EMPLOYMENT AS A FACTOR OF SOCIO - ECONOMIC GROWTH AND DEVELOPMENT AND STRATEGIES TO INCREASE EMPLOYMENT RATE IN BIH

Summary: Unemployment is the biggest problem to the citizens of Bosnia and Herzegovina, and the unemployment rate, present since the founding of BiH, had even reached a level of 44%. Bureaus are full of workers of different qualifications but in the economy lacks personnel. The few working population receives very low wages that can not provide a decent living. The problem of unemployment seams to be make people feel listless, apathetic and pessimistic. The situation on the labor market in Bosnia and Herzegovina led us to try to find an explanation for this state in terms of economic science and sociology. As a research problem we set up the question: why is unemployment rate so high in Bosnia and Herzegovina, why are wages so low in BiH, how doew unemployment affects men, why are bureaus so full jet the economy is missing workers?

To answer to these questions, we decided to look into the field of economics (especially macroeconomics) and sociology, which has defined the field of research.

The aim of the research that we have set is to explain the problem of unemployment in BiH from economic and sociological aspect by answering the questions set in the problem and, based on the findings made, to give recommendations for its resolution.

Our assumptions, that we believed to be of most importance and that their confirmation or rejection would explain the problem of research, were as follows:

The main hypothesis: The key to high unemployment is located in the low level of economic activity or low gross domestic product.

Supporting Hypothesis 1: Low wages are directly associated with a high rate of unemployment.

Supporting Hypothesis 2: The problem of unemployment is very destructive to the population in general so is also for people in BiH.

Supporting Hypothesis 3: The problem of unemployment and low economic growth rates are associated with the lack of quality of the education system in Bosnia and Herzegovina.

After setting hypothesis we ventured into their checking. We tried to find confirmation of the hypothesis in the proven economic and sociological theory, and subsequently to support it with the specific data for Bosnia and Herzegovina, where possible. For making conclusions, we used the methods of analysis, synthesis, deduction and induction.

On the start, by using the economic relation of real wage W / P = F (u, z), which indicates the existence of a functional relationship in which the height of the real wage (W / P) is inversely proportional to the rate of unemployment (u), we confirmed supporting hypothesis 1: “Low wages in BiH are directly associated with a high rate of unemployment. “

In addition to verifying supporting hypothesis 1, we found that other factors (such as the level of the minimum wage and unemployment benefits) abstracted in the variable (z), which affect the level of real wages have negative features in BiH and contribute to low real wages.

Thanks to Okun’s Law, which establishes inversely proportional and direct link between changes in the unemployment rate and the changes in the average rate of growth of gross domestic product, and the confirmation of its general validity in BiH based on data for the growth rate of GDP and the unemployment rate given in Table 1, we confirmed the main hypothesis: “The key to high unemployment is the low level of economic activity and low gross domestic product.”

Based on sociological researches on the importance of working for the man, according to which a man without a job feel lost and disoriented we confirmed supporting hypothesis 2: “ The problem of unemployment is very destructive to the population in general so is also for people in BiH.“

Using a macroeconomic formula for the aggregate production function, which emphasizes the importance of human capital as a factor of production in conjunction with the fact that the BiH bureaus are full of unemployed but the economy lacks workers, we confirmed supporting hypothesis 3: “The problem of unemployment and low economic growth rates are associated with insufficient quality of the education system in Bosnia and Herzegovina. “

On the basis of the confirmed hypothesis, we concluded that the unemployment problem can only be solved by combining strategies to reform the education system and strategies for starting the economy. When it comes to the education systems we have given a framework to strategic plan for the reform, whereas in case of starting economy, due to the complexity of the process, we didn’t proposed a strategic plan, but we concluded that we should encourage more strategic parts of the economy where Bosnia and Herzegovina has a comparative advantages such are:farming and organic food production , tourism and export-promising branches, and we have listed the measures which the government can use to stimulate economic activity in targeted segments of the economy.

Key words: Unemployment, GDP, Wage,Human capital, Education