‘Come into the light’ initiative, Bulgaria

About

Country: 
Bulgaria
Target Groups: 
employers/purchasersgovernmentsectoral organisationsworkers/suppliers

 

In 2007, two of the largest representative employer organisations in Bulgaria, with the help of eight national media outlets, united their efforts to bring to light the undeclared or ‘grey’ economy. A special website was set up and – through joint initiatives, publications and information – the employers are trying to provoke a wide public debate in order to overcome the existing problems. The initiative is supported by the state institutions and trade unions.

 

Background

Up to now, different projects and initiatives aiming to reduce the informal or ‘grey’ economy and uncover the practice of undeclared work have been implemented in Bulgaria. For example, such efforts have been made by the Centre for the Study of Democracy, the Confederation of Independent Trade Unions in Bulgaria (CITUB), the International Confederation of Free Trade Unions (ICFTU) jointly with CITUB, and the Confederation of Labour Podkrepa (CL Podkrepa), as well as by state institutions, non-governmental organisations (NGOs) and academic circles. However, the informal economy continues to be a substantial problem that erodes the state, puts society at risk and undermines the pillars of economic prosperity. All interested parties need to unite their efforts in an attempt to make progress on this issue.

The founders and main actors of the current initiative – known as ‘Come into the light’ (Инициатива ,Излез на светло’) – comprise two of the largest employer organisations: the Bulgarian Industrial Association (BIA) and the Bulgarian Industrial Capital Association (BICA). They also include eight media outlets: Bulgarian National Television, Private National Television, Bulgarian Television (bTV) and Nova Television, Bulgarian National Radio, the private national Darik Radio, and the national daily newspapers Trud, 24 Chasa (24 hours) and Sega.

In addition, the following organisations are also associated with the initiative: CITUB, CL Podkrepa, the National Trade Union ‘Promiana’, the Ministry of Labour and Social Policy (MLSP), the Ministry of Finance, the National Revenue Agency (NRA), the General Labour Inspectorate (GLI) and the Bulgarian Economic and Social Council (BESC), as well as companies and NGOs.

Objectives

The main aim of the initiative is to unite the efforts of all organisations and institutions in Bulgaria to make significant progress in combating the grey economy and undeclared work. The following goals may be defined towards this objective, namely to:

  • increase public awareness concerning the negative effect that individuals and society as a whole will experience as a consequence of this problem;
  • publish the activities and experiences of companies and organisations that work in the formal economy as examples of good practice in the fight against the irregular economy;
  • spread initiatives and practices of international experience that successfully opposed the development of the informal economy;
  • offer practical mechanisms to combat the grey economy and to encourage inspections following complaints by users of the project website, www.nasvetlo.net.

Specific measures

The public now receives better information related to actual events and through forums on the website designed by the project initiators. Special links on the website give each user the opportunity to propose practical mechanisms to combat the informal economy, as well as to complain about violations of labour legislation.

In parallel, all of the media involved are engaged in reporting and transmitting articles on the subject. Furthermore, the initiators of the website organised joint forums, including conferences, seminars and information campaigns in cooperation with trade unions, state institutions and NGOs.

Evaluation and outcome

Achievement of objectives

The activity of the participants was encouraging in the beginning. One month after the start of the initiative, a total of 81 complaints were made regarding breaches of labour legislation and 121 infringements were reported. The most common complaints (amounting to 48 cases) concerned employers’ payment of social insurance contributions on the basis of the minimum wage or minimum social security threshold where this was lower than employees’ actual pay. In second place were complaints concerning payment for overtime work (17), while 16 complaints related to unpaid wages and social insurance contributions. Overall, 10 complaints revealed that workers had no employment contract and social security insurance. In addition, five complaints concerned employment contracts signed on the basis of a four-hour working day while the workers actually worked more than 10 hours a day.

In the media, the co-founders of the initiative launched a series of programmes, articles, publications and interviews.

However, it is clear from the website data that activity on the whole slowed down in 2008. This is probably due to the fact that – in parallel with this initiative – the MLSP campaign ‘Work legally’ began in 2008.

Obstacles and problems

The obstacles and problems surrounding the informal economy may be summarised under three headings:

  • psychological – these are the most difficult set of factors, which could be largely overcome by greater public awareness especially among participants in the informal economy;
  • socioeconomic – the low living standard in Bulgaria exacerbates the situation as the grey economy provides an opportunity for earning considerable additional income. The underdeveloped and ineffective public systems, for example in the areas of healthcare, education and pension insurance, also tend to perpetuate strong distrust in these institutions;
  • administrative – a lack of capacity exists at national level to combat the informal economy, often combined with a lack of interest or motivation among state officials to tackle the problem. For this reason, the economy and corruption are directly linked.

Lessons learnt

On 19 June 2007, within the framework of the initiative, the discussion on the informal economy was launched with the participation of the relevant ministers, policymakers and researchers. During the forum, practical proposals were made to combat undeclared work on the basis of the current surveys, accumulated experience and lessons learnt. The recommendations included the following measures:

  • a sharp increase in the minimum social security thresholds;
  • a steady decrease in the tax burden;
  • the establishment of synergies between NRA and other institutions in order to implement correct controls;
  • all payable insurance amounts to be transferred to a state account by means of a payment order;
  • all payments between trade associations to be made through banks and, for this purpose, post terminals to be installed in all businesses;
  • a requirement for all payments to employees – monthly, weekly or bonuses – to be paid through the employer’s bank;
  • all relevant information on payments to be available in one state office;
  • companies in violation of labour law to be excluded from the right to apply for European funding.

The involvement of the leading media in the country has been particularly useful. However, it is surprising that the other four employer organisations besides BIA and BICA are not involved. This is not due to a lack of will to combat the informal economy, but results from the constant tensions and disputes between the employer groups. This problem often arises on the rather fragmented employer side, even on issues of mutually important interest.

Impact indicators

The initiative started on 2 May 2007 when BIA announced in the newspaper Trud that companies are saving about BGN 1.8 billion (€921 million as at 22 January 2009) annually due to the practice of hidden wages. In fact, almost BGN 9 billion (€4.6 billion) in undeclared income is in circulation in the state.

On 27 May 2008, during the roundtable discussion on ‘The grey economy in Bulgaria – Trends and challenges’ organised by the Centre for the Study of Democracy, the Chair of BIA, Bozhidar Danev, outlined the annual results since the beginning of the ‘Come into the light’ initiative. Through the project website, 157 complaints were received: 89 of these were sent to be checked by NRA, while 20 cases were sent to GLI and 36 were sent to both institutions. As outlined above, the majority of the complaints related to the paying of social insurance contributions on the basis of the minimum wage rather than on employees’ actual pay; a further significant number of cases concerned unpaid wages and employers’ social insurance contributions. However, little information was available on the results of the control, especially from NRA: only 31 answers were received, mainly from GLI.

Transferability

The experience is useful but needs to be better supported by the state institutions, especially NRA and GLI. So far, however, they have not had sufficient capacity to combat the informal economy and undeclared work.

Contacts

Main organisations responsible: Bulgarian Industrial Association (BIA) and Bulgarian Industrial Capital Association (BICA)

Website: www.nasvetlo.net

Bibliography

Project website, www.nasvetlo.net

Centre for the Study of Democracy, www.csd.bg

EIRO, ‘Social partners and government launch initiatives to combat undeclared work’, 2008, available online at: /ef/observatories/eurwork/articles/social-partners-and-government-launch-initiatives-to-combat-undeclared-work

Lyuben Tomev, Institute for Social and Trade Union Research (ISTUR)

 

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