11.03.2024
IN SOME SECTORS, THEY ARE MASSIVELY EMPLOYED ON THE MINIMUM WAGE
The minimum wage is below the means of subsistence. With a high level of discouraged unemployed and negative demographic processes, for 1 working person there are on average 1.5 unemployed people for support. This means that in Bulgaria those working on the minimum wage can fall into the risk zone and be considered poor. This is stated in an analysis of the Economic and Social Council.
According to the preliminary data of the National Statistical Institute, there are 440,320 persons, or 19% of the total number of those employed on a labor and service legal basis, employed on the minimum basic salary for the first nine months of 2023. There is a stronger presence in the private sector, where they represent 23.3% of those employed in the sector, while in the public sector they are 5.8%. The stable retention of around ¼ of those employed on the minimum wage in the private sector is impressive, while the share of those employed in the public sector will decrease by half in the period 2018-2023, the analysis states.
According to its authors, those working on the minimum wage cover the category of low-paid workers and hence make up a significant share of the working poor in Bulgaria. At the same time, those employed on the minimum basic wage are only part of the category of "low-wage workers". The scope is expanded following the definition of employed with pay equal to two-thirds or less of the national median gross hourly wage. If we look at the latest up-to-date minimum wage data (September 2023), there is a concentration of minimum wage earners in certain economic activities. Thus, sectors such as construction, agriculture, trade, transport, administrative and auxiliary activities report a high share of those employed on the minimum wage (or more than ¼ of those employed in the sector), while in other sectors this share is insignificant (e.g. creation and distribution of information, government, education, electricity production and distribution). A characteristic feature of these industries is the presence of a wide gray sector, lack of insurance and non-compliance with labor legislation, which as a rule presupposes the reproduction of poverty in the post-employment period, the Economic and Social Council points out.
They note from there that the net amount of the minimum wage for the country in recent years has remained above the poverty line, but does not correlate with the cost of living.
The government took the first step by adopting an official poverty line based on the SILK (Eurostat) methodology. However, it must be followed by the second, equally important step – the adoption of a methodology/mechanism for updating the minimum payments, for which a working group was created at the Ministry of Labor and Social Policy.
The mode of work and the form of employment are criteria that significantly influence the formation of the working poor category. The risk of poverty for permanent contract workers (8.6% in 2022) is four times lower than for temporary workers (34.7% in 2022 at risk of poverty with temporary work), reports the Council.
According to the analysis, the underemployment factor in Bulgaria has no significant impact on poverty, since according to official statistics, only 2-3% of employed persons are part-time. Part-time employment is not attractive because of the low level of pay. As paradoxical as it may sound, instead of striving to limit working hours, there is definitely an attitude in our country towards a voluntary increase in working hours, as long as this leads to slightly higher incomes in absolute terms.
The risk of in-work poverty varies with household structure. The presence of children, pensioners and people with special needs in the household increases the risk of a household with working members falling below the poverty line. The risk of poverty is highest in households with one worker and dependent children (22.0% working poor in this type of household). A high share of the working poor (12.1%) is also found in Bulgarian households, composed of a) a single worker and b) two or more workers with dependent children. The lowest concentration of working poor in Bulgaria is found in households with two or more working people without children (5.2%). Relative to households of two workers but with dependent family members, there is twice the level of reported working poor.
The Economic and Social Council finds a direct link between low levels of education and skills and low-paid employment and an increased risk of poverty, as many of these jobs are insecure and generally of low quality. They also open the so-called low-wage labor trap - i.e. individuals find themselves in a situation where they choose between unemployment and low pay. On the one hand, the availability of low-wage jobs can provide opportunities for job seekers, but they also lead to low levels of productivity and underutilization of workers' skills, limiting the economic growth and prosperity of the state. The latest available data are for 2018 and they show that in Bulgaria the total level of low-paid workers equals 21.4%, or about 670 thousand persons.
The relative share of the poor before social transfers remained stable in the period from 2018 to 2022, varying between 41.7% and 44.2% in different age groups and by gender. The rise in the poverty rate from 22.9% to 44.2% when social transfers are subtracted shows that this tool prevents low-paid workers from falling into the category of the working poor - especially housing or childcare benefits, plus minimum income guarantee schemes .
The relative share of the poor by region ranges from 12.9% to 33.9%, the analysis states. The leading factors for poverty by region are employment, the share of graduates and minority groups. The large differences in poverty at the regional level relative to the national poverty line, as well as the different factors that exacerbate poverty in individual regions, suggest policies that take these differences into account - especially with regard to labor market and education policies. The highest relative share of the poor relative to the poverty line for the district is in the districts of Stara Zagora - 33.9%, Dobrich - 27.0%, Lovech - 26.8%, and Pernik - 25.5%. The relative share of the poor is lowest in the districts of Shumen - 12.9%, Veliko Tarnovo - 15.8%, Silistra - 16.1%, and Targovishte - 16.2%. Compared to 2021, the areas remain relatively repetitive over the period considered.
The Economic and Social Council reports that there are significant differences in the poverty profile in cities and in villages. Urban poverty has a distinct monetary character, while poverty in villages is primarily associated with access to the labor market, education, healthcare, etc. social services. In villages, natural consumption continues to form a significant part of total consumption at the expense of income from wages or entrepreneurship.
In Bulgaria, the total level of low-paid workers equals 21.4%, or about 670 thousand persons. Gender ratios for low-paid work are largely reversed from the picture in the EU. In Bulgaria, men (23.6%) more often fall into the category of low-paid workers (compared to 19.2% of women), and there are no significant distortions in terms of age differences.
