17.03.2022

BULGARIA HAS A RESERVE ON THE LABOR MARKET OF OVER 1 MILLION ADULTS OF WORKING AGE, URGENT POLICIES ARE NEEDED TO INCREASE EMPLOYMENT

Bulgaria has a reserve on the labor market of over 1 million adults of working age, urgent policies are needed to increase employment. A total of 170,000 are young people who neither work nor study, 360,000 are unemployed from ethnic minorities, 290,000 are people, mostly women, who cannot work because they are caring for children or adults in the family. Another 190,000 are unemployed due to illness or disability, and the older unemployed of working age (55-64) are about 340,000.

These are data for 2019, reflected in the final report on a partnership project of the Bulgarian Employment Agency, implemented jointly with the European Commission (EC) and the Organization for Economic Cooperation and Development (OECD).

The report is published on the OECD website. The document is a result of the assessment of the institutional framework and current policies for activating inactive people in Bulgaria under the project "Reforming existing and designing new measures for activating inactive people and their inclusion in the labor market in Bulgaria."

By 2050 Bulgaria will lose nearly a third of its working age population, our country is the fastest declining in the world

Bulgaria faces structural challenges affecting the long-term prospects of its labor market. The unfavorable demographic dynamics, combining rapid population aging and severe depopulation due to low birth rates and emigration, are among the most serious challenges facing the country, the report said.

It recalls that, according to recent forecasts, Bulgaria will lose nearly a third of its working age population by 2050, making it the fastest shrinking country in the world. Until then, one third of adults in Bulgaria will be aged 65 or over, which is likely to lead to labor market shortages and stress on Bulgaria's social security system. Therefore, efforts to create a set of policies designed to maximize employment will be vital to alleviate the effects of a rapidly shrinking workforce, the document said. According to experts, sound and effective labor market policies are needed, which should be evidence-based and take into account the experience of other countries in order to be effective.

In Bulgaria, employment among the highly educated is among the highest in the EU - 89 percent

The second structural challenge facing the Bulgarian labor market is the high degree of its unevenness, the report said. Employment of the highly educated is among the highest in the EU - 89 percent in the group of 15-64-year-olds in 2019, while employment among the low-educated is significantly lower - only 38 percent. Similarly, both employment and wage levels are significantly higher in the economically richer areas than in the poorer and more remote parts of the country, and employment data vary significantly across ethnic groups. For example, the employment of men of Roma origin of working age is 51 percent, compared to 65 percent for men of Turkish origin and 76 percent for ethnic Bulgarians. For women, the differences are even greater: in employment, respectively, 31 percent, 48 percent and 71 percent for women of ethnic Roma, Turkish and Bulgarian origin.

About 900,000 adults of working age are unemployed or inactive, many of them from vulnerable groups furthest from the labor market

Despite the improvements in the labor market achieved by Bulgaria in recent years, there are about 900,000 adults of working age who are unemployed or inactive (excluding students). Among this unemployed population, 15 percent are unemployed (i.e. available for employment and effective job search), and the remaining 85 percent are inactive (i.e. out of the workforce). Although inactivity and unemployment are widespread among many different groups, some sections of the population are particularly affected and are at high risk of becoming or remaining inactive or unemployed, the report said.

Bulgaria is a leader in young people who neither study nor work

These groups include the unemployed, uneducated and untrained young people - NEETs - about 170,000 people in 2019.

Bulgaria has one of the highest percentages of such young people in the EU - 17 percent, compared to 13 percent in the EU, which highlights the need for additional efforts in this area. Young people have been hardest hit by the effects of the COVID-19 pandemic on the labor market. In the second quarter of 2020, the number of 15-24 year olds decreased sharply by 17 percent compared to a year earlier, while the effect on workers aged 25 and over was much smaller and the decrease was only 5 percent. This has again led to an increase in the percentage of NEETs - 18 percent in 2020, compared to the European average of 14 percent.

The analysis of income and living conditions statistics (SILC) shows that about 42 percent of young NEETs are Roma. Activation of NEETs is particularly important because the inability to increase human capital or skills can lead to long-term negative effects, reaching alarming proportions, the report said.

Another high-risk group is the unemployed from ethnic minorities (360,000 in 2019): Roma are affected by much higher unemployment than other ethnic groups and they face many barriers and challenges in terms of their participation in the market of labor. The Turkish community also faces relatively high levels of inactivity, especially among women, albeit to a lesser extent than the Roma community. In total, there are about 240,000 Roma of working age who neither work nor study, and less than a fifth of them are in contact with the Employment Agency. For the Turkish minority, estimates put the number of 123,000 adults of working age who neither work nor study.

Caring for family and family responsibilities is one of the most common reasons for inactivity in the labor market

Unemployed due to caring for close and family commitments are 290,000 in 2019. Caring for close and family responsibilities is the most common reason for inactivity in Bulgaria, in addition to training, the report said. This barrier affects women in particular, who make up the majority of people caring for loved ones and family commitments as their main barrier to not looking for work.

We have the longest leave for mothers, measures are needed to include fathers, as well as more opportunities for a reduced working day

Bulgaria provides one of the longest maternity leave in the EU (more than two years in total, including both maternity leave and less generously paid parental leave). Like most other EU countries, Bulgaria provides much shorter paternity leave (about two weeks), the report said. To encourage fathers to play a greater role in childcare, some countries, e.g. Sweden and Iceland have increased paternity leave, sometimes on a "use it or lose it" basis.

Other policies that can bring about cultural change can also help parents. For example, greater access to affordable care and the ability to work part-time can help parents balance their responsibilities for raising children and their work. However, the number of day care centers is limited, especially in rural areas, and Bulgaria has a culture of full-time work, with less than 2 per cent of workers working part-time, the lowest in the EU. In addition, wages for reduced working hours in Bulgaria are often too low to ensure a decent living, experts say.

Many unemployed women, for family reasons, often face other barriers to participation in the labor market - especially barriers related to skills and experience, including lack of up-to-date professional experience (while raising children), low level of education or previous low-skilled activities, the report said.

Bulgaria has the lowest employment rates among people with health problems

The third group at particular risk is the unemployed due to illness and disability - 190,000 in 2019. Disabilities are a common cause of inactivity, and employment rates for people with health problems are among the lowest in the EU.

Older unemployed people of working age (55-64 years) - about 340,000 in 2019 are the other problem group. Although employment rates for older people are higher than the EU average and have risen sharply in recent years, they remain well below the level for the main adult group. Given the large number of people aged 55-64 who do not work and due to the growing share of older people in the Bulgarian population, the activation of older people would have the potential to contribute to reducing the effects of declining and aging populations and will decide labor shortage problems.

The employment rates of older people (aged 55-64) have increased very significantly over the last decade, from 45% in 2011 to 64% in 2020. This increase is closely linked to the gradual increase in the official retirement age. However, a rapid decline in the labor force in Bulgaria and the need to further increase the work experience of older workers to alleviate labor shortages is projected. Although the employment of 55-64-year-olds is now higher than the EU average, it is still at least 10 percentage points lower than in leading EU countries, experts say.

Among men aged 60-64 who do not work, less than one in six is ​​registered with the Employment Agency, although they have not yet reached the official retirement age. This practice is partly related to financial demotivating factors for working in the pension system, which reduces the desire of older people to work.

The most common barriers to labor market inclusion are related to skills, family care, health barriers and living in remote areas.

The most common barriers related to labor market participation for the inactive and unemployed in Bulgaria are related to skills (limited education or professional experience), barriers related to family (care for relatives), health barriers and geographical barriers (living in remote settlements without a vehicle), the report states.

Certain barriers to the labor market affect some inactive and unemployed groups much more than other groups. A total of 42 percent of the unemployed Roma face a geographical barrier - compared to 21 percent of the total inactive population. Nearly half of the inactive or unemployed aged 55-64 have a significant or long-term health barrier - compared to one third of all inactive and one tenth of all unemployed. In many cases, the inactive and the unemployed face several barriers to employment at the same time.

A total of 75 percent of the inactive and 61 percent of the unemployed face at least two significant barriers to employment - compared to 18 percent of those working.

Different activation solutions are needed to meet the needs of different groups

To help different unemployed groups overcome their barriers, activation solutions should be combined to address multiple barriers and meet individual needs. In particular, in some cases, support from the Employment Agency should be combined with additional services provided by other institutions and aimed at e.g. to barriers of a health nature or social difficulties in order to be effective, the report said.

Bulgaria spends only 0.16 percent of GDP on active labor market policies, less than half of the EU average

Despite significant progress in the Bulgarian labor market over the past decade and despite the COVID-19 pandemic, employment levels in Bulgaria rose from below 60 percent among 15-64 year olds 10 years ago to 68.5 percent at the end of 2021, according to data presented in the report. However, in order to activate as many inactive people as possible, Bulgaria needs to redirect resources to policies that work best and increase support for those most in need, according to the OECD report. Bulgaria spends only 0.16 percent of GDP on active labor market policies (ALMPs), less than half of the EU average (0.39 percent). In addition, two thirds of Bulgaria's spending on ALMPs goes to direct job creation programs, while other types of programs are less common. The OECD recommends a reorientation towards retraining and retraining of workers, as well as targeted programs to support employment in the primary labor market.

The proposals of Bulgarian experts

The Balkan Institute of Labor and Social Policy has been working on the topic of the huge reserve on the labor market for a long time. Our educational system is aimed entirely at young people, and the demographic situation requires it to appeal to the elderly population - schools and universities to offer educational services for adults, said the chairman of the Balkan Institute of Labor and Social Policy Ivan Neykov and Yordan Dimitrov from the institute. Last week, the topic was touched upon again at a forum on the subject.

They report that in the next 20-30 years Bulgarian employers will work with more and more elderly people. If in 2000 100 people leaving the labor market were replaced by about 130 entering, now 100 adults are leaving the active labor force, but only 70 are being replaced.

According to experts from the Balkan Institute for Labor and Social Policy, the over-the-counter workforce faces greater difficulties in adapting to the green transition and digitalisation, and these are the changes we expect to lead to a better standard of living and a competitive economy. It is necessary to invest in human capital, including the elderly population. People need to renew their knowledge and skills at certain periods of their working lives.

The social activity of the elderly population can be maintained through a new insurance risk - long-term care

The Balkan Institute for Labor and Social Policy also proposes to create a new insurance risk - long-term care. This can be done through public or private insurance. According to the experts, a resource should be set aside to finance home help, various integrated social and health services, services for maintaining the social activity of the elderly population. New jobs will be created and providers will be encouraged to provide the services that adults need.

The aging of the population also implies adaptation of the workplace, labor processes and labor legislation, according to the Balkan Institute for Labor and Social Policy. Working hours, the combination of personal and professional life should be different for young and old workers, experts said. They believe that the debate is primarily about raising the retirement age, and may be in the direction of voluntarily staying longer in the labor market and creating conditions for adults to request it themselves.

Another labor reserve is people with disabilities. There are about 100-120 thousand people with disabilities in Bulgaria who have never entered the labor market - neither as unemployed nor as economically active because of their policies, according to the Balkan Institute for Labor and Social Policy. At least 60-80 thousand of them can be activated, so not only will they feel fuller, but they will also contribute to the economy. Experts believe that mothers of children up to the age of three should also be involved, as they lose their work habits and often fall out of the labor market through long motherhood. At the same time, according to Ivan Neykov, long motherhood over the years has not proved to be a working measure to increase the birth rate.

The Balkan Institute for Labor and Social Policy believes that telework should be encouraged because it can solve some of the demographic problems - young people return to their native places and, living in a more favorable atmosphere, have access to larger labor markets - Sofia, Plovdiv or abroad. Our companies can also look for a workforce that lives outside the country, and this will contribute to meeting the stated need of employers of about 200 thousand workers.

According to Ivan Neykov, we have been offering the same tools for 30 years to overcome the deteriorating demographic situation, and in 30 years three generations have changed and each of them comes with a new idea of ​​themselves and the world. He believes that so far the focus has been only on income - child benefits, allowances, etc., which has not changed the demographic picture. The institute proposes to think in the direction of improving social services by financing the care of children at home by outsiders, measures in enterprises to combine work and family commitments, assistance to young parents in the time zones for guiding and collecting children from nurseries and kindergartens.

Government requests

There are already requests from the government for measures to help people with disabilities return to the labor market. The Minister of Social Affairs Georgi Gyokov has repeatedly called for a reform of the TEMP system, and the coalition agreement includes the abolition of the TEMC system and the transition to the International Classification of Human Function, Disability and Health, also known as the ICF. System for retraining and returning people with disabilities to the labor market; encouraging employers to hire people with disabilities by covering part of the insurance; introduction of a system to encourage employers to retrain people with disabilities are among the measures set out in the agreement.

Work will also be done on the connection between education and the labor market. Arranging a facilitated regime of voluntary internships during the summer vacation of students, encouraging the active participation of employers in the programs for additional qualification and retraining, revision of the long-term care strategy.

The Minister of Labor and Social Policy Georgi Gyokov announced that changes in the Employment Promotion Act are forthcoming.