Unions debate jobs and incomes growth

Bulgarian trade unions hosted an international conference on 8–9 March to debate key issues facing the Bulgarian economy and how it can exit the current economic crisis. The conference was attended by trade unionists from the International Trade Union Confederation, and by policy-makers, academics and representatives of a number of international institutions. One of its aims was to widen cooperation between Bulgarian trade unions and international organisations.

Background

On 8–9 March, an international conference called ‘Jobs and incomes – A better deal for Bulgaria’ was organised by the International Trade Union Confederation (ITUC), the Confederation of Independent Trade Unions in Bulgaria (CITUB) and the Confederation of Labour Podkrepa (Podkrepa CL).

There were more than 80 participants and the conference was opened by ITUC General Secretary Sharan Burrow. In her opening address, she said the aim of the meeting was to widen cooperation between Bulgarian trade unions, the International Labour Organization (ILO) and the International Monetary Fund (IMF) on convergence of economic and social parameters to facilitate a faster exit for Bulgaria from the economic crisis.

Ms Burrow stressed the alarming situation of the Bulgarian labour market:

Many jobs were lost due to the recession in 2009–2011 and unemployment could reach 18%–19% at the end of the year (11.5% recently), which would make more young Bulgarians leave the country.

According to Ms Burrow, surviving on a monthly wage of €96 – the minimum wage after tax in September 2011 – was impossible. ‘There must be no fiscal austerity without a credible growth plan,’ she concluded.

Plamen Dimitrov, President of CITUB, argued that there is a need for an explicit strategy for jobs and wages, to respond to workers who are demanding fairness and social security. Negotiations for higher wages remain a priority for CITUB.

Trade unions, he said, will insist on more investment in sectors with higher added value, for example electronics, information and communication technologies (ICT), transport, machine building, tourism, the chemical industry, pharmaceuticals, food and the green economy, and will also demand a more flexible tax policy.

The conference was split into four sessions, each with a panel of international and Bulgarian speakers representing the Bulgarian government, unions, employers, the research community, the ILO, IMF, European Commission and the Organisation for Economic Co-operation and Development (OECD). In their presentations they addressed four main areas:

  • macroeconomic policy;
  • industrial policy;
  • the labour market, wages and collective bargaining;
  • pensions, social protection and social dialogue.

The conference debate highlighted union calls for further reforms in these four areas.

Macroeconomic policy

The core principle relating to current economic policy, reiterated by many of the conference speakers, is that austerity must be shared equitably with the twin goals of fairness and burden-sharing. It is essential to think towards the longer term with policies supporting education, training, innovation and infrastructure. The general view is that Bulgaria’s real interest rates are very high at 10% and could be reduced without undermining monetary policy.

Increased credit is essential for business survival and investment, especially for SMEs. Unions said existing government policy favouring low taxes had not attracted more investment into the country.

Many workers continue to be part of the informal economy (accounting for 32.6% of gross domestic product in 2010) and are thus avoiding paying tax even though they have been significantly reduced. Economic growth could be stimulated by new tax policies and a tax on financial transactions must be introduced.

Industrial policy

There was a broad consensus that the low-wage, low-tax model of successive governments has resulted in poverty, insecurity and migration. Instead, Bulgaria needs to develop industries with higher added valued and higher productivity, requiring more skills and education. According to the ILO, 95% of the country’s workers had received no training in the past ten months, and research and development levels are the lowest in the EU. Major investment is needed in transport, especially rail transport, and in tourism, pharmaceuticals, food and the green economy.

Labour market and wage policy

Labour market and wage policy is key to both long and short-term policies. The Bulgarian labour market is characterised by low competitiveness and slow adaptation to changes. According to CITUB President Plamen Dimitrov, the main reason for low incomes is the unfair primary income formation:

And this is not because of the crisis. The compensation of Bulgarian employees, which includes wages and social security contributions by employers, is 36.5% of GDP compared to a 49.3% average for the EU. Poverty is a big issue and things are getting worse with 41.6% of Bulgarians at risk of poverty.

In the short term, higher wages will have the immediate benefit of stimulating higher consumption and income-led growth. Conference presentations gave statistical evidence that the restrictive wage policy has not helped preserve jobs. Unemployment must be tackled by extending training and apprenticeships, part-time working, workplace rotation, job sharing and job centres.

Pensions, social protection and social dialogue

According to Michael Cichon, Director of the ILO’s Social Security Department, Bulgaria chose to combine labour market flexibility with higher social insecurity. It is one of the few EU countries with an incomplete social protection floor. There is no effective basic income security system, and the unemployment benefit system and social assistance schemes do not reach the majority of the needy.

Its pension system suffers from too high a dependency on the state budget, due to high deficits, and a flawed financing strategy related to the constant decrease in social security contributions. In the period 2006–2010, contributions fell by 15%. This puts too much pressure on the government’s budget, which in turn increases pressure on benefit levels and the retirement age.

The most pressing concern, however, is the question of how trade unions can resist inconsistent government pension policy (BG1112011I). The breach by the government of a tripartite agreement on pension reform, signed in October 2010, has undermined social dialogue. If workers and employers accept austerity in the short term, and agree on reforms in areas like fiscal policy, there has to be trust that the government will respect its side of any agreement.

Commentary

The conference demonstrated that there is a need for a clear social dimension to government policy, and enhanced social dialogue on measures for leading Bulgaria out of the economic crisis.

Nadezhda Daskalova, ISTUR

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