Impact of economic crisis on social partners and social dialogue

Bulgaria’s industrial relations have been negatively affected by the economic crisis due to a number of problems regarding its economic structures. Among them are the large debts being faced by some companies, along with incomplete restructuring in certain sectors of activity, as well as the country’s significant dependency on external resources for economic growth. Up until now, governments have failed to involve the social partners effectively in developing anti-crisis measures.

General overview

While the situation in the global and European economy are among the main factors influencing the economic crisis in Bulgaria, the effects of a number of domestic problems are also significant. Among them are the large debts being faced by some enterprises, along with the incomplete restructuring in many companies in sectors such as agriculture, mining and manufacturing. The economy also became too dependent on external resources – for instance, most of the country’s banks are owned by foreign banking groups and the majority of investments in production and services were usually made by foreign companies or groups. The low level of suitability of Bulgaria’s education systems to the new labour market requirements and the need for further reforms in healthcare could also be defined as strong and lasting influences on the country’s economic crisis.

The sectors of activity most affected by the crisis are mining, metallurgy and metal extraction, chemicals, construction materials production and construction, clothing and textiles, real estate and, to some extent, tourism. The main noticeable effects of the crisis are the reduction in gross domestic product (GDP) growth, the decrease in production and profits in manufacturing, the slow increase in inflation and the steady rise in unemployment.

Social partner reactions to crisis

Once the first signs of the crisis began to emerge, an intensive discussion was initiated between the social partners regarding the issues of employment, working time and social insurance. The social partners put forward their suggestions for a draft anti-crisis plan, which was not implemented by the previous government, with the exception of some particular measures. Employers mainly suggested measures related to the financial system – including banking, credit and tax measures – as well as measures concerning education and training, along with the restructuring of the social protection system. They also emphasised the importance of technological improvement and the promotion of innovation, including activities focused on the implementation of energy saving products and technologies.

The trade unions focused mainly on labour market policies, incomes policies (including wages in the public sector), and improving education and vocational training. The strategies of the Confederation of Independent Trade Unions in Bulgaria (Конфедерация на независимите синдикати в България, CITUB) also included: actions towards the stabilisation of national finances, including the implementation of full guarantees for deposits; the monitoring of economic development by the government together with the social partners, including tripartite meetings on sector-related issues; the restriction of the informal economy through the extension of sectoral collective agreements’ scope. The trade unions also proposed the extension of the number of companies where reduced working time could be implemented.

Only a few of the social partners’ suggestions – more specifically, those related to citizens’ bank deposits and to the labour market – have been implemented by the former socialist-liberal coalition government, which was in power from July 2005 to July 2009.

Effect of crisis on social dialogue

Social dialogue with the former government has been unsuccessful, with the national tripartite structures operating on too formal a basis even in a period of recession. The government did not discuss the draft anti-crisis programme with the social partners, nor were there programmes addressing the sectoral issues. In November 2008, trade union representatives walked out of the meetings of the National Council for Tripartite Cooperation (NCTC); since then, most of the consultations have taken place only through informal contacts.

According to the trade unions and to some employer organisations, the crisis could deepen because the informal economy is too large and as a result of the insufficient efforts being made by the government to restrict its expansion. Moreover, the insufficient labour market policies and low level of the minimum wage and social benefits could contribute to prolonging the crisis and lead to important repercussions.

At national level, an agreement for the implementation of reduced working time has been negotiated between the former government, employers and trade unions.

Impact on companies

Data regarding the impact of the crisis – including the findings cited in government reports and information from the trade unions, employer organisations and media – have shown that a large number of companies are already experiencing many difficulties, mainly due to the drop in demand for products and services. Some companies have even had to close temporarily. Most employers have tried to prevent bankruptcies through redundancies, working time reduction and other measures such as the implementation of plans for a wage and benefits freeze. This has also provoked tensions in industrial relations, resulting in more difficult and prolonged collective bargaining and even a reduction in the number of trade union members in some sectors. Currently, the employers are calling for the extension of periods for use of part-time work, which were agreed in the first half of 2009.

Response of new government

The tensions between the social partners are likely to continue, given that the new government has announced its intention to implement an anti-crisis programme that would include the temporary freezing of public sector wages, pensions and other social benefits, along with the implementation of redundancies in the state administration. However, the government has managed to revive social dialogue at the national level (BG0907039I) and has also agreed on the possibility of some income increases, which could not be made any earlier than the middle of 2010, if there are enough resources in the budget. In addition, the new government has revised its intention regarding the rapid reduction of the share of employers’ contributions in insurance funds, owing to the strong budget deficit.

Impact of crisis on social partner organisations

The impact of the crisis on the trade unions has not been that distinct thus far. Mergers between the trade unions have been promoted since the late 1990s among affiliates of CITUB, but until now the results have been a long way off the original aims. While some mergers have occurred, a number of splits in national trade union confederations have also been observed. The trade union developments have not only been caused by changes in economic structures and the labour market, but are also linked to inter-personnel relations, local and group interests, along with competition between local leaders for greater influence among workers.

In 2008, a number of splits occurred among trade unions in sectors such as communications and construction. The divisions were attributed to labour market issues and the need for clearer identification and better protection of the interests of trade union members. In some cases, the changes were also provoked by management interference in trade union activities, with the aim of establishing more suitable trade union structures.

A similar scenario is evident among the employer organisations. While some new organisations have appeared, no substantial splits have occurred between them since those that took place in the early 2000s. In addition, many employers are still members of more than one employer organisation, as this is not forbidden by law.

At present, any new mechanism for the recruitment of members seems to be a rare occurrence in the trade unions’ practices. These mechanisms have mainly been used due to an earlier decline in trade union density, which has been observed over the last 10 years. In general, trade union membership and the unions’ financial resources have continued to diminish, particularly since the large number of redundancies in the last year.

Industrial relations issues

Collective agreements and social partnership have been and are mainly focused on working timeissues, notably on short-term work at company level. These issues concern industries such as wood and paper, metal, clothing and construction. Many redundancies have also occurred in metallurgy, while plants have been temporarily closed in the chemistry and paper manufacturing industries. On only a few occasions, training measures for the redundant workers were organised. In some companies, amendments to the collective agreements have been negotiated for the social protection of the redundant workers.

Despite the economic crisis, the trade unions have insisted that they will be calling for higher wages in the new collective agreement negotiations in sectors and companies that have not been as adversely affected thus far, such as the pharmaceutical, food and tobacco industries.

Industrial action

In 2008–2009, a substantial level of industrial action occurred, although the activities were not only related to the effects of the economic recession. Most of the strike activity was related to the potential closure of the Bulgarian steel mill Kremikovtzi AD (Кремиковци) – one of the biggest mills in southeastern Europe. The real collapse of the company began, however, a long time before the beginning of the economic crisis.

In June and July 2009, industrial action also occurred in a number of companies in the metalworking industry, due to the employers’ intention to reduce wage levels and implement redundancies. The activities mainly involved demonstrations and protest meetings. In addition, national protest demonstrations took place on 16 and 26 June 2009. The demonstrations were organised by the country’s two main trade union confederations just before the elections and sought to voice trade union concerns about the crisis as well as proposals for the next government (BG0906029I).

Commentary

Bulgaria’s industrial relations and social dialogue have been affected at a relatively early stage by the economic crisis due to a number of other, older problems regarding its economic structures. The forecasts for the second half of 2009 and for 2010 are so far related to the continuing decline in GDP, ongoing problems for some sectors of activity and an increase in unemployment. Such difficulties could provoke more conflict between the employers and trade unions, along with greater tensions in industrial relations than in previous years.

Ekaterina Ribarova, Institute for Social and Trade Union Research (ISTUR)

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