Банкеръ Daily


The 60/40 measure is just slipshod

There are famous people. Some of them are positively known for their achievements - a famous actor, a famous athlete, a famous politician.

Others are notorious because their lives have destined them to practice in areas not typical for them. Or to practice under someone's orders, which are not taken to heart.


However, there is also a sizeable group - human commercial products - known for being ... known. The focus is on the government measure,aka 60/40, under which the state covers 60% of wages and 60% of workers' insurance.


This measure, which will continue for at least another two months, so praised by the government, has become a good commercial product - a symbol of the authorities’ concern, demonstrated to both business and workers. It is easy to remember andhas  become a hit- well deserved.


The good news covering the measure does not stop. Deputy Prime Minister Tomislav Donchev even announced that the state is ready for even greater participation in the measure. Whatever that means.


"1,000 companies have already benefited from the 60/40 measure. 136,000 people have kept their jobs. This is not a skeptical reaction, but an interest - Donchev answered with figures to the reproaches of the employers that the measure is not effective enough. "It is not a mass measure, it is not for 80% of the companies, it is for those who are experiencing difficulties and with its help they will continue to develop their activity," he said.


A study by The BANKER shows that the measure is really enjoyed mainly by workers. And


 by the trade unions, of course.


"I think it is necessary to expand the measure 60/40 in order to be able to support the newly hired workers. In this way we will also support the tourist season, the employees of the hotels in the seaside resorts, transport, international transport, etc.", said the President of CITUB Plamen Dimitrov.


Employers are more skeptical of this measure. And how couldn’t they be, since they - together with the state - will have to reduce their "body fat" (in the words of Prime Minister Borissov) in order to save employment, and hence their business.


They fell in love with the example of Germany, where the scheme is 60/0, i.e. the state there is saving jobs with wages equal to 60 percent of wages before the pandemic. That's it.

From every point of view, this scheme is unthinkable in BG for a very "intimate" reason. The local employers using pressure on the workers and accounting feints give officially very low salaries on the pay slip, so as not to pay social security contributions. So, if the German model is applied, the Bulgarian state will have to pay


"crown salaries" of BGN 300-400 each,


which is a real misery. While German workers who sign up for as much as they actually receive can still endure for a few months with 60% of their usual income.


In short, the 60/40 tends to blur the shameful truth that employers pay under the table and the state is not searching its taxes and social security money.


Is there an alternative to the 60/40 measure? If you ask famous Bulgarian economists, they will answer in the affirmative. They consider that


the philosophy of support is erroneous.


The state, instead of easing the tax-insurance taxation and leaving the companies to fend for themselves with their released funds, is trying from the position of last resort to scatter money at its own discretion. This is important for the government because it can take a selective approach and fund only those it needs to fund. That is - the right companies (mostly party sponsors), not companies chosen at random. It is for this reason that the program in question has become notorious as


"The program for the oligarchs."


One of the most outspoken critics of the 60/40 measure is the famous economist Krasen Stanchev. He believes the scheme will not do any good, but in general the government's economic measures are in the right direction. The founder of the Institute for Market Economics and a lecturer at Sofia's St. Kliment Ohridski University has argued that only about 2% of companies have taken advantage of the much-touted "lifebelt".


According to the BANKER, in March, about BGN 6 million were distributed under the scheme. If we assume that the money is the same in April, then, so far, the government's "aid" has been about BGN 12 million. That is as much as the money PM Boyko Borissov boasted he had given to the police - as a "bonus" for the job well done.


According to Stanchev, the problem is that the measure does not apply to all companies. Many of them (probably) do not even fall into the group of those affected, although the latter are much more than expected. He is convinced it would be more reasonable for the treasury to give up certain revenues for a long period of time. And the best would be


the abolition of corporate tax.


That is - if the funds that are now due as a corporate tax remain with employers, they will come out on top by BGN 3.1 billion. Much of this money will be invested in real business, new investments and new jobs, after which they will "return" to the budget not less than 600 million levs.


Why 60/40 does not work


The measure shows a narrow and one-sided view of business in Bulgaria. Both the measures and their effect would be relatively efficient for production, but with almost zero effect for a large part of the services sector.  In Bulgaria, however, services represent more than 2/3 of the gross domestic product.


The requirement "more than 50 per cent of employees are hired in sectors and economic activities for which a ban or restriction of activity has been imposed during the state of emergency" implies
that even if your business is directly affected by the measures and prohibitions imposed and  if its activity is not directly forbidden or restricted, you are not subject to compensation.  Compensation is provided only for suspended work, but not for a drop in sales due to the state of emergency.

Only companies that shut down 50% of their personnel can receive compensation. Only that the economy in Bulgaria is anchored mainly in small and medium-sized enterprises, often with less than 10 people of staff and the lack of interchangeability of individual positions. For small businesses, removing 50% of the "establishment plan" can be critical to their existence.


There is no possibility for rotation of employees. Even if you remove 50% of your available workers during the state of emergency, no possible flexibility to change them is taken into account.  If you have four employees in the same positions and with the same salaries, two persons can stay at home and receive the same money as their colleagues who stayed at work  during the state of emergency with all the risks involved.

The employer is required not to lay off any employee within 3 months after the end of the state of emergency. And it is logical for a person to need all his employees or workers in order to restore the production capacity in its full volume.

Employer’s obligation to pay the compensation for discontinued activity is not linked with obtaining receipt  the state aid.  There is no guarantee that an employer applying for state aid will receive it.

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