At the end of March, the largest national trade union in Bulgaria, CITUB, organised a round table debate, where the representatives of social partners, the government, politicians and research fellows discussed the extent of the 'working poor' phenomenon in the country and measures to mitigate the problem. The participants in the forum discussed the issues relating to the 'working poor' in the context of poverty in Bulgaria in general, as well as from the point of view of 'low-paid workers' and the state’s ability to influence the issue.
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At the end of March, the largest national trade union in Bulgaria, CITUB, organised a round table debate, where the representatives of social partners, the government, politicians and research fellows discussed the extent of the 'working poor' phenomenon in the country and measures to mitigate the problem. The participants in the forum discussed the issues relating to the 'working poor' in the context of poverty in Bulgaria in general, as well as from the point of view of 'low-paid workers' and the state’s ability to influence the issue.
Analysis in Bulgaria for the last 15 years shows that the 'working poor' issue is underestimated. There are neither comprehensive studies of the phenomenon nor information gathering, which would enlighten on the extent and specific features of this section of the population.
The 'working poor' are a high-risk grouping mainly due to the low level of pay. People in Bulgaria working for an average wage and below are at risk of being considered poor. A factor which adds to the situation is the high unemployment rate and demographic ageing of the population, resulting in two non-working dependants per one working member in a household. The failure to link the minimum wage with minimum consumption rates led to an imbalance in the average wage for the country. For the past 10 years the minimum wage has been about 35% of the average wage (in 2004 it was 39.7%), at its lowest value at merely 27.1% in 1997.
Part-time employment does not have a significant impact on poverty. Based on official statistics, only 2.3% of employed people are working in Bulgaria part time (2.7% are women). Part-time employment is not attractive due to its low level of pay. Instead of striving to limit working time, there are tendencies to voluntarily increase working hours and self-exploitation for a higher income.
The extent of 'working poor' throughout the country limits the incentive for reintegrating the unemployed into the labour market. Many unemployed and others entitled to social assistance are not motivated to actively seek jobs, despite the fact that unemployment rates and social payments are low. They prefer to have partial employment and generate income in the 'shadow' sector, thus providing additional means of subsistence while being a part of the formal social protection network.
Official statistics on poverty and working poor in Bulgaria
Using the relative method of EUROSTAT, based on the distribution of households based on their income as equivalent units and a poverty line of 60% of the median equivalised income, results show that the poverty threshold from 1995 to 2004 marks a visible growth trend - from EUR 501 in 1995 to EUR 872 annually for 2004, an increase of 74.1%. At the same time, the poverty level after social transfers throughout the years fluctuates in narrow margins from 13% to 16%, and in 2004 it was 15.3% (Table 1). In other words, using this method, there are between 1.1 and 1.2 million poor living in the territory of Bulgaria in the beginning of the new millennium.
| Year | Poverty threshold in ЕCU/EUR (60% of the median equivalised income) | Poverty level before social transfers (%) | Poverty level, including pensions, before social transfers (%) | Poverty level after social transfers (%) | Gini Coefficient | Quintileratio S80/20 |
| 1995 | 501 | 31.7 | 18.9 | 14.5 | 29 | 4.0 |
| 1998 | 568 | 34.9 | 17.5 | 15.6 | 26 | 3.8 |
| 1999 | 608 | 35.5 | 17.4 | 15.3 | 25 | 3.8 |
| 2000 | 628 | 39.0 | 17.5 | 14.3 | 25 | 3.8 |
| 2001 | 639 | 43.1 | 19.2 | 15.5 | 26 | 3.8 |
| 2002 | 762 | 37.3 | 16.6 | 13.4 | 26 | 3.8 |
| 2003 | 843 | 36.7 | 16.1 | 14.1 | 24 | 3.6 |
| 2004 | 872 | 40.1 | 17.6 | 15.3 | 26 | 4.0 |
Source: NSI
The available data show that in 2001 the poverty threshold per person for Bulgaria is average EUR 639 (or monthly EUR 53.20), with a poverty level of 15.5%. For the new EU Member States, the poverty threshold is significantly higher (two- to threefold) than in our country, and a comparison with the EU15 shows a thirteenfold difference. For the individual states, it is as follows.
| Czech Republic | EUR 1,897 at poverty level of | 8% |
| Hungary | EUR 1,641 | 10% |
| Poland | EUR 1,742 | 15% |
| Estonia | EUR 1,208 | 18% |
| Latvia | EUR 1,124 | 17% |
| Lithuania | EUR 1,215 | 16% |
| ЕС15 | EUR 8,319 | 15% |
It is interesting that pensions as a major social transfer are one of the most significant factors for reducing poverty in Bulgaria. This is due to their relatively high share in the gross household income - 20.6% versus 40% relative weight of salary. Other social payments appear to have a limited impact on reducing poverty. The reasons for this are the economic backwardness of the country, but also the inefficient targeting of funds towards the poor population.
The data in Table 2 show the relative share of poor people by economic activity below the determined poverty threshold. The share of poor in the total number of employed is 5-7%. The proportion of 'working poor' women is relatively higher than that of men (with an exception in 2004).
The share of poor in the self-employed aggregate is within 4-6%. They too can be considered to be 'working poor'. The differences between the shares of poor employed and self-employed throughout the years are insignificant. The quantitative assessment for the working poor on a national scale with a view to these relative values adds up to about 200,000 people, of whom 180,200 are employed and 18,500 are self-employed.
| Indicators (%) | 2000 | 2001 | 2002 | 2003 | 2004 |
| Share of poor | 13.5 | 14.8 | 13.2 | 13.6 | 14.3 |
| Men | 13.2 | 14.3 | 12.0 | 12.0 | 13.0 |
| Women | 15.3 | 16.6 | 14.9 | 16.0 | 17.4 |
| Employed | 5.2 | 6.3 | 5.5 | 6.8 | 6.8 |
| Men | 5.1 | 6.3 | 4.6 | 5.5 | 7.2 |
| Women | 5.3 | 6.4 | 6.5 | 8.1 | 6.3 |
| Self-employed | 4.9 | 6.4 | 6.1 | 4.2 | 6.1 |
| Men | 5.1 | 6.5 | 4.9 | 4.8 | 6.0 |
| Women | 4.5 | 6.2 | 9.0 | 3.0 | 6.4 |
| Unemployed | 31.0 | 33.3 | 31.2 | 30.9 | 33.8 |
| Men | 32.1 | 35.5 | 33.1 | 35.1 | 36.0 |
| Women | 29.9 | 31.2 | 29.3 | 27.0 | 31.9 |
| Pensioners | 12.9 | 13.6 | 12.5 | 14.1 | 14.8 |
| Men | 7.9 | 8.0 | 6.7 | 8.5 | 6.6 |
| Women | 16.3 | 17.3 | 16.2 | 17.3 | 19.8 |
| Other economically inactive | 17.0 | 18.2 | 17.7 | 18.3 | 17.3 |
| Men | 18.1 | 20.2 | 19.1 | 17.5 | 12.9 |
| Women | 16.1 | 16.4 | 16.4 | 19.0 | 20.7 |
Source: NSI, various years
The share of poor unemployed for the period under review is the highest at 30-34%. This is a logical result showing the noticeable interdependence between unemployment and poverty.
The trade unions’ viewpoint
Trade union experts are of the opinion that the main weakness in terms of methodology is the use of relative method, which is unable to provide reliable results for countries with big gaps in living standards. The poverty threshold in Bulgaria, recalculated on the basis of purchasing power parity, is about twofold lower compared to the 10 newly accessed countries and about fivefold lower compared to the EU15. This gives reason to believe that poverty levels calculated with this method are highly underestimated, since with equal price conditions income is twice as low and provides a lower living standard.
With a view to the above-mentioned circumstances, the trade union experts are of the opinion that when assessing poverty as a whole, and the 'working poor' in particular, the relative method should be complemented by an absolute poverty line. Appropriate in this case would be both a study of the consumer basket, as well as the Orshansky method of a standard nutrition component. This would overcome the variation in income and consumption, which are currently calculated into the relative poverty line. Thus, a more 'realistic assessment of income poverty' would be achieved, which affects about 35-40% of households according to the estimates of trade union experts. This would result in the 'working poor', including employed and self-employed, reaching a relative share of 18-20% of all employed, i.e. about 550,000 workers.
Low-paid workers
If we assume that low-paid workers are those with a wage of up to BGN 150 (50% of the average wage for 2004), 24.4% of insured and self-insured persons will fall into this category, i.e. more than 587,000 persons, of whom 535,000 are employees and 52,000 are self-employed (National Social Security Institute (NSSI) data).
The information on characteristics of low-paid workers in Bulgaria is rather limited. Nevertheless, it is possible to group the average wages by industry and branches giving a reliable picture of the ratio to the average wage for the country.
| Industry/branch | Ratio in % of the average wage for the country |
| Below 75% | |
| Agriculture, hunting and related services | 74.4 |
| Forestry, wood industry and related services | 74.4 |
| Agriculture, forestry and hunting | 74 |
| Trade and repair | 73.6 |
| Other activities | 71.1 |
| Production of timber and products thereof | 69.2 |
| Below 67% | |
| Processing industries, not classified elsewhere | 66.3 |
| Production of furniture | 65.9 |
| Lease or hire of motor vehicles, other equipment and property | 63.7 |
| Production of textile and garments | 63 |
| Production of garments, processing furs | 59.7 |
| Production of leather and products thereof | 59.3 |
| Hotels and restaurants | 59.3 |
| Repair of personal and household goods | 56.4 |
| Other services for the population | 54.2 |
| Below 50% | |
| Waste collection and treatment, sanitation activities | 48.6 |
| Fishery and related services | 45.8 |
Source: NSI
There are six sectors in the low pay category:
agriculture and forestry
textile and garments
leather and products
trade and repair
hotels and restaurants
processing industries not classified elsewhere.
These industries fall under the three different thresholds of low-pay used most commonly in European countries (Table 3). In general the main group of working poor is formed within these industries. There are more than 666,000 employees in these sectors, which is 32% of all employees.
Commentary
What measures can be applied to reduce the numbers of 'working poor'? Actions can be in three areas:
Firstly, implementing regulation through minimum wage and defining its reference values. The committee of independent experts on the implementation of the European Social Charter at the Council of Europe has determined that the lowest net wage should not fall below 60% of the average net wage. There is significant potential in Bulgaria for achieving this reference value. Trade unions’ and employers’ opinions differ significantly on this issue. According to the latter, a higher minimum wage increase would lead to increased unemployment, mainly for the low-paid workers.
Secondly, implementing reforms of tax and social insurance benefits for low wages. Two approaches can be used here. The first provides for subsidies for the social insurance contributions of low-paid workers, and the second provides for payment of subsidies to both the employer and the worker in inverse proportion to the increase in wages, up to a certain threshold. As a rule, both approaches stimulate the relief of the income status of 'working poor' and lead to new job openings for long-term unemployed. Employers and trade unions are of similar opinions on this, but government is reserved about its ability to implement such 'expensive' mechanisms at this stage.
Thirdly, introducing measures to protect and stimulate income at household level, i.e. compensating for income distribution between supporting workers and their dependants. The social partners and the government are of the common view that the introduction of a family income taxation would be an appropriate and timely instrument, easing the financial situation of most working poor households, especially those with three or more children.
(Lyuben Tomev, Institute for Social and Trade Union Research)
Eurofound recommends citing this publication in the following way.
Eurofound (2005), Round table on working poor in Bulgaria, article.
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