Court cuts minimum monthly wage, government raises it

published on 5/21/17 5:06 PM

Photo: BGNES

The Supreme Administrative Court (SAC) has repealed the Decree of the Council of Ministers, which set a minimum monthly wage of 230 euros from 1 January 2017. Previously the minimum salary was 210 euros. The court's decision is not final and may be appealed within 14 days before a five-member jury of the SAC.

Almost simultaneously with this court ruling, the government formally promised that until 2020, the minimum wage will grow by 25 euros each year. The court explained that it repealed the government's decree because it was not discussed in advance with all social partners, employers' organizations in particular. The government will now appeal the court decision and would start consultation with employers, in order to convince them that the move will be beneficial. That is how it seems the government is raising salaries while the court cuts them.

This seemingly procedural legal dispute actually speaks a lot about the Bulgarian economy and its problems. According to official data about 12% of the employed in this country receive and are socially insured on receiving a minimum salary. Actually salaries are higher in reality but not officially declared, causing harm to the social security and pension systems. Many Bulgarian say they need more money now and are not worried about lower pensions in the future as they might not be alive to even receive.This behavior of a large part of the employed in the Bulgarian economy has its explanation. The official minimum wage is so small that no one can live properly if they relied on it. It is not even to pay for heating costs, food and transportation of a normal Bulgarian household. Not to mention having a car, excursions, better clothing, cultural entertainment and books. But employers are reluctant to pay more because social payment burden on their backs are heavy. Experts estimate that these social costs reach nearly 40% of real wages. If a person had an official salary of 1,000 euros, the employer actually spends 1,400 euros. This is unacceptable and many Bulgarian small and medium enterprises cannot afford it. Therefore, the business firmly opposes the policy of automatic and annual increase of the minimum wage, which is what the government plans to do. This brings about very difficult negotiations each year and casts doubt on the otherwise good-looking official intentions. Moreover, business threatened to cut staff and increase unemployment if government policy was actually implemented and insists on wage hikes only on the basis of productivity gains.

On the other hand, higher payment plays a rather positive role because it increases consumption, which is in fact the real and most important engine of economic growth registered in recent years in Bulgaria. It remains the government to convince the business with actions that it is also on the winning side.

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Court cuts minimum monthly wage, government raises it

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