IT Specialists, Regional Development

digital_economy
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Over the past 10 years, the Bulgarian economy has changed dramatically. The manufacturing sector is gradually shifting towards higher value added production. The number of employed in traditional industries, for instance the clothing industry and furniture manufacturing, has dropped significantly.

At the same time, the production of machinery, electrical equipment and auto parts has grown, hence more hired individuals in these sectors.

However, the most remarkable increase of employed in a single industry is not in the classical manufacturing, but in the ICT sector (Information and Communications Technology) – an increase of 31,000 hired for the period from 2009-2017. In the beginning of 2019, this upward trend continues including around 8,000 new jobs in the ICT sector compared to 2017.

The sector deserves our attention not only because it is the most dynamic one in the Bulgarian economy, but also due to other factors.

First, the increase of the employed in the ICT is almost entirely on the account of information technology – around 50,000 individuals are hired in the IT sector, compared to less than 20,000 10 years ago.

Secondly, the highest salaries in the country are in the ICT sector – the average salary is typically close to the maximum insurable income. The trend remains the same for the current year – the average salary exceeds 3000 BGN in March 2019. Thirdly, this is the sector, where the majority of the hired are young and qualified specialists.

The mix of these three factors is quite interesting, because it is new to our economy. This is the first time when a sector was formed within the service industry that was different from tourism, where a great number of young people could earn high salaries without occupying a managerial role.

This is important, because a weak service sector – one that only serves the local community and is not able to provide high salaries, is practically a guarantee of demographic problems. Urban areas in our country are the most dynamic in those regions, where young people could find alternatives that provide high remuneration.

Namely these considerations – demography and urban area – make the regional outlook on the ICT sector important.

Which are the regions that benefit from the increase in the number of employed in the IT sector? Unfortunately, the answer is short. The increase of 31,000 hired for the period from 2009-2017 broken down by regions is the following – rise of 31,000 in Sofia (City), 1,700 in Plovdiv, and 1,100 in Varna.

All other districts have either a slight increase, or even a decline in the number of employed in the ICT sector. This huge concentration in Sofia is one more factor that contributes to the progress of the city, whereas in the other parts of the country, the processes are much harder. 

In fact, one of the most essential questions regarding the regional development in Bulgaria is to what extent the ICT upsurge would affect the other cities in the country? It is important not only income-wise, but also considering the urban area and stopping the outflow of young people, which could be observed even in the top 10 cities in the country.

A positive impact from the ICT expansion is perhaps most visible in Plovdiv.

In 2008, 2,250 people are employed in the ICT sector in Plovdiv and their average salary is relatively high – around 1.4 times higher than the average salary for the district.

However, in 2017 the situation is quite different. The number of employed people in the ICT sector in Plovdiv is 4,000 with salary (close to 2,050 BGN in 2017) that is 2.3 times higher than the average for the district and 2.2 times above the average salary in the manufacturing industry in Plovdiv.

Practically, the development of the ICT sector in Plovdiv had led to the formation of a group of roughly 1,700 young people, who found a well-paid job in the service sector. For the majority, the alternative would be to start a job that pays at least two times less or migrate to the capital city or move abroad looking for a better-paid job.

It does not come as a surprise that within the same time frame, the urban area in Plovdiv has changed – the latter is supported by other factors.

However, in other major cities one could hardly observe the same trend. For instance, in Stara Zagora 690 people are employed in the ICT sector in 2017 with a slight increase only in the last 2-3 years (around 70-80 people). The average salary in the sector barely surpasses the average for the region. Veliko Tarnovo also registers some positive trends.

Within a 3-year period (2015-2017), there is an increase of about 120 hired with an average salary in the sector 1.6 times above the average in the region. The scale is still relatively small to talk about a spillover effect on the local economy and urban area.

As we mentioned in the beginning, in 2019, the number of people employed in the ITC sector continues to grow with roughly 8,000 new hires after 2017. There is still no data what their regional distribution is, therefore we could only speculate.

Indisputably, the majority would be in Sofia, probably we would observe an increase in Plovdiv and Varna. It is unclear whether other districts have managed to achieve growth. It is a fact that some of the smaller district towns in the country, including the north-west region, have different initiatives aimed at developing the ICT sector on a local level.

We have yet to examine whether they will be able to foster more complex process.

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