strategies for curbing unemployment in bosnia and herzegovina: lessons from ireland and netherlands

International Conference on Economic and Social Studies (ICESoS` 13) Economic Crises and European Union 10-11

May 2013 Sarajevo BIH

1

Strategies for Curbing Unemployment in Bosnia and Herzegovina

Lessons from Ireland and Netherlands

Bičo Azra Faculty of Business and Administration International University of Sarajevo

Hrasnička cesta 15 Ilidža 71200 Sarajevo BiH azrabicohotmailcom

Bajram Narela Faculty of Business and Administration International University of Sarajevo

Hrasnička cesta 15 Ilidža 71200 Sarajevo BiH narela7yahoocom

Abstract

Over the past three decades European countries have been coping with problems of high

unemployment and they need rigid labor market improvements Countries tried to find strategies

to decrease unemployment by using different methods such as wage moderation income tax

cuts tightening of unemployment benefits reduction in barriers to part time work and education

programs This paper examines methods which have been proven to be successful in Ireland and

Netherlands By looking at its implications it tries to give strategic solutions to countries as

Bosnia and Herzegovina since it is coping with the same problem This paper analyzes problems

of unemployment with special focus on the youth unemployment in Bosnia and Herzegovina

Keywords Strategy Curbing Unemployment Ireland Netherland Bosnia and Herzegovina



2

Introduction

Unemployment has been one of the greatest problems in European countries over the past three

decades According to Abel Bernanke and Crushore (2008) unemployment occurs when a

person who is actively searching for employment is unable to find work Other definition by

International Labor Organization is unemployment (or joblessness) occurs when people are

without jobs and they have actively sought work within the past four weeks

Unemployment is often used as a measure of the health of the economy The most frequently

cited measure of unemployment is the unemployment rate

Having a low unemployment rate in countries is of true importance because when a country

keeps its workers as fully employed as possible it achieves a higher level of GDP than it would

if it left many of its workers standing idle (Mankiw and Taylor 2006)

Youth unemployment as one of the key issues of today unemployment is symptomatic for the

developing countries

Bell and Blanchflower ( 2010) argue that the youth unemployment is one of the most pressing

economic and social problems confronting those countries whose labor markets have weakened

substantially since 2008 following the near-collapse of worldwide financial markets

Blanchard and Landier (2000) investigated that unemployment rates can be classified as natural

rate (long run unemployment) and cyclical unemployment (short run unemployment)

Accordingly natural rate of unemployment is the normal rate of unemployment around which

the unemployment rate fluctuates Cyclical unemployment is the deviation of unemployment

from its natural rate

While European countries have been trying to find ways and methods to strategically curb

unemployment rates two of the European counties Netherlands and Ireland have succeeded in

this trial Trough strategic corporation between government worker unions and firm they have

succeeded to overcame the obstacles of high unemployment Methods that two countries used

were at that time radical but they succeeded to stimulate the spending within the economy Labor

market reforms of the two countries were based on negotiations between government and firms

and these changes were consensual These changes also increased participation of women in the

labor force which occurred as result of reform of removal of barrier to part time work Other

reforms that were imposed are wage moderation tightening of unemployment befits since it is

known that higher unemployment benefits lead to a higher wage

Evidence shown that with tightening of unemployment benefits by 1998 the minimum benefit

had been pared to 60 percent of the average wage a decline of 9 percentage points from the early

1980s (Algan and Cahuc 2006)

European countries started a sequence of reforms in the early 1980s based around wage

moderation Real wages per person hour rose less rapidly than elsewhere in Europe and

employment rose more strongly (Barrell and Genre 1999)

Other reforms made the labor market more flexible and many part-time jobs were created The

Dutch can claim to have succeeded in improving their labor market performance Registered

unemployment has fallen sharply as a result of these new style policies but only some of these



3

individuals have moved into employment Increased flexibility moderate real wage growth and

active support for job-seekers all seem to help reduce unemployment and raise employment

Evidence from Ireland and the Netherlands suggests that making work relatively more rewarding

helps to reduce inactivity and unemployment (Watson Halikias Bakker and Martijin 1999)

In this paper my focus will be on these strategies that may reasonably be expected to reduce

unemployment in other European countries By comparing the figures of unemployment I will

show the positive effect of policies implied in two countries and according to fact that Bosnia

and Herzegovina (BaH) copes with same problem propose the same policies that have been

proven to be beneficial in Ireland and Netherlands Therefore the labor market reform has

become a central policy issue for many European countries and there are lessons to be learned

for the further development of other countries

The main purpose of this study is to analyze strategic solutions that will lead to curbing of

unemployment and then to be able to use these solutions in Bosnia and Herzegovina and other

countries which are facing high unemployment rates

Facts and Figures on the Unemployment in Europe

The simplest measure of unemployment is the claimant count It is measured by counting the

number of people who on a given day are claiming unemployment benefit payments from the

government This is one of the easiest and cheapest methods to count for the unemployment

Second method and most reliable method used are labor force surveys Results of survey can be

placed in three categories employed unemployed or not in the labor force

A person who fits neither of the first two categories such as full time ndash student homemaker or

retiree is not in labor force or economically inactive Once the government has placed all the

individuals covered by the survey in category it computes various statistics to summarize the

state of the labor market (Blanchard and Portugal 2001)

Unemployment levels and rates move in a cyclical way largely related to the general business

cycle However other factors such as labor market policies and demographic developments may

influence the short and long-term evolution as well

According to estimations 24667 million men and women in the EU-27 of whom 17405 million

were in the euro area (EA-17) were unemployed in April 2012 Compared with March 2012 the

number of persons unemployed increased by 102 000 in the EU-27 and by 110 000 in the euro

area Compared with April 2011 unemployment increased by 1 932 000 in the EU-27 and by 1

797 000 in the euro area (Eurostat 2012)

Below are listed facts on Europe unemployment

Fact 1 Unemployment was not always high in Europe Institutions were different and the labor

market rigidities have appeared only in the past 40 years Explanation lies in the interaction

between institutions and shocks Some labor institutions may be benign in some environments

more costly than in the others (Blanchard 2006) Employment protection in certain firms

competing is limited and they need to adjust employment in each firm which may be limited as

well so the cost of employment protection may be low But if competition either from the



4

domestic firms or from foreign firms increases the cost of employment protection may become

rather high Firms that cannot adjust their labor force quickly may simply be unable to compete

and may go out of business Thus even if employment protection rules do not change higher

competition can lead to a higher natural rate

Fact 2 Many European countries actually have low unemployment In these countries reason for

it is a stable inflation so the unemployment rate is roughly equal to the natural rate Countries

with rather low unemployment rates are in particular Denmark Ireland and the Netherlands

(Blanchard 2000)

Table 1 Shows the data on the unemployment rate of 18 selected European countries during a

five years time period from 2006 to 2010 Unemployment rate is expressed in percentages out of

total labor force Netherlands and Ireland faced following unemployment rates figures In the

Ireland unemployment rate figures in 2006 amounted to 44 out of total labor force in 2007 it

increased by 02 In 2008 and 2009 these figures continued to grow and reached its peak in

2010 when they amounted to 135 which was one of the highest unemployment rate figures in

whole Europe

Netherlands shows a great example of low unemployment In year 2006 unemployment rate

amounted to 39 in 2007 it amounted to 32 In 2008 the year of global economical crises

unemployment rate amounted to 28 out of total labor force which proves that Netherlands

great unemployment curbing strategies had positive effect In year 2009 unemployment rate

amounted to 34 out of total labor force and in 2010 it increased to 45

Data on the region shows devastating numbers Unemployment figures are highest in Bosnia and

Herzegovina then Serbia and Croatia seems to appear as best in the group of three countries

compared in the region

Table 1 Unemployment Rates on 18 European Countries in Percentages

Country 2006 2007 2008 2009 2010 Country 2006 2007 2008 2009 2010

France 880 800 740 910 930 Austria 470 440 380 480 440

Spain 850 830 1130 1800 2010 Sweden 700 610 610 830 840

Greece 890 830 770 950 1250 Netherlands 390 320 280 340 450

Belgium 820 750 700 790 830 Ireland 440 460 600 1170 1350

Germany 1030 860 750 770 710 Luxembourg 470 410 510 510 440

Portugal 770 800 760 950 1080 Denmark 390 380 330 600 740

Finland 760 680 630 820 840 Bosnia and

Herzegovina

3180 2970 2390 2410 2720

Italy 680 610 670 780 840 Croatia 1110 960 840 90 1180

Great

Britain

540 520 530 770 780 Serbia 2080 1810 1360 1660 1920

Source Authors elaborations of 18 European countries data on Unemployment rate World Ban



5

Why unemployment rates are high

According to Barrell and Genre (1999) major factors that affect labor market rigidities in Europe

are a generous system of unemployment insurance and duration of benefits Generous benefits

may increase unemployment in at least two ways They decrease the incentives the unemployed

have to search for jobs They may also increase the wage that firms have to pay so the higher

unemployment benefits are the higher the wages firms have to pay in order to motivate and keep

workers A high degree of employment protection-by employment protection economists have

in mind the set of rules that increase the cost of layoffs for firms These range from high

severance payments to the need for firms to justify layoffs to the possibility for workers to

appeal the demission and have it reversed (Blanchard 2006)

On the other hand most European countries have national minimum wages In some countries

the ratio of the minimum wage to the median wage can be quite high High minimum wages

clarity run the risk of decreasing employment for the least skilled workers therefore increases

their unemployment rate

One of the reasons for high unemployment is also existence of bargaining rules In the most

European countries labor contracts are subject to extension agreements A contract agreed to by

a subset of firms and unions can be automatically external to all firms in the sector This

considerably reinforces the bargaining power of unions because it reduces the scope for

competition by non-unionized firms Stronger bargaining power on unions may result in higher

unemployment (Howell 2005)

Unemployment in the Netherlands

Netherlands is among the countries that retains the lowest unemployment rate in Euro Zone over

years Figure 1 shows the unemployment rate in Netherlands in percentages out of total labor

force Over the years unemployment rate in Netherlands remains stable In 2001 unemployment

rate amounted to 21 out of total labor force In the next year 2002 unemployment rate

increased to 26 out of total labor force In year 2004 it amounted to 47 out of total labor

force From 2008 which was the year of the global economical crises when everyone expected to

be hit by high unemployment rates Netherlands strategically planned they unemployment

curbing strategies Accordingly unemployment rate in 2009 amounted to 34 out of total labor

force The effect of good strategic planning is also seen in 2010 where the unemployment rate

was 45 out of total labor force when most of countries experienced very high unemployment

rates



6

Source Authors elaborations of Netherlands data on Unemployment rates World Bank

Figure 1 Unemployment Rate in Netherlands in Percentages

Unemployment in the Ireland

Figures show that Ireland has the fifth highest rate of unemployment in the European Union

(Eurostat 2012)These figures are showing that although once powerful strategic planning of

curbing the unemployment in Ireland no longer work in the years of global economic crises

Figure 2 shows unemployment rates in Ireland in percentage out of total labor force In the year

2001 it amounted to 37 out of total labor force Until year 2007 this figure was amounting to

4 meaning until the 2007 these unemployment rates over years were rather balanced in 2007

they amounted to 46 In year 2008 which was the year when the global economic crises

begun unemployment rate amounted to 6 out of total labor force In 2010 figure of

unemployment rate in Irelands was among the highest in Europe reaching devastating 135 out

of total labor force

Source Authors elaborations of Ireland data on Unemployment rates World Bank

Figure 2 Unemployment Rate in Ireland in Percentages

210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Netherlands Unemployment total ( of total labor force)

Unemployment total ( of total labor force)

370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

IrelandUnemployment total ( of total labor force)




7

Unemployment in the Bosnia and Herzegovina

BaH is among countries that have highest unemployment rate in Europe Major reason for it is

the war which devastated entire economy Fact and figures are showing devastating results on

the unemployment In 2006 the unemployment rate in BaH is approximately 318

Unemployment in BaH is one of the most important issues for young people according to the

latest Bosnian government statistics more than 517000 people are out of work - most of them

are Bosnian youth

The education system in Bosnia and Herzegovina has not fully adjusted to meet market needs

When young people finish school they are unable to find jobs leading to discouragement

apathy and social exclusion Data is available from 2006 (Figure 3) and at this year

unemployment rate amounted to 318 out of total labor force In year 2007 unemployment rate

decreased to 297 out of total labor force In year 2008 unemployment rate amounted to 239

out of total labor force while in 2009 it amounted to 241 which presented significant

decrease In year 2010 unemployment rate again increased to 272 out of total labor force

Source Authors elaborations of BaH data on Unemployment rates World Bank

Figure 3 Unemployment Rate in Bosnia and Herzegovina in Percentages

It is a enviable that young people age 15-24 have been hit hard during a recession word wide

High rates of joblessness among young people have been explained in two quite different ways

The traditional view holds that the problem is one of job availability A general shortage of

openings makes it very difficult for some workers to find jobs It takes the unemployed a long

time to find a job The ldquonewrdquo view sees employment instability as the crux of the joblessness

problem‟ The central difference between the traditional and new views of youth unemployment

lies in their conception of turnover The traditional emphasizes the infrequency of job finding

and the consequent lengthy duration of unemployment while the new focuses on the brevity and

frequency of unemployment spells (Clark and Summers 2008)

Table 2 shows youth unemployment rates in BaH from 2006 to 2011The unemployment rates

trough years are extremely high starting from 2006 when youth unemployment amounted to

624 The unemployment rate decreased in following years in 2008 it amounted to 4730

and in 2010 it started increasing again amounting to enormously high 5760

000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

BaH Unemployment total ( of total labor force)




8

Table 2 Youth Unemployment Rate in Bosnia and Herzegovina in Percentages out of Total

Labor force

Indicator Name 2006 2007 2008 2009 2010 2011

Unemployment youth total

( of total labor force ages 15-24)

6240 5860 4730 4890 5760 5750

Source Authors elaborations of BaH data on Unemployment rate World Bank

Strategies for Curbing Unemployment

Curbing unemployment is one of the most difficult tasks for the economy management

Unemployment has remained extremely high despite a range of government policies designed to

attack the unemployment problem

The policies a government uses to reduce unemployment will depend upon what it sees as the

main causes of the unemployment problem (for instance) the government will stimulate a rate of

economic growth that is sufficient to absorb that unemployment and the growth in the labor

force while at the same time holding down the rate of inflation (Perry 2008)

Curbing unemployment can be achieved by implementing very simple steps change the attitude

of people towards labor encourage them to take responsibility for their own future support

people with entrepreneurship spirit provide social assistance to people in need

There are several economic policies to curb unemployment Macroeconomic policies and

microeconomic policies

Under macroeconomic policies are ones that affect the economy as a whole with the aim of

minimizing fluctuation in the business cycle also referred to as demand management or counter

cyclical polices Those are effectiveness fiscal policy monetary policy labor market reform

Effectiveness - these policies are unlikely to reduce the structural unemployment rate it instead

increases inflationary pressure because high economic growth induced by technological change

can result in high structure unemployment Fiscal policies are one of the macroeconomic policies

which can influence resources allocation redistribution income and reduce the fluctuation of the

business cycle Monetary policy involves action by the Reserve Bank on behalf the

government to influence the cost and availability of money and credit in the economy Labor

market reform is using programs to improve the flexibility of the labor market to reduce

structural unemployment

Under microeconomic policies are ones by whom the government improves the resource

allocation between firms and industries Those are industry reform reduction in real wage and

taxation reform

Industry reform is based on encouraging research and development and encouraging innovation

in specific industry this can boost their productivity and growth in that particular industry

Reduction in real wage- by reducing the real wages there will be a higher employment rate but it

can also increase a high unemployment rate in certain industries and a lower real wage will

increase youth unemployment Taxation reform is aimed at improving the investment climate in

countries a higher potential for economic growth and lower the unemployment rate



9

Labor Market Reforms in Ireland and Netherlands

Unemployment remains extremely high in most of Europe and it is believed that it can be solved

only by labor market deregulation

Ireland began a series of labor market reforms in the late 1980sThe reforms were consisted of

limits on wage increases reductions in income taxes a cutback in unemployment benefits and

the adoption of ldquoactive labor market policiesrdquo- policies favoring public job training and

placement programs Recovery was established in two stages The first stage beginning at the

end of the decade and continuing until 1993 involved a stabilization of the labor market and

modest decrease in the unemployment rate The second stage extending from 1993 to the

present saw a spectacular employment boom (Nickell 1997)

Labor market reforms in Ireland were done trough wage moderation income tax reduction and

tightening of unemployment benefits active labor market policies Certainly the most significant

initiative in the early period was a three-year national wage pact the Program for National

Recovery which was supported by employers trade unions and the government the pact limited

annual wage increases to 25 percent between 1988 and 1990

Income tax reduction on the other hand helped out in reducing taxes as in beginning of 1987

with the marginal rate falling from 35 percent to 29 percent by 1991 in the lowest income

bracket and from 58 percent to 48 percent in the highest bracket In the 1980s Ireland‟s ldquotax

wedgerdquo- the difference between the cost of a worker to the employer and the net wage received

by the worker - was the fourth highest in the Organization for Economic Co-operation and

Development (OECD)

The Irish welfare system traditionally provided ldquomore or less permanent support for the

unemployedrdquo with no maximum duration for unemployment assistance As a result of tightening

of unemployment benefits recipients in some age groups have been required to register in a

public employment or training program if they wish to continue to receive benefits after their

first six months on the rolls (Nickel and Ours 2000) Active labor market policies were program

designed to mobilize labor supply improve job skills and to increase efficiency of the labor

market This program had a special focus on the senior citizens who have been unemployed for a

longer period of time in way of reintegrating these citizens into a labor market

Reforms in Dutch labor market started with Wassenaar Agreement of November 5 1982 The

agreement was reached between the government unions and employers One of its reforms was

Wage moderation with its feature of reinforcing the reduction in labor costs was a cut in the tax

that firms pay for each worker especially for low-wage workers

Second Dutch reform was tightening of unemployment benefits The unemployment insurance

system was significantly curtailed in 1986-87 The duration of benefits was reduced from thirty

to six months for younger workers and the replacement rate was lowered from 80 to 70 percent

Because minimum benefits are linked to the minimum wage lowering the minimum wage

reduced the minimum benefit The Wassenaar Agreement helped in removing barrier on part-

time work Unions waived their opposition to part-time work and part-time employees became

eligible for full social security benefits including unemployment insurance and disability



10

insurance The lowering of barriers to part-time work contributed to a large influx of women into

the labor force

Conclusion

Lesson to curb unemployment should lie in generous social protection which should be

consistent with low unemployment It has to be provided efficiently For example unemployment

benefits can be generous as long as the unemployed are forced at the same time to take the jobs

if such jobs are available Some employment protection ndash for example in the form of generous

severance payments - may not prevent low unemployment as long as firms do not force the

prospect of long administrative or judicial uncertainty when they layoff the workers Countries

such as Netherlands and Ireland appear to be more successful in achieving these goals Creating

incentives for the unemployed to take the jobs and simplifying the rules of employment

protection are on the reform agenda of many European governments

Emphasis has also been directed to Ireland‟s experience and its spectacular emergence during

the last couple of decades as the fastest growing economy in the developed world It has been

argued that tax incentives to encourage business development investment in education fiscal

rectitude and labor market policies that hold down real unit labor costs have been of critical

importance in explaining Ireland‟s ascent

Ireland and Netherlands model is efficient it combines high unemployment benefits with low

job protection and high participation rate and relies on strong public-spiritedness I also argue

that other European countries might face difficulties when implementing the Netherlands Model

because the lack of public-spiritedness of their citizens raises moral hazard issues which hinder

the implementation of efficient public unemployment insurance

According to Employment Strategy report of Bosnia and Herzegovina 2010-2014 (2010) here are

three clearly defined objectives and targets

to promote a inclusive and job rich growth and reduction of deficit of productive

employment and decent work (improve the business environment and support the

establishment and development of small and medium enterprises reduce employment in

the informal economy and facilitate the formalization of economic activities productive

use of cash remittances from abroad foster local economic development (strengthen

social dialogue at social level))

improve employability of men and women and especially the most vulnerable

(synchronize the results of the vocational education and training system with the labor

market requirement implement the legal and institutional framework for establishing a

system for adult education and training include entrepreneurial education programs in

educational programs establish the cross-sectored cooperation of social partners in

education)

improve effectiveness efficiency and management of policies and labor market

institutions (improve the preparation monitoring and evaluation of interventions in the

labor market increase the availability of active measures especially for the long term

unemployed disadvantaged youth and low qualified persons modernize and improve the



11

capacity of employment services for the efficient and effective development and

implementation of labor market interventions activate passive interventions in the labor

market improve the statistical system with the purpose of improved creation

implementation monitoring and evaluation of policies and labor market programs)

General conclusion that can be made that if these policies are applied such as wage moderation

tightening of the unemployment benefits imposed on to Bosnia and Herzegovina and other

countries that are facing high unemployment rates the unemployment rates could be

substantially reduced in short period of time In order to make these changes efficient they need

to be consensual the product of agreements between employers unions and the government as

it was in the case of Netherlands and Ireland Many of the advances brought about by the Irish

and Dutch reforms-such as the increased participation of women in the workforce-had occurred

earlier in other European countries Thus the scope for improvement in the unemployment rates

in these countries would undoubtedly be smaller

Once the mentioned labor market reform strategies are implemented in Bosnia and Herzegovina

there is a justified hope that they will lead to a decrease in the natural rate of unemployment in

future



12

References

Abel A B Bernanke B S amp Croushore D (2008) Macroeconomics (6th edn)

Agency for Statistics of Bosnia and Herzegovina (2013) Retreived from httpwwwbhasba

Algan Y amp Cahuc P (2006) Civic attitudes and the design of labor market institutions which

countries can implement the Danish flexicurity model (No 1928) IZA Discussion Papers

Bakker B B Halikias I Martijn J K amp Watson M (1999) The Netherlands Transforming

a market economy (Vol 181) International monetary fund

Barrell R amp Genre V (1999) Employment strategies for Europe Lessons from Denmark and

the Netherlands National Institute Economic Review168(1) 82-98

Bell D amp Blanchflower D (2010) Youth unemployment deacutejagrave vu IZA Discussion Paper No

5673

Blanchard O (2000)The Economics of Unemployment Shocks Institutions and Interactions

London School of Economics Lionel Robins Lectures

Blanchard O (2006) European unemployment the evolution of facts and ideas Economic

policy 21(45) 5-59

Blanchard O amp Landier A (2002) THE PERVERSE EFFECTS OF PARTIAL LABOUR

MARKET REFORM FIXED‐TERM CONTRACTS IN FRANCE The Economic

Journal 112(480) F214-F244

Blanchard O amp Portugal P (2001) What hides behind an unemployment rate comparing

Portuguese and US labor markets American Economic Review 187-207

Clark K B amp Summers L H (1982) The dynamics of youth unemployment In The youth

labor market problem Its nature causes and consequences (pp 199-234) University of Chicago

Press

European Commission Eurostat 2012 Retrieved from httpeppeurostateceuropaeu

Howell D R (2005) Fighting unemployment why labor market bdquoreforms‟ are not the

answer Online Document

Mankiw G amp Taylor M (2006) Economics Thomson Learning

Nickell S (1997) Unemployment and labor market rigidities Europe versus North

America The Journal of Economic Perspectives 11(3) 55-74

Nickell Samp Ours J (2000)The Netherlands and the United Kingdom A European

Unemployment Miracle Economic Policy A European Forum no 30 (April) 135-75

Perry L J (2008) A Comparison of Labour Market Reforms in Ireland New Zealand and

Australia Journal of Economic and Social Policy 12(2) 1

The Organization for Economic co-operation and Development (2013) Retrieved from

httpwwwoecdorg



13

Tille C amp Yi K M (2001) Curbing unemployment in Europe are there lessons from Ireland

and the Netherlands Current issues in economics and finance 7(5)

World Bank (2013) International Economics Dept Development Data Group (1978)World

development indicators World Bank Retrieved from httpwwwworldbankorg



2

Introduction

Unemployment has been one of the greatest problems in European countries over the past three

decades According to Abel Bernanke and Crushore (2008) unemployment occurs when a

person who is actively searching for employment is unable to find work Other definition by

International Labor Organization is unemployment (or joblessness) occurs when people are

without jobs and they have actively sought work within the past four weeks

Unemployment is often used as a measure of the health of the economy The most frequently

cited measure of unemployment is the unemployment rate

Having a low unemployment rate in countries is of true importance because when a country

keeps its workers as fully employed as possible it achieves a higher level of GDP than it would

if it left many of its workers standing idle (Mankiw and Taylor 2006)

Youth unemployment as one of the key issues of today unemployment is symptomatic for the

developing countries

Bell and Blanchflower ( 2010) argue that the youth unemployment is one of the most pressing

economic and social problems confronting those countries whose labor markets have weakened

substantially since 2008 following the near-collapse of worldwide financial markets

Blanchard and Landier (2000) investigated that unemployment rates can be classified as natural

rate (long run unemployment) and cyclical unemployment (short run unemployment)

Accordingly natural rate of unemployment is the normal rate of unemployment around which

the unemployment rate fluctuates Cyclical unemployment is the deviation of unemployment

from its natural rate

While European countries have been trying to find ways and methods to strategically curb

unemployment rates two of the European counties Netherlands and Ireland have succeeded in

this trial Trough strategic corporation between government worker unions and firm they have

succeeded to overcame the obstacles of high unemployment Methods that two countries used

were at that time radical but they succeeded to stimulate the spending within the economy Labor

market reforms of the two countries were based on negotiations between government and firms

and these changes were consensual These changes also increased participation of women in the

labor force which occurred as result of reform of removal of barrier to part time work Other

reforms that were imposed are wage moderation tightening of unemployment befits since it is

known that higher unemployment benefits lead to a higher wage

Evidence shown that with tightening of unemployment benefits by 1998 the minimum benefit

had been pared to 60 percent of the average wage a decline of 9 percentage points from the early

1980s (Algan and Cahuc 2006)

European countries started a sequence of reforms in the early 1980s based around wage

moderation Real wages per person hour rose less rapidly than elsewhere in Europe and

employment rose more strongly (Barrell and Genre 1999)

Other reforms made the labor market more flexible and many part-time jobs were created The

Dutch can claim to have succeeded in improving their labor market performance Registered

unemployment has fallen sharply as a result of these new style policies but only some of these



3










































4








(Blanchard 2000)







whole Europe










Country 2006 2007 2008 2009 2010 Country 2006 2007 2008 2009 2010

France 880 800 740 910 930 Austria 470 440 380 480 440

Spain 850 830 1130 1800 2010 Sweden 700 610 610 830 840


Belgium 820 750 700 790 830 Ireland 440 460 600 1170 1350




Herzegovina

3180 2970 2390 2410 2720

Italy 680 610 670 780 840 Croatia 1110 960 840 90 1180

Great

Britain

540 520 530 770 780 Serbia 2080 1810 1360 1660 1920




5
































rates



6
















210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010



370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







3










































4








(Blanchard 2000)







whole Europe










Country 2006 2007 2008 2009 2010 Country 2006 2007 2008 2009 2010

France 880 800 740 910 930 Austria 470 440 380 480 440

Spain 850 830 1130 1800 2010 Sweden 700 610 610 830 840


Belgium 820 750 700 790 830 Ireland 440 460 600 1170 1350




Herzegovina

3180 2970 2390 2410 2720

Italy 680 610 670 780 840 Croatia 1110 960 840 90 1180

Great

Britain

540 520 530 770 780 Serbia 2080 1810 1360 1660 1920




5
































rates



6
















210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010



370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







4








(Blanchard 2000)







whole Europe










Country 2006 2007 2008 2009 2010 Country 2006 2007 2008 2009 2010

France 880 800 740 910 930 Austria 470 440 380 480 440

Spain 850 830 1130 1800 2010 Sweden 700 610 610 830 840


Belgium 820 750 700 790 830 Ireland 440 460 600 1170 1350




Herzegovina

3180 2970 2390 2410 2720

Italy 680 610 670 780 840 Croatia 1110 960 840 90 1180

Great

Britain

540 520 530 770 780 Serbia 2080 1810 1360 1660 1920




5
































rates



6
















210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010



370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







5
































rates



6
















210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010



370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







6
















210 260360

460 470390

320 280340

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010



370 420 450 450 430 440 460 600

11701350

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







7







are Bosnian youth























000 000 000 000 000

3180 29702390 2410 2720

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010





8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







8


Labor force

Indicator Name 2006 2007 2008 2009 2010 2011



6240 5860 4730 4890 5760 5750




























taxation reform









9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







9





















Development (OECD)






















10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







10


the labor force

Conclusion

































education)







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







11
















future



12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







12

References










5673




policy 21(45) 5-59



Journal 112(480) F214-F244





Press












httpwwwoecdorg



13







13





strategies for curbing unemployment in bosnia and herzegovina: lessons from ireland and netherlands

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