For four years since graduating from an economics high school, Slavica Savić of Kozluka has worked in a coffee house and in two shops in Zvornik.
When she couldn’t find a job in her chosen field she joined the black labor market: the pool of unregistered workers who don’t exist in the rolls of a company or in the records of agencies that dispense health care, unemployment or pension benefits.
‘I only cared about having a job’ she said. Retirement is 40 years off for her and at 26 she also can gamble she won’t often need to see a doctor. What was important to her was the 300 KM a month she earned in the shops and the 10 -15 KM a day she picked up in the coffee shop. ‘Who cares about registration?’ Savić adds.
She is far from the only BiH citizen to feel this way. Government counts of the size of the black market are that 241,740 in a workforce of 810,792, or one of every three workers, are not official.
The black labor market has huge consequences for business and society in the country. Professor Fikret Čaušević of the Sarajevo School of Economics called the issue ‘one of the biggest problems’ the new government in BiH will face.
The government is losing some 250 million KM a year, according to some estimates, money that should be flowing into pension funds, unemployment and health care insurance. Some people have given up the thought of retirement while pensioners trying to scrape by on meager monthly allowances are ironically being forced into becoming unofficial workers. Some workers, without rights granted legal workers, are exposed to miseries from mobbing or harassment to arbitrary firing.
BiH’s informal economy is harder on middle-aged workers who are less likely to choose to work on the Black Market than on new workers such as Savić. Older workers care more about insurance and retirement. But their need for a salary for now is the same.
Fifty-one-year-old Drago Đerek from Žepče had a regular job. If everything went as it was supposed to, he should have been able to retire after 30 years spent at the personal safety gear factory Mahnjača in Žepče. But, the company stopped paying contributions for him into the FBiH Pension and Disability Fund 14 years ago. He doesn’t expect to find another job at his age that would pay into the fund, so he has stayed at his old job. ‘I don’t know what to do… I’ve lost everything’ Đerek said.
Fadil Ćosić, at 50, with two children in school and a wife who works in the home, has worked for 30 years at Stolarija, a window and door manufacturer in Zenica. Contributions toward his health insurance and retirement have gone unpaid since 1998. For the past decade, in fact, except for daily meals, factory employees have not seen any money.
Ćosić spends weekends and days when there’s no work at Stolarija doing other jobs and survives by borrowing. ‘I do whatever is in demand and that’s how I get money to pay back what I borrow’ he said. ‘I survive.’
Hospitality worker, Indijad Bajramović, 49, from the Zenica firm “21. Decembar” said that his pension contributions have not been paid since 1998. He mostly just hopes that his 220 KM salary will show up. It has been up to three months late.
‘My spouse works in the same company, so you can judge for yourself how we live’ he said. ‘Our two children are in primary school. We barely make the ends meet. We cannot afford the basic things for kids, not to mention a computer…’
The employees of Inpek, a Zenica bakery, saw the last contributions on their behalf to the pension fund in 2000. The company was privatized but the troubles did not end there. The new owners could not meet their obligations.
‘We have an internal agreement, that if a worker needs to retire, then for that one worker, the contribution is paid’ said employee, Meho Tahirović, ‘How long can it go like that?’
Tahirović commutes from the village of Bistričak, paying 6 KM for a bus ticket. He has two children, a son in the fifth grade, and a daughter who finished elementary school, but he can’t afford her further education. On his 320 KM a month salary he can’t pay for her books.
‘My wife doesn’t work and we barely scrape by. How things are going, it looks like I won’t be able to earn a pension either’ said Tahorović. Inpek’s other 80 employees face the same bleak future.
Fuad Poskić, the bakery’s technical director, said the company was bought out two years ago by the Krehić company and he hopes they will settle the debt.
Sarajevan Redžep Hamza, 60, has worked with Centrotrans MT International freight service, for 41 years. That length of service for one company means legally he could have retired a year ago. But contributions to his pension account have gone unpaid for the past eight years so he keeps on working unregistered. ‘It’s ‘a wretched situation’ he said. ‘What’s there to say?’
Agnesa Pilav, acting director of Centrotrans MT-International says the company has a plan and expects to have all pension debt settled soon, but she did not want to talk specifics.
A survey of 1,550 citizens done in December for the Center for Investigative Reporting in Sarajevo (CIN) by Prism Research found that when asked, ‘What are your plans for the future without health insurance or pension’ 62.4 percent of respondents answer with the same kind of despair. They say they hope things will be different someday.
Debts on hold
Steps toward improving and strengthening BiH’s overall economy and businesses, ironically, have further hurt workers in the short-term.
Under laws both entities passed in 2006, companies struggling to grow were allowed to restructure and to postpone debt payments for up to seven years. Contributions for employee benefits are among the debts put off although the entities have taken different approaches to how far employers can go.
In the RS, employers paying debts immediately can avoid paying interest that has accrued on the debt. In the FBiH, companies paying immediately can get discounts of up to 70 percent of the principle of the debt. However, the discount means that workers are ultimately paying the discount in reduced pensions.
Most union leaders applaud efforts to shore up the economy and say workers will benefit. But not all of them think so. Ranka Mišić, president of the Alliance of RS Unions, said debt restructuring was done to sell off companies more effectively because buyers are more likely to snap up a company if they don’t have to contend with old debt. However, that shifts the burden to the workers and still, investors are not showing up.
‘So I’m not an optimist’ said Mišić.
Unions offer workers little protection
BiH unions do little to help defend workers against employment abuse.
Some union leaders like Šaban Kadirić, president of the union of construction workers in FBiH, believe that directors have ties with politicians and that is why companies don’t get punished for not registering workers.
Governments routinely award big tenders to small, new firms that have at most four or five workers. It is plain, he said, that the only way they will do the work required is by using crews of unofficial workers.
Azra Šehbajraktarević, president of the BiH Trade Union, said that management in private companies effectively shut out unions for fear that they might thwart black market labor. She remembers a threat from one of the owners of a supermarket chain to halve wages if employees unionized.
Some unions have taken action, however. A major report out in December on pension system abuse urged union personnel to learn what was going on so they could act to protect workers.
In early 2006, the RS Alliance of Unions launched ‘Stop Informal Work’ a joint campaign with labor inspectors. The unions passed on all tips from workers about employers not registering workers to inspectors who then visited those firms.
Union and inspection officials said the campaign got results – though neither kept track of how many workers were registered or companies fined as a result.
Council not reforming
Professor Čaušević estimates that the state may be losing 250 million KM a year to the labor market. But the BiH Council of Ministers has no plans to push for change.
Zlatko Hurtić, economic aide to the former Council’s chairman Adnan Terzić, said reform is up to the unions and entity governments, unless it’s brought up on state level, which requires a constitutional change.
Hurtić also blames unions for helping to cause the problem by championing salaries that are too high.
‘If you have the minimum salary at the level above the market one, than it is logical to expect that the employers will pay less, if they can’ said Hurtić.
Another problem is the tax and benefit rate, 69 percent in FBiH and between 42 and 57 percent in the RS. Employers say the high rates encourage black market labor. The Federation rate is among the highest in Europe.
World Bank experts say that BiH market reform is necessary. They recommend: a reduction of 10 percent in the tax rate on employers, a gradual cut in the guaranteed salary, introduction of lower minimum wage for youth workers who face the worst unemployment, cut female unemployment by slashing maternity benefits that are among the most generous in the world, but which discourages employers from hiring women.