15.12.2022
IN WHICH AREAS AND SECTORS ARE WAGES RISING THE MOST?
Against the background of the continued rise in consumer prices, measures to increase incomes and purchasing power take center stage in the parliamentary debate. Leading at this stage is the proposal for an aggressive increase in the minimum wage, which threatens to even increase inflationary pressure, economist Adrian Nikolov from the Institute for Market Economy writes in an analysis.
The most general idea is provided by data on household income and expenditure as of the third quarter of 2022. At first glance, the average income per person in a household not only reached, but also outpaced the quarterly average inflation as measured by the consumer price index (18%), with the registered growth being 21%. However, this is a direct consequence of the aggressive increase in pensions over the year – recorded growth in pension income was as much as 44% year-on-year, compared to 11% growth in wage income, which was significantly behind the rate of inflation.
Visibly, the dynamics are highly uneven between individual economic activities. Average wage growth lagged inflation in the third quarter by just over 3 percentage points, but there was a significant difference even by ownership type, with the private sector lagging by 2.6 points and the public sector by 5.5.
This mostly reflects a slowdown in wages for a number of public-sector occupations that depend on the state budget, which lacks the flexibility of private businesses to adjust to changes in macroeconomic conditions, the analysis said.
According to the economist, among the individual sectors, the least lagging is in agriculture, public administration and trade, the largest - in health care and education. The large delay in hospitals and schools confirms the observation that the budgetary sphere fails to react in time to the contraction of the real wages of those working in it. In contrast, the outsourcing sector and processing in general are doing relatively well.
However, there is not a single sector of the Bulgarian economy in which the growth of wages exceeds that of consumer prices and realizes an increase in purchasing power.
As well as between industries, the country's 28 regions recorded significant differences in wage growth relative to inflation. As expected, Vratsa is doing the best - with only 0.4 points behind, thanks to the good performance of the energy sector during the year. Vidin, Blagoevgrad and Sofia achieved similar results. On the other side are Smolyan, Razgrad, Yambol and Lovech, where the slowdown compared to inflation is almost 10 points. The remaining areas are located across the spectrum.
The approach applied here, of course, has some obvious weaknesses - the review of economic activities does not take into account the differences in the dynamics of pay for individual positions, in the case of regions - the different price levels in different parts of the country and the potential for a different rate of change. Despite these limitations, however, it demonstrates sufficiently clearly the heterogeneous impact of price growth on workers in individual industries and areas, the analysis says.
This, in turn, has some obvious consequences for the way income policies, and in particular changes to the minimum wage defended through the preservation of purchasing power, are played out. The large differences both in the starting levels and in the rates of development of the country's regions and individual industries require an individual approach to each of them, which takes these realities into account.
Instead, the changes currently under discussion suggest simply tying the minimum wage to the dynamics of the average, which is extremely sensitive to the dynamics of the leading sectors and the fastest growing regions, which will inevitably lead to even greater problems in the least developed and the weakly competitive ones, the economist is categorical.
