Bosnia and Herzegovina: The Public Sector Labor Market and Its Implications

Bosnia and Herzegovina (BiH) face the dual and interlinked challenge of lack of jobs and low quality of public services. Labor force participation rates, especially of women, are among the lowest in Europe, and the country faces high and sustained levels of unemployment, especially of the youth. Even within the employed sector there are concerns regarding the quality of jobs, including high levels of informality. The dearth of quality jobs is linked to skills mismatches between the demand and supply of labor, which in turn reflects the relatively low quality of human capital of workers, and poor education and health services. The objective of this report is to examine the “public sector labor market” in BiH and its implications for this twin challenge. The public sector labor market is defined as the employment, compensation, management, and work environment practices of the public sector. These practices influence the employment choices of individuals, such as whether to work and preferences over public sector or private sector employment. They also affect the selection, retention, motivation, and productivity of public sector workers, which in turn impact the ability of the government to effectively deliver its variety of outputs. The report measures these features of the public sector labor market through an original household survey conducted by the World Bank (WB) in 2021-2022 that is representative of the urban areas of the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS).