Wage growth in Bulgaria outstripping productivity growth – European Commission report

Written by on October 14, 2017 in Bulgaria - Comments Off on Wage growth in Bulgaria outstripping productivity growth – European Commission report

Real wage growth in Bulgaria has been exceeding productivity growth, posing the risk of higher inflation, it has emerged from an annual report by the European Commission.

In the Commission’s annual report, titled Labour Market and Wage Developments in Europe, it is pointed out that real wage growth exceeded productivity growth in the Baltic States, Slovakia and Bulgaria in the 2014 – 16 period.

Bulgarian employers’ organisations have warned for years about the dangerous overruns in labour costs. For this imbalance, they blame the government, which has  been constantly raising the statutory minimum salary.

The European Commission said that in 2016, wages increased in almost all EU countries, including in countries such as Greece and Portugal where they declined in the previous years.

Wage growth was highest (above five per cent) in the Baltic States, Hungary and Romania, member states with comparatively low wage levels, pointing to crosscountry convergence.

Yet in a number of EU countries wage growth has remained modest even as the recovery gained strength, the report said.

In 2016, the increase in euro area wages adjusted for consumer price inflation was stronger than in 2015.

“At the country level, recent developments in real wages were in line with productivity growth in most member states, except for the Baltic States, Bulgaria and Slovakia (where wage growth was faster than productivity growth) as well as Croatia, Malta and Portugal (where wage growth was slower).”

The Commission said that the 2017 edition of the report “confirms the positive labour market trends that have been witnessed in the EU”.

EU employment has surpassed pre-crisis levels with more than 235 million people at work.

Unemployment which now stands at 7.6 per cent tin the EU is also approaching levels prior to the recession.

In addition, the report shows that it has become easier for unemployed people to find a job.

On the other hand, more flexible working arrangements have brought advantages to both firms and individuals, but have led in some cases to a divide between workers holding different types of contracts, with people in temporary employment and self-employment being less well protected.

Meanwhile, the head of the Bulgarian Parliament’s budget committee, Menda Stoyanova of Prime Minister Boiko Borissov’s GERB party, said that the government is planning 2.5 billion leva more spending in the 2018 Budget.

The higher spending was possible because of higher revenue due to Bulgaria’s economic growth. For this year, GDP growth is expected to come in about four per cent, and the same amount in 2018.

Bulgaria’s government intends that greater spending will be directed at three priority sectors – education, defence and security, and social assistance.

Starting September 1, teachers’ salaries will increase by 15 per cent on average, with an additional 330 million leva planned. The increase will be according to the individual assessment of each teacher, not the same percentage. An additional 180 million leva will go to various educational programs, to raising scholarships and for repairs to schools and kindergartens.

Following protests this year by Interior Ministry employees, the Budget is planned to provide 55 million leva more for salary increases. According to Stoyanova, the average increase will be five to six per cent, but this will affect law enforcement officers who are “on the ground”.

An additional 100 million leva will be provided in next year’s Budget for increases in the salaries of military personnel. At the same time, more than 490 million leva will be provided for military modernisation.

The biggest increase will be spending in the social sector. More than a billion leva will be spent next year in the budget for pensions, health care, social services and social assistance. An all-inclusive increase of 3.8 per cent is envisaged.

“The social assistance thresholds will be lifted, which will extend the circle of people who will receive them, while the aid will be really focused on the people who need it and can not take care of themselves,” Stoyanova said.

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