Банкеръ Weekly


Government, Unions and Employers To Have Difficult Talks in Tripartite Council

Against the backdrop of continuing protest, the Caretaker government, unions and employers almost unanimously called for emergency measures to hike incomes of people and support labour market. But a consensus between the three heads of social dragon is unlikely to be reached. Partly because each of the three pursues its own objectives, which are largely financially unacceptable to the other two. The new Minister of Social Affairs Deyana Kostadinova has announced that soon she would summon the National Council for Tripartite Cooperation, but it will probably have to sing its old song. This government is not ready, nor is it authorized to provide the much sought after half a billion levs, even if had where to materialize this sum from. Unions decide to ride the wave of mass protests to put a bunch of otherwise reasonable, but unrealistic for now budget requests, which could dangerously empty the state treasury. Employers have indicated that they are not willing to increase salaries and perhaps to a some extent they have right, because such a measure would lead to layoffs and even bankruptcies in many SMEs.

Obviously, the most pressing issue are the emergency measures that caretaker Government should take with regard to the policies on incomes, allowances and benefits for the poorest, most vulnerable Bulgarians. There are several scenarios. The most recent is a discussion about the rise in minimum wage to 340 levs as from April 1, 2013, on which the unions insist. This would be a very good move for the image of the government and a victory for the workers, but it would be detrimental for the bulk of the business. Statistics show that the minimum wage is paid to about 130,000 people in the country. Almost 100,000 of them are employed in the real sector, while the remaining 30,000 are in the state budget sector. It follows that the government should find additional 9 million Levs only to cover the wages of low-paid civil servants by the end of the year. This money will go back into the treasury in the form of increased revenues from social security contributions, so that the state will come out in the black figures. Far more complicated will be the situation for employers, which will be further squeezed by 30 million levs on wage costs, not to mention the increased social security burden. The association of Industrial Capital in Bulgaria has already warned that the administrative setting of increasingly higher minimum wage in the absence of economic conditions (and the agreement between unions and employers) does not consider the financial condition of individual companies and can thus ruin SMEs. Business argues that if the minimum wage is increased to 340 levs, this will diminish opportunities for employment and many companies will head to go to the informal sector. That may be so, but consumption, which is the main economic engine will surely increase, while informal practices still have to evade labour inspectors. Perhaps the compromise option is social partners to negotiate directly differentiated minimum wages in different sectors, taking account of the actual condition of each sphere.

Social Kostadinova Minister pledged that the increase in pensions by an average 9.3 percent from April 1 would not be a bad joke. The budget has envisaged this and there is a sum available for that in the amount of 600 million levs, but a possible jump of 12% of pensions from April 1 as the president of the Podkrepa union Plamen Dimitrov insisted on, will swallow far more than the estimated 100 million levs and may turn out impossible.


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