Expensive real estates in Banja Luka are pushing young people to emigrate

Young people are leaving B&H, it’s a fact. There are several economy related reasons. But there are also reasons not directly related to economy. One of them, in my city (Banja Luka), is price of real estates.

For example, in Paris you would need 1,3 average salaries to buy 1 square meter of a real estate, and in Vienna 1,5. In Banja Luka, you would need 2,86 average salaries. I’m not sure why is that so. Answer might be somewhere between investor urbanism and trend of Banja Luka’s diaspora buying large percent of those flats. For diaspora, 1150€ for 1 square meter is affordable (in Paris it’s 6500€ and in Vienna 3000€), but for domestic residents it is not.

I recently got a chance to read Eda’s publication First flat (2010), and in there I have found a scenario calculation for young couple planning to raise a credit for buying flat.

  • flat size: 50 square meters
  • price of square meter (cheaper one): 1050€
  • 2 average net salaries: 780€
  • maximal yearly annuity: 390€
  • interest rate: 7%
  • repayment period: 261 months
  • interest: 50 000€
  • principal and interest: 102 000€

This is not a realistic scenario IMO. It is more likely that young people will continue living with their parents and minimize their costs, delay forming a family, or rent cheap flat and wait for the opportunity to leave the country. Other alternatives I see are involving in criminal activities or leaving the country immediately. In any case, in all of these scenarios their bonds with this city and country are purely emotional, and therefor relatively weak. That means even less workforce in B&H in the future, and what is even more worrying for the society in general is lower birthrate.

I see this as some kind of a failure (market failure?) which needs intervention in order to make buying a flat feasible for young couples (using credit funds seems inevitably). It is not only society in general, represented by the government and local governments, that I believe should be very interested in solving this issue, but also enterprises. If these trends continue in the future, and if nothing changes they will, there almost won’t be any workers left.

There were some attempts to lower price of real estate for specific groups in some municipalities and I will analyze them in the next blog. I will also try to position where could enterprises be in that scheme, in a way that could be acceptable for them.

P.S. While writing this, I started thinking if bonding young people to this country is evil and if I should simply delete this post. I decided not to delete it, but it probably is evil, sorry.

Iceberg model and Employment Issues in Bosnia and Herzegovina /Thinking Out Loud/

I have firstly encountered Iceberg Model somewhere on the Internet during 2017, in one of Leyla Acaroglu’s articles/blogs. It immediately made sense to me and I copied it to my notepad. In short, it’s a tool used to gain a deeper understanding of things. It illustrates that things we see or read about in newspapers (events) are only a tip of iceberg. There’s much more of iceberg under the water, just as there are things that influence things we see or read about, but are not easily visible.

source:  Leyla Acaroglu 

A few days ago I tried to find Leyla’s post, but failed. Instead, I found Systems Thinking With The Iceberg: A Tool for Multi-stakeholder System Sight which explains it nicely.

In order to help myself understand (un)employment in Bosnia and Herzegovina better, I decided to give the iceberg model a try. Here are the first results:

right click -> open image in the new tab to see full size image

EVENTS:

  • Poor working conditions in industry: overtime work, irregular salaries, “bossing”, incomplete salaries at the end of the month, poor salaries…
  • Employers report that high school graduates don’t have appropriate knowledge
  • Employers often don’t register their employees (they usually do it later, when state offers incentives for employment)
  • Enterprises can’t find workers
  • Unemployed persons show poor interest for employment programs (note: high school graduates show best interest)
  • Enterprises mostly need low skilled workers

PATTERNS:

  • Workers are leaving B&H, especially younger people (large percentage of them is finding jobs abroad with help of Employment Offices)
  • High-income families are also leaving (some of the reasons I found in interviews online are general uncertainty and lack of possibilities for professional advancement)

STRUCTURES:

  • Enterprises must offer their products for low price to be competitive (since without Research&Development and final products, they don’t have many possibilities), so they are making saving by paying low salaries

MENTAL MODEL:

  • Ingenuity at the expense of the state
  • “If others are doing it so will I”
  • “It’s better to do nothing for nothing, then to work for nothing”
  • general belief that it’s a shame not to finish a college

I’m about to add more events in the next few days (or weeks), which I will use to see if there are any new patterns or structures appearing. I’m also sure some things are misplaced, but still I decided to post it. If someone who has used Iceberg model in practice and/or is interested in the same topic is reading, a comment would be great.

To be continued…

Enterprises in Banja Luka Region mostly need workers with low level of knowledge and skills

It is possible to find a news article with lists of unemployed persons sorted by professions. But I don’t remember I ever found similar list of workers required by enterprises, sorted by professions.

I got a chance to make such list for region of Banja Luka on Job Fair in June 2017. I’m aware that not all enterprises which are looking for workers were present on this Job Fair, but I believe that based on those that were present a rough image can be formed on what professions are needed by domestic enterprises.

Enterprises from Banja Luka and neighboring municipalities (Čelinac, Gradiška, Kotor Varoš and Prnjavor) were present and they were in search for almost 800 workers.

It is evident that nearly half of workers are required by textile and shoe wear industry, and that they need workers in production. Requirements for employment in these enterprises are low. Candidates are only required to have elementary school diploma, which means non-qualified workers can apply. Low level of needed skills and knowledge for work in these positions conditioned very low salaries (minimal salary, ~200 EUR). This shouldn’t surprise anyone, since textile and shoe wear industry products are made in the same way in Germany, Turkey, India and here, which means enterprises in this industry need to offer lower price to be competitive. That’s why they need to make savings in production, and the most effective way to make those savings are low salaries for workers. To conclude, enterprises in this industry offer plenty of jobs, but those jobs are, conditionally speaking, not quality ones.

For easier analysis, in further text I will ignore this industry and analyze rest of required workers.

When we ignore workers required by textile and footwear industry, most of required workers are non-qualified workers with only elementary school finished. They are mostly required by construction companies: construction carpenter, armature workers, masons, electrical installers. Then there are Mechanical engineers (first profession with Faculty education) – 19 of them. Out of mechanical professions, mechanical technicians, welders and locksmiths are also needed. Leather technicians, carpenters, sellers, whitesmiths, tip truck drivers are also needed, about 10 for each profession.

I was surprised to see small number of required CNC operators (7), since I often hear in enterprises they’re always in pursuit for them.

It’s interesting to highlight number of needed engineers, total 28. 19 mechanical engineers, 8 electrical engineers and one geoinformatics engineer. Number of needed architects is 5 and number of economists with Bachelor is only 1. In total, number of professions with Faculty diploma is 34.

Then I grouped professions required by domestic enterprises based on level of knowledge and skills they need to have. This is how I did it:

5 – engineer / Faculty diploma
4 – Technician / Highschool diploma
3 – craftsman
2 – trained worker
1 – non-qualified worker

This is the result:

Hence, enterprises in Banja Luka Region are mostly looking for trained workers (whereby terms for employment are usually minimal, so we can also call them non-qualified workers), 478 of them. With 37 non-qualified workers, we get information that 65% of required workers are those with minimal knowledge and skills. With raise of needed knowledge and skills, demand for these professions is decreasing. Thus, number of needed craftsmen is 199, number of needed technicians is 51 and number of needed professions with faculty education is 37.

Now let’s get back to the beginning and remind ourselves that now all enterprises in Banja Luka and Region were present at Job Fair Banja Luka 2017, so these data should be taken with reserve. But I think that at least they are useful to make these conclusions: Required professions in Banja Luka are mostly those with low level of knowledge and skills. That shows us that economy of Banja Luka Region is not complex enough and that products it makes are relatively simple, because demand for knowledge and skills is low.

From the perspective of enterprises, it means they can’t be competitive with quality, but with low price. From workers’ perspective it means that their knowledge and skills are not needed and that what lefts, and that is their physical work on relatively simple jobs, will be low paid.

PS

Banja Luka Region has 35 000 people on Employment Office’s list of unemployed persons. Yet, during my visit to Job Fair, only about 10 unemployed persons were inside the hall. More employers then unemployed persons. But that’s topic for another blog.

Review of Labour Force Survey in B&H 2017 – more realistic representation of workforce in RS

These days media in Republic of Srpska are reporting of 263 476 employed persons, which is the highest number in history, referring to data published by Employment Office of RS. At the same time, Agency for Statistics of B&H publishes Labour Force Survey 2017, given the information of 313 000 employed persons in RS.

Where does the difference come from?

Unlike the Employment Office of RS, which defines registered workers (working in enterprises, institutions, as entrepreneurs etc.) as employed persons, Agency for Statistics of B&H used a definition that also included non-registered workers, working in enterprises or as entrepreneurs.

“Employed persons are persons aged 15 years and above and in the referent week they: (a) worked at least one hour for salary or fee, regardless of their formal status, or (b) didn’t work, but had a job they will return to.”

If we search for the number of unemployed persons in Labour Force Survey 2017, which is 116 274 according to Employment Office data, we will see it is 83 000. Therefore, significantly minor. Once again, definition of unemployed persons is different between Employment Office of RS and Agency for Statistics of B&H. Employment Office implies that unemployed persons are persons registered at Employment Office as active job seekers, and Agency for Statistics implies that they are persons who didn’t perform activities for salary, or were seeking for a job. (More about active and passive job seekers you can read in my previous blog.)

“Unemployed persons are persons aged 15 and above who: (a) in referent week didn’t perform any activities for a salary or a fee, (b) during four weeks (referent week and three previous weeks) were actively seeking for a job or found a job and will start working soon, (c) could start working in the next two weeks, if they were offered a job.”

 

Employment Office of RS (October 2017) Agency for Statistics of B&H (April 2017)
Number of employed persons 236 476 313 000
Number of unemployed persons 116 274 83 000

As in my previous blog, I need to underline that RS, as well as whole B&H, isn’t a place with surplus of workforce anymore, but a place with deficit of workforce. Number of working age population is decreasing at significant speed. Firstly that was recognized by local enterprises, who in the beginning had difficulties to find skilled workforce, and nowdays have more and more problems to find any workers. A drastic example happened recently in Visoko, where enterprise Prevent opened a call for employing 400 people, and they only found 2.

Only during the last 2 years, number of working age population in RS decreased by nearly 50 000. The trend is, unfortunately, speeding up: between 2015 and 2016 number of working age population decreased by 18 000, and between 2016 and 2017 by 29 000.

2015 2016 2017
Working age population in RS 885 000 867 000 838 000

In the meantime…

In the meantime, Council of Ministers of B&H and Government of Republic of Slovenia have an agreement on employing citizens of B&H in Slovenia through 3 employment offices in B&H, which is being more and more exploited.

2013 2014 2015 2016 2017 (until October)
Numbers of B&H citizens employed in Slovenia through employment offices in B&H 661 1870 2677 4478 8123

How much incorrent secondary data are? (In context of employment in RS)

Republic of Srpska (federal unit of Bosnia and Herzegovina) has, based on Employment Office records, 116 274 job seekers as of October 2017. According to these data, unemployment is significant. Someone could say there is not enough jobs in Srpska, since these people can’t find one. Even Employment Office, in such deficit of jobs, published advertisements for employing our people in Slovenia, Slovenian Post Office for example, or various private owned businesses. Apparently, they have deficit of workers, and we have plenty.

Is this so?

When you talk to domestic enterprises and people from these enterprises, you’ll hear they have serious problems finding not only skilled workforce, but more and more any workforce. Also, projects organizing trainings for acquisition of skills for work in industry have problems with low number of unemployed people applying to these trainings.

So, something here isn’t right.

There are many unknown elements in this equation, but now I want to concentrate on one of them, which is of technical nature. Number of listed unemployed persons, or active job seekers, does not corelate to real situation.
Namely, job seekers are divided into two groups: passive and active. Passive job seekers (an oxymoron) are not seeking for a job. They are registered in the Employment Office records because of exercising their constitutional rights on health insurance. Even though they are called “job seekers”, they are not job seekers. Everybody is aware of that and they do not participate in this number of 116 274 job seekers.
Active job seekers should be really seeking for the job. They are, from time to time, contacted by Employment Office for job interviews in enterprises. They do make the number of 116 274 job seekers. Problem with reliability of the job seekers list exists because of the way job seekers are classified in active or passive group – they declare themselves as passive or active. Part of those people, de facto passive job seekers, are declaring themselves as active ones in fear they will be deleted from the list and loose their constitutional right on free health insurance. While talking to employees of Employment Office, you can hear that number of active job seekers varies depending on statements of high-ranking RS Government officials regarding deleting passive job seekers from the list. During the job interviews, these persons say to potential employer that they participate only pro forma.

I’m not sure is it possible to determine approximate number of such cases, but I’m afraid they make too large percentage of the active job seekers. This could, partly, explain wrong perception of Republic of Srpska as area with surplus of unemployed people.

In any case, secondary data should be defined the way that they make easier, instead of they make more difficult proper treatment of the problem they are related to.