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Head Asst.Prof. Atanas Vladikov University of Plovdiv, Bulgaria

07 April 2011 Hotel Dubrovnik, Zagreb, Croatia. Employment Policies in Bulgaria Efficiency Misunderstood & Equity Distorted. Head Asst.Prof. Atanas Vladikov University of Plovdiv, Bulgaria avladikov@gmail.com , http://pu-fisn-sotirova-vladikov.eu. A PRESENTATION OF:. Slide 2 of 18.

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Head Asst.Prof. Atanas Vladikov University of Plovdiv, Bulgaria

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  1. 07 April 2011 Hotel Dubrovnik, Zagreb, Croatia Employment Policies in Bulgaria Efficiency Misunderstood &Equity Distorted Head Asst.Prof. Atanas Vladikov University of Plovdiv, Bulgaria avladikov@gmail.com, http://pu-fisn-sotirova-vladikov.eu A PRESENTATION OF:

  2. Slide 2 of 18 (Source: National Statistical Institute) Structural Changes of Bulgarian Economy (1950-2010)

  3. Slide 3 of 18 (Source: Council of Ministers Project /Fall-2009/) Present Situation Bulgaria DID NOT SIGN SBA with the IMF

  4. Slide 4 of 18 GDP Chained Growth (by Quarters) 2000 - 2010

  5. Slide 5 of 18 (Source: Eurostat) Pre-Accession Labor Market Compostion For Bulgaria (2000 – 2006) * Level of Unemployment is decreasing, but above 10%; * Employed in Services composed half of all employed in the economy;

  6. Slide 6 of 18 (Source: Eurostat) Post-Accession Labor Market Compostion For Bulgaria (2007 – 2008)

  7. Slide 7 of 18 Unemployment: The New Spinning-Up Spiral Jan./2007 – Feb./2011 From about 200,000 Unemployed in 2008, this number reached 368,000 Unemployed in Feb./2011 and keeps going up. Unemployment in Bulgaria is STRUCTURAL by nature. Individuals do want to work, but companies would not be able to sustain the crisis, if they keep their workforce employed for longer periods.

  8. Slide 8 of 18 Monetary Priorities: High Social Price for Low Inflation To keep the Inflation Down (2007=8,4%; 2011=2,4%), Unemployment returned on levels of 2007 (2007=9,7%; 2011=9,7%) 2011 2007 There is high social price for having stable monetary policy!

  9. Slide 9 of 18 Present Labor Market Situation: (Feb./2011)

  10. Slide 10 of 18 Present Economic Indicators For Bulgaria

  11. Slide 11 of 18 Why the Minimum Wage is Important For Bulgaria? • ~ 250,000 individuals are paid the Min. Wage (Trade Union Data); • ~ 25% of Bulgarians live on or below the Poverty Line; • ~ 1,1 mln. retired Bulgarians receive monthly pensions less or equal to the Poverty Line; • All employed on Governmental programs get an amount equal to 100% of Min.Wage; • Monthly allowances per with permanent disabilities (70% of Min.W.); • Monthly allowances per student mothers (100% of Min.W.); • Consumer Fees on Doctors/Dentists/Physicians (1% of Min.W.); • Student Guarantees on Credits (% of Min.W.); • Legal System Cases for Personal Wealth (Times of Min.W.); • Others;

  12. Slide 12 of 18 Present Government Policies Anti-Social, and Anti-EU policies • In contrast to developed economies and some countries from the Central and Eastern Europe, Bulgaria applies ULTRA-NEO-LIBERAL STRATEGY, where budget stability is the primary goal. • A third consecutive Government maintains the following: • Strong deregulations of labor markets (Workers virtually do not have any rights - incorrect understanding of the EU Concept for Flexicurity); • Pressure of growth of wages and pensions; • Dumping tax policy /10% Corporate Tax, and 10% Tax on Incomes of Individuals; This Flat Tax Rate policy favors corporations, at the expense of income of individuals and households/;

  13. Slide 13 of 18 Present National Priorities of Bulgaria • For the previous Government, priority number one was accession of Bulgaria to EU, as a full member state; • For the new Government, priority number one is Bulgaria’s entry to the ERM-II (in 2011), and the EuroZone (in 2013); • Conclusion:Combating the Crisis and Exit-Strategy from it are not a priority. The Government relies on strong restrictive budget measures and strict conformity to the financial discipline, imposed by the Currency Board in order to get stabilization and natural transition to economic growth;

  14. Slide 14 of 18 Three Forecasts for the Rate of Unemployment • The newly elected Government forecast that unemployment would be about 10% on an annual basis (for 2011); • Trade Unions forecast that rate of unemployment will be about 15%for 2011; • Bulgarian Industrial Association (An Organization of Employers) forecast that this rate will be 20%for 2011; The reasons the three forecasts to be different is the problem with inaccurate data collection & interpretation. From methodological point of view, all three forecasts are sound, but in reality, labor market analysts tend to defend greater levels of unemployment (what the reality is) than what the official Governmental analysts forecast.

  15. Slide 15 of 18 Specifics of The Secondary Labor Market in Bulgaria • Different /“alternative”/ modes of employment are utilized /subsidized employment, pay-by-the-hour employment, temporary employment, etc./ • Payment of labor is typically very low; • Often, working time is composed of irregular time intervals or work by accident; • Often, there is a high level of workforce turnover; • Many labor malpractices prevail (payment without social and tax deductions, work abuse, physical punishments, etc.); • It is primarily used in Bulgaria a special instrument, called “National Employment Action Plan” /NEAP/; • In 2009, NEAP was worth 175 mln. BGL (€89 mln.) • In 2010, NEAP was scheduled in two halves- only 65 mln. BGL (€33 mln.), having in mind, that it is scheduled for Q1 and Q2 of 2010; Nothing has been announced for the execution of the second half; • NEAP in 2010 is not a STIMULUS PLAN, but an AUSTERE MEASURE!!!! • NEAP in 2011 is the same as the one in 2010;

  16. Slide 16 of 18 Predominant Scenario for Combating Crisis and Unemployment • Market fundamentalists /who have serious positions among employers and the Government/ believe that unemployment may be combated by: • Further tax and social security reliefs for the business; • Payment (SETTLEMENT) of state dues to the business, based on validated agreements, contracted by the previous government; • Speedy return of VAT back to companies; • Forecast and future actions to stabilize the labor market in the period 2011-2012;

  17. Slide 17 of 18 Additional Alarming Issues For Bulgaria “Alternative” economists and trade-unionists alarm for: • the real danger of jobless economic growth; • possible “lost decade”; • increase of the “working-poor” class; • transfer of crisis costs to employees; • businesses apply “EU-prices”, but preserve “Bulgarian” wages, which distorts the pivotal ratio for competitiveness (w/p); • businesses “leech” economic and purchasing power of workers, through wide-spread labor abusing, and contractual malpractices; • State provide no stimuli for businesses to create sustainable job occupations;

  18. Slide 18 of 18 THANK YOU! • Head Asst.Prof. Atanas Vladikov • University of Plovdiv, Bulgaria • avladikov@gmail.com, http://pu-fisn-sotirova-vladikov.eu

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