Unions agree minimum social security thresholds
Published: 4 December 2012
Mandatory registration of individual employment contracts and minimum social insurance thresholds were introduced by the government in 2003 as a measure to combat the informal economy and redress the lack of sufficient employment insurance in Bulgaria.
Annual negotiations among the sectoral social partners in Bulgaria over social security thresholds for 2013 have ended successfully for 58 economic activities. The concluded agreements cover 1,380,100 employees. The average growth rate of the Minimum Insurance Threshold (MIT) – a mechanism introduced by the government in 2003 to increase tax revenues and combat the informal economy – will be 4.54% above 2012 figures. An increase in the statutory minimum wage was also agreed.
Background
Mandatory registration of individual employment contracts and minimum social insurance thresholds were introduced by the government in 2003 as a measure to combat the informal economy and redress the lack of sufficient employment insurance in Bulgaria.
Minimum social security levels for 2013 have now been agreed as the country heads into the fourth year of the economic crisis. The results were deemed satisfactory for all concerned, although for some of the sectors the social partners have agreed on zero growth in 2013. The current economic situation, and the general effect of the economic crisis on different economic activities, have meant that there is a wide variation in the Minimum Insurance Threshold (MIT) with growth rates ranging from zero to 21%.
| Sectors with high MIT growth | Sectors with zero or low MIT growth | ||
|---|---|---|---|
| Manufacture of medical instruments | 21.0 | Beekeeping | 0 |
| Production of knitwear | 15.0 | Passenger and freight rail transport | 0 |
| Manufacture of clothing | 14.3 | Manufacture of beer and malt | 0.4 |
| Manufacture of timber | 9.7 | Postal and courier activities | 0.5 |
| Manufacture of furniture | 9.6 | Road transport | 0.5 |
| Crops and livestock | 9.4 | Hotel, restaurants and tourism | 1.0 |
Social partners’ views
The opinions of the social partners differ on the question of what should be done in the sectors that have not participated in the negotiations, or have not signed an agreement. The sectoral employers’ organisations say the MIT should remain at this year’s level in those sectors, while the two representative unions, the Confederation of Independent Trade Unions in Bulgaria (CITUB) and Confederation of Labour Podkrepa (CL Podkrepa), insist that the average increase of all the sectoral agreements, 4.54%, should be applied.
Employers argue that in times of crisis it may be problematic to impose such an increase because of the danger that it could lead to an expansion of the informal sector economy. Unions argue the opposite, saying the increase in social security resources would facilitate the transition of workers from the informal sector.
Ultimately, the final decision will be made by the Ministry of Labour and Social Policy.
Minimum wage discussed
The minimum wage was also the subject of much discussion and controversy in the National Tripartite Cooperation Council (NTCC). Three of the four national representative organisations of employers, the Bulgarian Industrial Association (BIA), Bulgarian Chamber of Commerce and industry (BCCI) and Bulgarian Industrial Capital Association (BICA), disagreed with the government’s proposed increase in the minimum wage to €155 a month.
Their main concern was that the continuous increase of the minimum wage reduces the gap between it and the average wage, and this discourages high performance at work. The employers also say that at times of crisis, raising the minimum wage could force employers to make further staff reductions.
This dilemma of ‘higher wages or better employment’ was categorically rejected by trade unions. They highlighted the recommendation of the European Parliament, that in times of crisis, governments should set the minimum wage at 60% of the average wage for the country. The benefit of this, according to the European Parliament, is an increase in the security of low income groups in society. In Bulgaria the average wage/minimum wage ratio is below 40%.
Based on these arguments, CITUB proposed raising the minimum wage to a higher level of €165. The government responded that the draft state budget for 2013 had been drawn up on a proposed minimum wage of €155, and CITUB’s proposal could be only considered in the future when it would depend on improvements in the economic situation and budget income.
Commentary
The public and media reaction to the discussions in the NTCC included some unusual suggestions, such as setting and using the minimum wage as a regulator.
The Minister of Finance, Simeon Djankov, put forward the possibility of introducing regional minimum wages, following acceptance by the trade unions and verification of its legality. This option was strongly rejected by trade unions. CITUB President Plamen Dimitrov dismissed this idea as contrary to the principle of ‘equal work – equal pay’. Biser Petkov, Governor of the National Social Security Institute (NSSI), said the ‘practical applicability’ of a regional minimum wage had also been questioned by experts.
The employers further developed the idea of replacing the single minimum wage. Bojidar Danev, Executive President of BIA, said the minimum wage should apply only in state-run companies and organisations. In the private sector, the rate would be set by the market. Vasil Velev, President of BICA, suggested it should be negotiated by sectoral economic activities as a minimum hourly rate.
A question not addressed is that because of the low coverage of collective agreements (35%), what will be in place to protect other workers?
It seems that the only compromise reached among the social partners so far is to retain the single minimum wage, albeit with the option to negotiate and introduce increases at sectoral/branch level. Trade unions insist that the minimum threshold in the sectors should be considered as that minimum wage.
Lyuben Tomev, ISTUR
Eurofound recommends citing this publication in the following way.
Eurofound (2012), Unions agree minimum social security thresholds, article.
