Social partners agree new poverty line for 2010
Published: 16 February 2010
In late October 2009, the National Council for Tripartite Cooperation (Национален съвет за тристранно сътрудничество, NCTC) discussed and adopted a new poverty line of BGN 211 (about €108 as at 8 February 2010). However, the government decided to maintain the present minimum wage level of BGN 240 (€123) for 2010 rather than follow the practice in force up to now of increasing the minimum wage every year.
At a meeting at the end of October 2009, the National Council for Tripartite Cooperation discussed and adopted a new poverty line of BGN 211 (€108). Despite the trade unions’ insistence on a minimum wage increase, the government with the support of the employers decided to maintain the existing minimum wage level of BGN 240 (€123). This decision was motivated by the need to implement a more strict income policy in times of deep economic crisis.
In late October 2009, the National Council for Tripartite Cooperation (Национален съвет за тристранно сътрудничество, NCTC) discussed and adopted a new poverty line of BGN 211 (about €108 as at 8 February 2010). However, the government decided to maintain the present minimum wage level of BGN 240 (€123) for 2010 rather than follow the practice in force up to now of increasing the minimum wage every year.
Government argues against minimum wage hike
According to the government, the proposal from the trade unions to increase the minimum wage would limit the employment opportunities of the most vulnerable workers in the labour market – that is, low-qualified workers, young people without professional experience or persons employed in the sectors most affected by the current economic crisis. However, during the discussions at the NCTC meeting in October, the government representatives declared their willingness to adopt a more flexible income policy in case of an improvement in the economic situation. Therefore, the minimum wage policy in 2010 will be consistent with the level of economic growth and labour market conditions.
Employers support government decision
The employer organisations fully supported the government’s intention to freeze the statutory minimum wage. According to them, this is a reasonable measure in light of the economic crisis, as otherwise a minimum wage increase could result in job losses. They also highlighted the already agreed new minimum social security thresholds (BG0307101F, BG0609019I) for 2010 at sectoral or branch level as an additional argument against increasing the minimum wage. The average increase in the new social security thresholds amounts to 4.85%. The employers argue that if there had been reserves for increasing the minimum wage, these would have already been exhausted and a new minimum wage hike for the country would be extremely risky.
Trade union disagreement
The Confederation of Independent Trade Unions in Bulgaria (Конфедерацията на независимите синдикати в България, CITUB) declared its disagreement both with the approach taken by the government and employers as well as the level of the minimum wage. According to trade union experts, the comparison of the net minimum wage with the current poverty line displays a very unfavourable trend. In 2008, the net minimum wage (excluding taxes and employee social security contributions) exceeded the poverty line of BGN 166 (€85) by BGN 6 (€3). In 2009, the net minimum wage was below the poverty line of BGN 194 (€99) by BGN 6 (€3). In 2010, the net minimum wage is expected to be lower by BGN 21 (€11) than the officially adopted poverty line of BGN 211.
Impact of minimum wage freeze
The effect of the minimum wage freeze can also be seen by the correlations of the gross minimum wage, the official poverty line and the average gross wage (see table). In 2008, the minimum wage exceeded the poverty line by 32.5% and represented 42% of the average wage, while in 2010 the corresponding rates will be 13.7% and 40%.
| 2007 | 2008 | 2009 | 2010 | |
|---|---|---|---|---|
| Official poverty line (in BGN) | 152 | 166 | 194 | 211 |
| Minimum wage (in BGN) | 180 | 220 | 240 | 240 |
| Average wage (in BGN) | 430 | 524 | 578* | 600** |
| Minimum wage /official poverty line (%) | 118.4 | 132.5 | 123.7 | 113.7 |
| Minimum wage /average wage (%) | 41.9 | 42.0 | 41.5 | 40.0 |
Notes: €1 = BGN 1.96. *For the first nine months of 2009. **Estimates for the first nine months of 2010.
Source: Ministry of Labour and Social Policy (Министерство на труда и социалната политика, MLSP) and National Statistic Institute (Национален Статистически Институт, NSI)
Commentary
The official poverty line was adopted in 2007 for the first time. Since then, two controversial questions have been raised: the first one concerns the applicability of the methodology for the country; the second question relates to the use of the poverty line as a tool for political aims. The social partners have highlighted the advantages and disadvantages of the method of determining the poverty line as 60% of median household income. The mechanisms for binding the poverty line with the minimum wage and the social security system are also debatable. The government cabinet is committed to improving the methodology of determining the poverty line and to defining appropriate political mechanisms for linking the poverty line and minimum wage. However, the current crisis might be a suitable argument for postponing any decisions on these issues until better economic times.
Lyuben Tomev, Institute for Social and Trade Union Research (ISTUR)
Eurofound recommends citing this publication in the following way.
Eurofound (2010), Social partners agree new poverty line for 2010, article.
