BCCI: Increasing the minimum wage will additionally burden the business

The minimum wage is not a kind of social benefit, but the financial equivalent (consideration) for work done.

Therefore, the minimum wage in Bulgaria must be specified on the basis of the economic indicators in the country determining the financial equivalent of the work done. From this point of view, the comparative indicators for Bulgaria and the average performance indicators of the other EU member states show the following:

   According to EUROSTAT data for 2011, Bulgaria ranks last among EU member states by GDP per capita expressed in Purchasing Power Standards (PPS) (Bulgaria=45, EU27=100) – enclosed is the Eurostat report
   In the second quarter of 2012 in Bulgaria the trend to increase wages and salaries in comparison to other EU member states is preserved. Our country is ranked second by highest annual increase in labour costs – remunerations per 1 worked hours have increased by 5.9% in the second quarter of 2012 in comparison with the second quarter of 2011, while in the EU27 their average growth was 1.9%. Enclosed is the Eurostat report showing the composition of total labour costs (covering wage and labour costs and non-wage costs) in the EU member states for the second quarter of 2012.

The economic results show that the financial equivalent of labour (including of low-qualified labour which remunerated with the minimum wage) is not proportional to productivity, respectively to the growth of GDP.

The comparative analysis with the other EU member states also does not provide sufficient grounds for increase of the minimum wage.

According to Eurostat data:
        in 12 EU member states, including Bulgaria, the minimum wage is determined by the state for all sectors/branches of industry (Spain, Latvia, Lithuania, Luxembourg, Hungary, the Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia and Bulgaria);
    in 9 countries the minimum wage and the minimum hourly rate are not legally determined (Austria, Denmark, Finland, Italy, Sweden, Greece, Iceland, Norway and Switzerland);
    in 5 countries there is a minimum wage and/or minimum hourly rates, but they are different for the various sectors/branches or only for specific sectors/branches/positions (Belgium, the Czech Republic, France, Germany – only for specific branches/sectors and Cyprus – only for specific branches/sectors);
        in 4 countries (Ireland, France, Malta, England) only the minimum hourly rate is determined by the state.

Therefore, in most of the EU member states the minimum wage/minimum hourly rate is determined in a different manner than in Bulgaria.

If the minimum wage must be legally specified in Bulgaria, then only a minimum hourly rate must be specified, which must be different for the various sectors of economy.

If despite all this, the approach a minimum wage to be determined by the Council of Minister is adopted, this must be done in accordance with a previously adopted mechanism specifying the criteria/indicators which should be taken into account when determining the minimum wage on the basis of the economic indicators of our country. Every other approach, including determining the minimum wage on the basis of the average minimum wage in EU27 won’t take into account the business climate in the country and will have an adverse effect on economy.

In a survey held in 2011, BCCI’s members shared their fears that an increase of the minimum wage would cause growth of unemployment and informal economy. Those fears are reflected in the on-going negative trend of employment. According to Eurostat, in the second quarter of 2012 Bulgaria was the country with the highest drop of employment – 1.3% as compared to the previous quarter – enclosed is the Eurostat report.

According to the survey, 5.6% of employers accept the idea of increasing the minimum wage but in order to put it into practice will let go some of their employees, while 14.3% of employers would not dismiss anyone. Around 70% of employers disagree with the proposed increase of the minimum wage. Employees are divided 50-50 in their opinions whether the increase of the minimum wage should be bound with dismissal of staff – 51.22% voted in favour of the idea to lay off personnel. Asked “If there was an administrative increase of the minimum wage, would you increase the wages of all employees proportionally?” 10.4% of polled employers reply affirmatively. The others are against. With employees the percentage is completely the opposite. Around 40% of employers reckon than an increase of wages would cause higher unemployment, and more than 53% think that some companies would transfer in the informal sector of economy.

Practically, increasing the minimum wage will additionally burden the business, which will cause for measures to be taken to compensate it.