No agreement on pay and benefit increases after months of talks

In March 2011 two Bulgarian trade union organisations submitted a package of seven interrelated measures to increase salaries, pensions and benefits for discussion at the National Council for Tripartite Cooperation. However after three months of talks, employers, unions and government representatives failed to agree on most of the issues. Unions were represented by the Confederation of Independent Trade Unions in Bulgaria and the Confederation of Labour ‘Podkrepa’.

Background

Experts from trade unions, employers and government representatives spent three months in talks at the Commission on Income and Living Standards of the National Council for Tripartite Cooperation (NCTC). Despite this, and broader public debate in the media, the parties still failed to reach agreement on a package of measures proposed by the unions to increase salaries, pensions and benefits.

At its meeting on 23 June 2011, the NCTC reached a consensus on only two decisions out of seven initially proposed by the unions:

• to raise the monthly minimum wage from BGN 240 to BGN 270 (€123 to €138);
• to increase the pension paid to widows from 20% of the pension that was paid to the spouse to 26.5%.

Both measures will be in force from 1 September 2011, but the situation remains unsatisfactory for trade unions.

Trade union proposals

The unions want to see wage growth as well as higher pensions and benefits across the board, and specifically they are demanding:

• negotiations with employer organisations to determine a benchmark index for wage growth in the private sector in 2011;
• increased wages in the public sector by an average of 5.3% for 2009 and 2010, and an increase in the minimum wage from BGN 240 to BGN 290 (€123 to €148);
• an increase in the minimum retirement pension for length of service and old age from BGN 136.08 to BGN 159.50 (€70 to €82);
• an increase in the so-called social pension, paid to those who are not entitled to an old age pension because they haven’t paid social security contributions for long enough, from BGN 100.86 to BGN 105.50 (€52 to €54);
• an increase in the minimum household guaranteed income, used as a basis for calculating social benefits, from BGN 65 to 84 (€33 to €43);
• increased child benefit payable to parents of children under 18, rising from BGN 35 to BGN 45 (€18 to €23) per month.

During the debates, the views of the NCTC and social partners remained irreconcilable, so compromises will have to be reached before there is any agreement.

Trade union representatives stressed the need to increase the minimum wage from 1 July 2011 for two reasons. The net minimum wage level is no longer sufficient to put a full-time worker above the official poverty line of BGN 211 (€108) and the ratio between the minimum and average wage has fallen to 34.8%. Moreover, they argue that increasing the minimum wage would have additional positive effects, such as:

• reducing the grey economy through increasing fiscal revenues and payment of more taxes and social insurance contributions;
• raising consumer spending, which would in turn stimulate Bulgarian production, as people with lower incomes consume mostly essential goods.

Unions say this measure is absolutely necessary for the poorest citizens who have been hardest hit by the financial crisis.

Government reaction

Experts from the Ministry of Finance say that in mid-year the budget would not be able to withstand such high additional costs, as many other payments are linked to the minimum wage, such as healthcare fees, local taxes and government subsidies for political parties. Increasing the Guaranteed Minimum Income and child benefit alone would cost in excess of BGN 100 million (€51 million).

Representatives of the National Social Insurance Institute (NSII) defend the position that if there is an increase only in the minimum pension, it will result in the long-term in the violation of the basic insurance principle based on the social insurance contributions. They would rather recommend the grant of compensation than raising the minimum pension.

In the end, the government’s proposals have prevailed, introducing an increase only in the pension for widows (men/women); about one third of all pensioners receive such pensions. Widowed people will from 1 September 2011 receive 26.5% of the pension formerly received by their spouse, rather than the current 20%.

Disagreement from employers’ organisations

Four employers’ organisations; the Bulgarian Industrial Association (BIA), the Bulgarian Chamber of Commerce and Industry (BCCI), the Confederation of Employers and Industrialists in Bulgaria (CEIBG) and the Bulgarian Industrial Capital Association (BICA), have categorically rejected the proposal of a benchmark index for the wage increases in the private sector. According to them the situation is radically different from three years ago when such an index was first negotiated.

With the exception of CEIBG, the employers’ organisations were also opposed to the idea of increasing the minimum wage, arguing that this would lead to a chain of claims for higher wages in companies and causing further cuts in employment due to the inability of employers to fund the wage bill in times of crisis.

Commentary

Very few of the trade unions’ proposals were adopted, so CITUB announced that they accepted the increase of the minimum wage to BGN 270 (€138) only as a first step, to be followed by a further increase early in 2012.

Between now and then many pressing problems have to be discussed, including the level of child and other social benefits, and the rate of increase of all pensions. It will also be imperative to break the link between the minimum wage and a number of other payments that are not related to work.

Lyuben Tomev, ISTUR