The minimum wage in Bosnia and Herzegovina is rising, but the cost of living and doing business is growing even faster, experts warn.
In such an environment, thousands of newly founded businesses and limited liability companies (doo) enter the most critical first years of business without system support, clear rules and a safety net.
Financial literacy educator Adela Ramić and entrepreneur Selma Hadžić point out for Forbes that behind the statistics on the growth of the number of companies, a different reality is hidden – exhausted people, a high rate of business failure and fiscal measures that affect micro-entrepreneurs the most.
Three waves of entrepreneurship in Bosnia and Herzegovina
Ramić reminds that BiH has a short and fragile tradition of entrepreneurship, marked by three waves.
The first wave lasted from 2000 to 2008, during privatization and the arrival of foreign capital, but was interrupted by the global economic crisis.
The second wave began between 2016 and 2019, with the development of the IT sector, freelancing and export micro-entrepreneurship, only to be stopped by the pandemic in 2020.
The third wave consists of today’s new entrepreneurs, who most often enter the business with minimal capital and maximum risk.
– “The most stable companies come from the first wave. Micro-entrepreneurs dominate today, but they are also the most vulnerable,” emphasizes Ramić.
Who starts businesses today
According to her, businesses today are most often started by people who have not been able to find a job, people between the ages of 35 and 45 who are disappointed with their career so far, and those who want to invest knowledge and savings before retirement. There are more and more women among them.
Entrepreneur Selma Hadžić warns that the reality is much more difficult than the image that is often presented to the public.
– “Estimates say that even 90 percent of startups do not survive the first years of business. People are not ready for entrepreneurship to mean the loss of free time, security and stability,” says Hadžić.
He adds that startup entrepreneurs work 12 to 14 hours a day, six or seven days a week, without any guarantee of success.
The minimum as an additional impact
The sudden increase in the minimum wage in the Federation of BiH, which came into effect on January 1, is a serious problem for many small businesses.
– “In a system without predictable costs, it is impossible to plan business operations. The consequences are often dismissals or replacement of workers with machines,” Hadžić points out.
Ramić explains this with a concrete example of a self-employed woman who produces bags. In order to pay the minimum gross salary of around 1,687 KM, with a profit of 50 KM per bag, she must sell at least 33 bags per month. If the minimum net salary increases to 1,200 KM, that number increases to 40 bags.
– “Increasing the minimum wage primarily fills the state budget. The entrepreneur then chooses between her own salary and the liquidity of the business,” warns Ramić.
A system without real support
The interlocutors warn that economic decisions in BiH are often made without serious analysis, while creating a false conflict between workers and employers.
– “Entrepreneurs love this country and stayed here to create, but they are not clay pigeons,” says Hadžić.
Ramić reminds that in BiH about 52,000 people work illegally, while legal workers finance the health system, and that the state does not have reliable data on the number of closed companies.
He considers the position of self-employed women to be particularly difficult – a delay in one payment means the loss of health insurance, while liquidation and bankruptcy procedures are expensive and time-consuming.
– “The worst thing is that civil servants sometimes advise people to break the law because they know that the system does not work. This is a defeat for the state,” concludes Ramić, writes NOISE.
