However, implementation is still at the early phase to evaluate the impact. In FBiH, no legislative frameworks are yet in place to this end (European Commission, 2020[24]).
10.1.3. Create equal opportunities for vulnerable groups to participate in the labour market
Bosnia and Herzegovina needs to create equal conditions for participation of its sizeable Roma minority in the labour market. Although the share of Roma population (1.7% of total population) is among the lowest in the Western Balkans, their numbers are still sizable: some estimates indicate between 46 000 and 76 000 Roma living in Bosnia and Herzegovina (European Commission, 2014[25]). Overall, Roma have worse well-being outcomes than the general population, especially in terms of employment. Only 11% of Roma participate in employment in comparison to 29% of non-Roma Bosnians living in the same areas (Figure 8.7 of Chapter 8 – Panel B). Roma also have worse outcomes in access to healthcare, housing and education (OECD, 2021[2]).
Ensuring better opportunities to obtain high quality education is one of the key levers for creating employment opportunities for Roma. The primary school enrolment rate of Roma children is roughly two-thirds that of the rest of the population; their secondary school attendance rate is less than 50%. Roma students have higher dropout rates compared to their non-Roma peers, especially among girls. Roma parents report the stigma and discrimination against their children as reasons to keep them out of school. One in three Roma children have experienced some kind of discrimination in their schools. Children need identity papers to access school, which is an additional issue as many Roma children do not have birth certificates (UNICEF, 2020[26]). Among young Roma (aged 15-24), as many as 82% do not participate in employment, education or training (in comparison to 43% of their neighbours) (Figure 8.7 of Chapter 8 – Panel A). This implies a great human capital loss and limited social cohesion in some areas.
Addressing discrimination and institutional barriers against Roma also matters to access education and employment. A European Court of Human Rights report found that discrimination against Roma is evident in the provision of services such as housing, healthcare, education and employment (UNICEF, 2020[27]). Most Roma live in informal settlements in extremely impoverished conditions, often without proper heating or even access to safe water. Furthermore, many Roma cannot access services because they do not have the necessary papers due to the fact that many live in informal settlements and cannot register with the municipalities there (Minority Rights Group, 2021[28]).
Bosnia and Herzegovina is making efforts to improve employment outcomes for the Roma population. The most recent Action Plan for Addressing Roma Issues in Employment, Housing and Healthcare (2020), the Framework Action Plan on Educational Needs of Roma Boys and Girls in Bosnia and Herzegovina (2018-2022), and the accompanying allocation of around EUR 1.2 million per year to Roma-related activities by the Ministry of Human Rights and Refugees at the state level are important steps forward (UNICEF, 2020[26]). In RS, the Social Inclusion Strategy (2021-2027) recognises education as a key factor to improve labour market outcomes of ethnic minorities and other vulnerable groups (Republika Srpska, 2020[29]). Likewise, in FBiH, the Social Inclusion Strategy (2021-2027) lays out elimination of discrimination against minority groups, and particularly Roma, as a key measure (Government of the Federation of Bosnia and Herzegovina, 2020[30]).
10.2.1. Create a more inclusive and fairer social security system in Bosnia and Herzegovina
An inclusive and fair social security system calls for a combination of policies that encourage people to participate in formal employment and bring the unemployed back to work. In Bosnia and Herzegovina, unemployment benefits do not act as a safety net for previously employed people: in 2020, only 5.3% of those registered as unemployed received unemployment benefits (Figure 8.10 of Chapter 8 – Panel A). Structural labour market challenges, such as long-term unemployment, youth unemployment, low labour market participation of women and other vulnerable groups, mean that many people either do not contribute to unemployment insurance long enough to qualify for unemployment benefits or have exhausted their unemployment benefits. High levels of informality (about 30.9% of total employment in 2019) further limit social security coverage (ILO, 2020[31]). Among self-employed workers (24.9% of total employment), about 53.1% were estimated to be working informally in 2020 (ILO, 2021[32]). As social security contributions finance more than 75% of social protection spending in 2016 (Obradović and Jusić, 2019[33]), low coverage is jeopardising the financial sustainability of the system.
Building on the recent Reform Agenda for Bosnia and Herzegovina (2015-2018), it would be important to consider further reduction of high social security contributions in combination with other policy instruments (such as in-work benefits) to reduce the tax burden on labour for many, especially low-wage earners. Because of high social security contributions in total labour taxes,3 Bosnia and Herzegovina has one of the highest labour tax wedges4 in the region (for a single worker earning the average wage) (Figure 8.11 of Chapter 8 – Panel A). High tax wedges tends to discourage employers from formalizing employment relationships with workers (Packard, Koettl and Montenegro, 2012[34]) . As progressivity of personal income tax5 is low, those earning low wages face a high relative tax wage in comparison to workers earning average wages. As part of the Reform Agenda for Bosnia and Herzegovina (2015-2018), the entity governments committed to reducing the burden on labour by lowering social security contributions and implementing changes to personal income tax (Obradović and Jusić, 2019[33]). The FBiH has been planning to adopt a Law on Contributions, which envisages reducing social security contribution rates from 41.5% to 32.5%, and a Law on Income Tax that plans improvement in progressivity of income taxation.6 The Government of FBiH expects these reforms would have a neutral financial effect on social insurance funds, as the tax base would be broadened to include all fringe benefits (e.g. meal and transport cost allowances). Despite the proposals, concerns have been raised that the changes might lead to a reduction in the social security fund, while not reducing the tax burden on labour.7 Likewise, as the tax base would be broadened to include all fringe benefits, trade unions fear that wages will be further reduced. The unions argue that application of these laws would increase the tax burden on low-income workers, especially in the private sector where a substantial share of workers’ wages are paid in fringe benefits (Obradović, 2019[35]). It is not yet clear how the resulting drop in social insurance funds will be offset in the short term (ESPN, 2019[36]). Experience from RS, which made significant reductions in social security contributions in 2009, show that this approach led to a reduction of government revenues8 (Obradović and Jusić, 2019[33]). At the end of 2019, the RS reduced social security contributions from 33% to 32.8% (Republika Srpska, 2021[37]).
Considering the low labour market participation and rapid ageing of the population in Bosnia and Herzegovina, addressing social security coverage can improve the financing of old-age pensions, an integral part of any social security system. Although rising, Bosnia and Herzegovina has one of the lowest employment rates in the region (Figure 8.1 of Chapter 8). Together with population ageing, this trend is reducing the social security coverage rate of the active population, with potential negative impact on future pensions. The pension funds of both entities function on the “pay-as-you-go” principle and are largely financed by social security contributions (87% in FBiH and 99% in RS in 2018) (Obradović and Jusić, 2019[33]). Given the low level of formal labour market participation, each contributor currently supports more than 1.26 pensioners in Bosnia and Herzegovina, one of the highest burdens per contributor in Europe (Figure 8.12 of Chapter 8). Despite a steady rise in social fund revenues in recent years, both entities were forced to take out loans to pay pensions (OECD, 2021[2]). Given expected negative labour market trends, especially in the context of the COVID-19 pandemic, the entities will need to explore complementary and more sustainable financing models. To improve the financial sustainability of the pensions system in Bosnia and Herzegovina, RS started to operate its first private pension fund in 2017 while FBiH adopted a law on voluntary pension funds in 2016 (Obradović and Jusić, 2019[33]).
In addition to boosting coverage, Bosnia and Herzegovina should improve equity in its pensions, including by phasing out benefit increases for special interest groups. Although pension benefits are not particularly generous (net replacement rates were just above 40% of net wages, compared to almost 60% in OECD countries), high spending is largely the result of early retirement and war veterans receiving disability or special pensions (OECD, 2017[38]; Bošnjak, 2016[39]). In 2017 in FBiH, the government bill for early retirement of army veterans from the 1992-95 conflict was BAM 122 million (EUR 65.5 million) (Obradović and Jusić, 2019[33]). Special pensions, in combination with early retirement, have led to a situation in which one-third of all pensioners in Bosnia and Herzegovina are younger than 65. At the same time, approximately 38% of elderly adults (over 65), likely do no collect state pension at all (World Bank, 2020[4]).
10.2.2. Strengthen targeting, equity and adequacy of social assistance for those most in need
Social assistance schemes in Bosnia and Herzegovina should ensure better equity by better prioritising persons in need. The three main programmes of social assistance in Bosnia and Herzegovina are permanent social assistance, disability allowance, and war veterans pensions (Table 8.A.2 of Chapter 8). Of 4% of GDP spent for social assistance overall, around three-quarters is directed to veterans and their dependents (51 727 beneficiaries in 2018) (SDC/UNDP, 2021[40]; OECD, 2021[6]). This limits poverty-reduction efforts within social assistance spending in Bosnia and Herzegovina (Numanović, 2016[21]; Obradović, 2018[41]).9 Spending on permanent financial assistance, the only means-tested scheme, remains limited (around 1% of GDP in 2020 (SDC/UNDP, 2021[40]) and is low given that 27% of the population is estimated to be at risk of poverty in 2015 (Eurostat, 2021[8]).
Social assistance schemes in Bosnia and Herzegovina should improve targeting. Considering that only 18% of permanent financial assistance (the main means-tested scheme) was received by the poorest income quintile, it seems clear this scheme insufficiently targets the poorest (Numanović, 2016[21]). Poor targeting of the main means-tested assistance therefore explains the low reduction of the at-risk-of-poverty rate through social transfers10 (9.16% against the EU average of 33.2% in 2018) (European Commission, 2020[24]). In RS, for example, the elderly must meet very restrictive conditions to receive cash benefits. According to the Law on Social Protection, persons need to fulfil various cumulative conditions for continuous financial assistance, including being incapable of work, having no property (movable and immovable) and having no immediate family members (Republika Srpska, 2020[29]).
To decrease poverty, Bosnia and Herzegovina should also reassess the adequacy of its permanent financial assistance. The permanent financial assistance payment varies depending on household size but is very low in both entities. For a four-person household, the permanent financial assistance benefit stands at 56.9% of the poverty threshold in RS and only 25.8% in the FBiH.11 Having a veteran-based status also disproportionally affects disability allowances. A person with disability and war veteran status at the same time receives benefits that are five times larger than a person with the same, but non-war related, level of disability (Numanović, 2016[21]).
The social assistance system in Bosnia and Herzegovina would benefit from better co-ordination. Regulatory inefficiencies and significant inequalities in providing social assistance can be attributed to a highly decentralised system comprised of more than 20 central and local ministries, as well as separate administrative systems among entities and cantons (World Bank, 2020[4]). Cantons in FBiH, for example, apply different laws when determining eligibility for financial assistance, including diverging treatment of household income components and differing percentage increases in assistance for additional or incapacitated household members (Delalić et al., 2020[42]). Harmonising legislation and standardising qualification criteria at the entity level at least would lead to equal treatment of citizens, regardless of their place of residence. The new bill on Support to Families with Children, in parliamentary procedure in the FBiH at the time of writing, aims to regulate the basic financial support that currently varies and depends on cantonal arrangements.
10.2.3. Deliver community integrated social services
Establishing community integrated social services is one of the key policy priorities that emerged from the peer-learning workshops. As indicated in Chapter 8, community integrated social services encompass a range of approaches and methods for achieving greater co-ordination and effectiveness among different services, such as elderly care, health care, education and others, with the objective to achieve improved outcomes for services users.12 During the OECD peer-learning workshop, participants stressed the importance of community-integrated social services as a key lever to strengthen social protection, deliver social care services and reduce long-term dependency on social welfare through better labour market integration.
Bosnia and Herzegovina’s unique governance structure could be conducive for establishing community-integrated social services at the local level, but this requires adequate financial and human resources for local authorities. In Bosnia and Herzegovina, most of the responsibility for social services lies with local government units, including cities and municipalities where service delivery is through centres for social work (Lepir, 2015[43]). Despite the high level of responsibility, local government units often lack capacities to deliver quality social services. Local government revenues amounted to 10.4% of total public revenues in 2019, the lowest level in the region (Figure 8.14 of Chapter 8). Responsibility for financing social services lies fully within local authorities.13 Most social protection funding in Bosnia and Herzegovina is geared towards financial and material support, leaving very little space to develop social services (Lepir, 2015[43]).
Centres for social work, which should be an integral component in delivering integrated social services, need to increase their capacities to deliver broader services. Centres for social work in Bosnia and Herzegovina generally employ a small number of professional workers with inadequate experience and a disproportionate number of technical staff; the centres are burdened by the increased demands of beneficiaries (Lepir, 2015[43]). Also, most centres for social work have very limited funding. As a consequence, limited capacities affect also the co-operation of social services with other partners, such as NGOs and the private sector. There are localities where social services are provided by NGOs on project basis, financed from foreign donors. Most of these projects are not supported by local government, which negatively impact their sustainability. Also, private provision of social services have emerged, especially in elderly care and ECEC as there is a high demand for these services. However, the owners only need to fulfil minimum standards related to facilities and personnel, representing a big shortcoming in maintaining the quality of the service that is provided (Lepir, 2015[43]).
To monitor progress in improving socio-economic integration of welfare beneficiaries and in addressing other policy priorities in Bosnia and Herzegovina, the OECD suggests a set of key indicators. These are set out in Table 10.3 which includes values for Bosnia and Herzegovina and benchmark countries (either the OECD, the EU average, or benchmark economies, based on data availability).
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Notes
← 1. Bosnia and Herzegovina has ratified ILO Conventions 100 (Equal Remuneration), 111 (Discrimination in Respect of Employment and Occupation) and 156 (Workers with Family Responsibilities). The Law on Gender Equality mandates non-discrimination on the basis of sex in employment (art. 2, 12, 13, 14 & 15), specifically covering: job advertisements, selection criteria, hiring, terms and conditions of recruitment, promotions, trainings, assignments and termination of contracts. This Law also mandates equal remuneration for work of equal value (art. 13) (OECD, 2019[52]).
← 2. Early childhood education includes early childhood educational development programmes that target children below 3 years of age; pre-primary education programmes target children aged 3 years until the age to start their primary education (UNESCO, 2021[51]).
← 3. At 41.5% in FBiH and 33% in RS, the contribution rates significantly exceed the average of 29.7% in 6 Western Balkan economies (World Bank, 2020[4]).
← 4. The tax wedge is defined as the ratio between the amount of taxes paid by an average single worker (a single person at 100% of average earnings) without children and the corresponding total labour cost for the employer. This indicator is measured in percentage of labour cost (World Bank/WIIW, 2019[53]).
← 5. Progressivity of labour taxation is calculated as the percentage point increase of the tax wedge between workers earning 67% of the average wage and workers earning 167% of the average wage (World Bank/WIIW, 2019[53]).
← 6. Persons earning below BAM 800 (EUR 410) per month are not to be taxed (Obradović, 2019[35]).
← 7. The Employers’ Association of FBiH proposed reducing contribution rates to 30.5% and suggested that, up to a certain level, fringe benefits should not be taxed. The government raised concerns that such a reduction would result in a loss of revenue for pension and unemployment insurance funds. Additionally, the employers called on the government to not support the laws in the absence of a provision stating that any growth in revenues would be matched by a further decrease in contribution rates (Obradović, 2019[35]).
← 8. The overall rate was reduced from 42% to 30.6% in RS. One year later, to preserve fiscal and social stability, the government increased the overall contribution rates from 30.6% to 33% (Obradović and Jusić, 2019[33]).
← 9. More than 20% of social assistance for veterans is given to the 40% of beneficiaries with the highest income (World Bank, 2020[4]).
← 10. According to Eurostat, “the reduction in percentage of the at-risk-of poverty rate due to social transfers is calculated by comparing the at-risk-of poverty rates before social transfers with those after transfers” (Eurostat, 2018[50]).
← 11. Adequacy calculations have as basis the at-risk-of-poverty threshold (60% of median equivalised income) for a single person household, if not otherwise defined. The four-member household basis is the at-risk-of-poverty threshold for two adults with two children younger than 14 years, as defined by Eurostat. For the Federation of Bosnia and Herzegovina only the cross-cantonal average value of permanent social assistance is available, thus adequacy calculation overestimates the value for a single person household and likely underestimates the value for households with four members.
← 12. Definition from the Council of Europe.
← 13. The state-level authorities do not have jurisdiction in the financing of social services, except for funding social services for asylum seekers, and victims of trafficking (Lepir, 2015[43]).