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Skilled Workforce: Escaping the Middle-Income Trap in Bosnia and Herzegovina

Learn about the challenges of mass unemployment and policy recommendations to overcome it, focusing on skills development and labor market reforms in BiH.

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Skilled Workforce: Escaping the Middle-Income Trap in Bosnia and Herzegovina

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  1. Vjekoslav Domljan CRES Mostar, BiH A SKILLED WORKFORCE FOR AVOIDING THE MIDDLE-INCOME TRAP IN BIH

  2. Overview • Introduction • Escaping income trap • Mass unemployment • Policy recomendation

  3. Introduction

  4. Introduction • Middle income trap • Low to middle income country - industrialisation • Middle to high income country? -

  5. Introduction High income (> 12,196 US$) Middle income (996-12,195 US$)

  6. Escaping middle income trap

  7. Escaping middle income trap • For moving up the value chain with knowledge and innovative-based products and services: • investment rates >25-32 % of GDP • innovation-conducive policy framework • business environment

  8. Escaping middle income trap

  9. Escaping middle income trap • transition countries share the same 3 top business obstacles (EBRD, 2010): • skillsavailability • corruption • tax administration.

  10. Overcoming middle income trap • enterprises in transition countries with • small private sector and • higher unemployment rate • …complain less about skills.

  11. Mas unemployment • the labour market in BiH face many challenges: • Activity rates are low • Unemployment rates are long-term, largely structural • Very few new jobs are created • Underemployment is significant • Employment services have a very limited role • Education programmes are not in line with labour demand • Young people are poorly prepared for labour market • Young people do not consider entrepreneurship as an option for them.

  12. Mass unemployment

  13. Mass unemployment

  14. Mass unemployment

  15. Mass unemployment

  16. Mass unemployment • Issue of human capital development is apriority for faster, export-oriented and sustaining growth • Improved skills will upgrading the skill content of exports (and reducing vulnerabilityto low-wage competition) lead to increased • productivity and • employability • ... will alsoendogenize the creation of newenterprises through the creation of more entrepreneurs.

  17. Mass unemployment • mismatch between demand and supply of skills is aresult of • A) supply side failure • undeveloped private market for skills provision,and asmall number ofthe (un)employed are willing to participate in • lack of adequate government policies and strategiesaddressing the problem • B) demand side failure • Very few new jobs are created

  18. Mass unemployment • wages are high relative to • the product compositionof exports • productivity in a regional comparison

  19. Policy recomendations • The policy recommendation • Follow the export and competitiveness strategy (agro-food, metal, wood, construction materials and tourism) • Introduce the private and develop public institutions mathing demand and supply • Create a tertiary education strategy • Review the secondary school curricula • Create an adult education strategyframeworks/regulation • Create cluster training centres

  20. Policy recomendations 1. Increase talent base • Review the primary and secondary education system – shift approachfrom ‘rote learning’ to ‘creative and critical thinking’ • Increase emphasis on reintroducing technical and vocationaltraining schools • Identify and nurture talent through a demand-drivenprocess • Improve autonomy and accountability ofeducationalinstitutions • Encourage R&D collaboration between terciary education and firms • Enhance English language proficiency

  21. Policy recommendations 2. Re-skill the existing the labour force • Upgrade skills of the bottom segment of thelabor force through continuing education and training • Develop tranining centres at employment agencies • Formalise international quality standards and certificationof skills • Allow wage levels to be reflective of the skill level

  22. Policy recomendations 3. Remove labour market distortions constraining wage growth • Protect workers, not jobs, through a stronger safety net,while encouraging labour market flexibility • Revise legal and institutional framework to facilitate hiringand firing • Raise pay through productivity gains, not regulation ofwages

  23. Policy recomendations 4. Increase reliance on diaspora • Create a strategy for tapping into the country’s diaspora • Review existing programmes to attract highly-skilled Bosnians-Herezgovinians overseas to return home • Offer permanent residence for ex-Bosnian and Herzegovinians and theirfamilies • Centralise oversight of foreign labour and expatriates toenable coherent practice • Build up critical mass of skilled professionals through simplerwork permit and immigration procedures • Liberalise professional services through mutual recognitionarrangements

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