FBiH Government aims to fill pension fund by increasing minimum wage, had to add 511 million KM for pensions in 2024

(Patria) - It has long been warned about the collapse of the pension system because the number of pensioners in FBiH is slightly lower than the number of employed people in the Federation of BiH.

The number of employed people based on employee residence as of November 30, 2024, according to data from the BiH Tax Administration, was 552,148. The Tax Administration of FBiH has not yet published data for the number of employed people in December.

The number of pensioners who received their December pension is 453,900 beneficiaries, for which 298 million KM was needed.

This difference between the number of employed people and the number of pensioners sends a signal to even the biggest economic layman that the pension system could collapse. Statistics are relentless, and the working population is getting older while there is no mass employment.

The decision of the FBiH Government on a minimum wage of 1,000 KM, specifically by nine out of ten ministers present, as Minister Ramo Isak claims 12 days after the decision that he did not support it, will further affect these numbers.

While the federal Prime Minister Nermin Nikšić claims that the money that will flow into the FBiH budget will go to pensions and health insurance, and estimates are that it will amount to 470 million KM annually, it is important to point out that the Government had to add 511 million KM for pension payments during 2024. This is an average of 42 million KM per month.

"Based on the data from the FBiH Tax Administration's estimates, slightly less than 470 million KM will be paid in contributions for PIO/MIO and health. 256 million will be paid to the PIO Fund, and 183 million to the Health Insurance Fund. About 20 million is for the solidarity fund, and the rest is revenue for cantonal health insurance funds. 22 million KM from unemployment insurance goes to the employment fund. Additional revenue for lower levels of government is 76 million KM. The funds we are talking about will come into the Federation's budget but cannot be used for anything other than pensions," said Nikšić.

By increasing the minimum wage and paying the corresponding taxes and contributions, it is evident that employers will fill the budget for pension payments. However, considering employers' announcements of dismissals, reduction in the number of employees, deregistration of workers, and undeclared work, there could be a burden on employment bureaus, which will again require funds that the FBiH Government and cantons will have to provide.

Although it is still too early to talk about the real effects of this decision, and without a set of fiscal laws that would alleviate some of the employers' costs, it is certain that several months of adjustment to the new circumstances will follow.

In addition to all this, the inflation rate will have to rise, so workers will barely feel any wage increase.

The government itself is divided on this decision, and if fiscal laws are not passed in the first quarter of 2025, the number of employed people could significantly decrease.

According to data presented yesterday by the federal Prime Minister, 187,690 workers in BiH receive a salary up to 1,000 KM.