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How do European minimum wages affect Bulgaria? :: Investor

IME: How do European minimum wages affect Bulgaria?

Photo: Reuters

When an idea is dangerous but populist, it is accepted by logical thinkers as a necessary crime. However, it got worse when the same dangerous idea, again for populist reasons, began to "improve". This is happening minimum wage currently at the European level, experts from Market Economics Institute Adrian Nikolov.

Contrary to the background of a bunch of promises – ranging from limiting and directing migrants, overloading the internet giants and more aggressive climate policies, to renegotiating the main agreements that form the foundation of the European Union (EU), which has disturbed European voters in the campaign. European Parliament, a new policy seems very dangerous for the East European labor market and the competitiveness of new member countries. Here, of course, we are talking about the European minimum wage idea, which has found support for most of the left-wing parties and candidates, and, more surprisingly, the leader of the GERB list for European elections.

Proposal to enter pan-european minimum wage there are, in general, three separate forms.

The first implies the same proportion of minimum wages compared to the average for all European countries, regardless of the level of economic and social development. For example, this is the concept of the European Commission Deputy President French Timmerman, which proposes to be set at 60% of median wages.

A softer version of this approach was proposed by French President Emanuel Macron, who supported it European mechanism to determine the minimum wage without giving details of how it will function.

The most difficult, mostly supported by high-profile candidates, impose the same minimum wage rate for the entire block. The reason for introducing European minimum wages in general is the same – combating income inequality, both between and within European countries, social justice and restoring "damage from neoliberal policies".

Of course, introducing such an approach to determine minimum wages, especially in the most extreme versions, will not solve this problem – on the contrary, it will most likely help deepen them.

The most competitive proposals are easiest to assess, i.e. fixation from a minimum wage of 60% from the median for each country[1].

Unfortunately, structural statistics wages and labor costs National Statistics Institute collected every four years (the latest data available is mine 2014), and that only includes median payments.

However, from the last four editions of this study we found that in Bulgaria the relationship between average and median salary relatively constant – between 69-71%, which allows us with relative accuracy to calculate median wages based on average wages. Given that the average gross monthly salary in 2018 is 1135 leva, this places the median salary for the same year at the level of around 795 leva. As a result, according to the proposed approach to determine minimum wages in the EU, that in Bulgaria in 2018 there should be around 475 levs.

Interestingly, the minimum wage calculated lower than prevailing in Bulgaria in 2018, from BGN 510. In other words, if the proposal for European minimum wages is applied as "exactly 60% of median wages" rather than "at least 60% or more", this means that the minimum wage in Bulgaria needs to be reduced. Given that the relationship between average wages and the median has been quite stable over the past two decades, in practice setting minimum wages as part of median wages will cause retention of MDL growth in Bulgaria and the decline compared to current levels, and proposals from most unions and politicians left wing in Bulgaria.

Although far from ideal, the rigid relationship between the median and minimum wages is close to the idea of ​​introducing a mechanism for establishing MRL rather than defining it through deal between employer, labor union and government. Of course, it is similarly preferred mechanism to include other macroeconomic indicators, but in the case of Bulgaria even the proposed one is preferred over the current approach. But the reduction and retention will hardly occur in practice, at least because there is no clear reason for the EU to ban member states from increasing their minimum wages above the European minimum.

However, the problem with the introduction of a single European method for determining minimum wages came from elsewhere. At this stage of EU development, social policy is almost exclusively in the hands of member states and the way it is led is a direct result of their economic and social development. For the most part, wages are a function of labor productivity, and every attempt to equalize approaches to defining them, between countries with economic structures and fundamentally different levels of economic development, causes significant imbalances.

Even with the simple calculation above, it would appear that the only concrete approach proposed is to stop the growth of minimum wages in Bulgaria, there is no guarantee that the relationship between the median and minimum wages at the European level will be maintained in the future instead of reducing differences. .

On the other hand, we also have to remember the images today European policy. In recent years, we have seen a clearer division of the East-West line, in large part because of the increasingly common position of some Western European countries (the clearest French) that new member countries unfair competition with low taxes and wages, creating "social dumping". For this reason, the rejection of sovereignty in the field of social policy and its delegation of decisions at the European level can be a way to reduce the competitive advantage of Eastern Europe, especially considering that they enjoy support from Macro, which stands high among politics.

If we set aside some of the observations above, proposals for European minimum wages apply to all problems that cause maintenance of MDG policies in general:

Distortion from labor market,

– Closes access to it for lower level workers education, qualifications or experience,

– less work,

Twisting the arm employer, among many others.

In this case, if EU policy focuses on more competition than on more solidarity, the introduction of European minimum wages must be completely abandoned.

In conclusion, for now, we know too little about what is actually behind the proposal for European minimum wages, mainly because it is faster political sloganfrom real political proposal. Obviously, however, it hides the risk of setbacks and dangers mitigation competition, especially for Eastern Europe.


[1] Here we must make the necessary difference between the median and the median wage – the median is the value that divides into two parts equal to a certain number, in this case salary. It is important to note that the median is often different from the arithmetic mean, much lower in the case faced. The average arithmetic value cannot be used as the basis for the minimum wage (MRL), because each increase in MRL will increase it significantly, thus limiting the lowest potential value.

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