IME Press Conference Report: Jobs During Crisis

The Institute for Market Economics (IME) presented its view on the performance of the economy, putting the focus on the labor market and the job creation in a time of crisis.

The latest data from Eurostat shows that more and more European countries are again in a recession and that Bulgarian growth is weakening in the end of 2011. It seems that Bulgaria is also heading towards a recession in 2012. The labor market is in trouble – the unemployment hit 12% in the first months of 2012 and the youth unemployment is above 30%. These negative developments lead us to the labor market policies and measures that are concerning the job creation.

The labor market policies in Bulgaria are predominantly expenditure oriented (trainings, subsidized employment, etc), while the labor legislation and the flexibility of the market is being neglected. The legislative (and bureaucratic) cost levied on entrepreneurs and labor is essential for job creation and this is where the policy shall be focused in a time of high unemployment. Using the words of the Nobel Laureate Christopher A. Pissarides (2010), what we need is “an increase in the flexibility of employment, less taxation (social contributions) of low-wage jobs and less administrative burdens on new entrepreneurs”

In this respect, IME presented its alternative policy towards jobs:

  • Lowering the burden of social contributions on labor – through the reduction of the administratively levied minimum social security thresholds. Our analysis shows that one of every four workers is paying contributions on that administrative minimum;
  • Freezing the minimum wage – poverty in Bulgaria is driven predominately not by low salaries, but by the low level of employment. Official data shows that the risk of poverty is 7 times bigger for the unemployed persons comparing to those that have work;
  • Lowering the administrative burden of labor legislation – this includes paperwork in spheres like health and safety at work, especially for low risk firms/sectors and small enterprises.

More is available in Bulgarian here.


More information:

Petar Ganev

Institute for Market Economics

02/ 952 62 66, 952 35 03