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| THE LABOUR MARKET POLICY IN BULGARIA (1990 - 1993)
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THE LABOUR MARKET POLICY BETWEEN THE
DESIRED AND THE POSSIBLE
The formation of a labour market is related to the adoption of an
adequate institutional structure and the accompanying language. The
term 'LMP' does not exist as such in Bulgarian theory and the
practice. The terms in circulation are 'employment policy' and
'unemployment policy', without there being a very strict
distinction between them. In their composite meaning these two
terms cover all means of influencing the labour market. It could be
argued that since the beginning of the reform the unemployment and
employment policy has developed from a passive unemployment policy
which was restricted to mere compensating of the unemployed to a
passive and active unemployment policy and finally to a LMP, whose
foundations are already being set up. It is "a policy which
improves the functioning of the labour market, strengthens labour
supply and facilitates adjustment to structural change and reduces
the risk that sustained expansion."
Given the current economic, political and social situation, it is
only natural that
'post factum'
policy, that is, compensating and assisting those who have already
lost their jobs, cannot cope with the challenge of the reform in
the economy, the privatization and the land restitution. The
regulatory aspect of the employment policy is a subject of
contention and certainly a component of differing political
platforms and philosophies. The problem stems from the background
to all economic and employment policies. Regulation was brought to
the point of absurd elimination of market forces, and therefore the
call for regulation of the labour market is potentially very
dangerous in that it can bring about a restoration of old practices
if employment becomes a starting point in economic policies.
1. Labour Market Developments
The major lines of development of the LMP are determined by the
tendencies of development of the labour market, i.e. labour demand
and supply, employment and unemployment, the variation of the price
of labour, etc..
Labour Supply
Demographic tendencies over the past four years contribute to a
fall in labour supply. Data from the last census
show that the population growth rate as of early 1990 is negative
(-0.4 per one thousand), and in 1992 the figure tops -2.2 per one
thousand. The country's population by 4 December , 1992 is 8 472
724, the population under working age being 21.2 percent, the
working-age population 56.1 and above working age - 22.7 percent.
The number of the working-age population is decreasing, there is a
process of overall aging of the labour force, with the number of
the retired increasing substantially. The ratio working/retired
population is among the least satisfactory in the world, namely
4:3. Bulgaria is among the countries with earliest retirement age:
it is 55 for women and 60 for men. In 1990 a number of professional
groups whose working conditions are detrimental to health were
granted the right to an even earlier retirement age under the
pressure of the trade unions. The entire policy could be termed
'early retirement for the whole population". It did create
condition for full employment but it also placed a time-bomb, which
has already gone off. The retired will be an increasingly heavier
burden on both the state budget (with their demands for higher
pensions) and on the labour market.
Both
emigration and immigration
exert a substantial influence upon labour supply. The mass
emigrant wave following 1989 reduced the population by about 400
000, a considerable portion of those being in their working
age.(Table 1) Seasonal labour migration and the labour migration
organised by state and private labour offices should have an easing
effect upon the labour market. The effect on labour supply,
however, is not felt as lay-off rates are very high.
There are no exact data on immigration so far. According to data
disclosed by the Ministry of internal affairs, there were
approximately 50 000 foreigners in Bulgaria as of the end of 1992.
Illegal immigration is becoming one of the gravest challenges to
LMP.
An important factor contributing to the increase of labour supply
is the recent tendency for students to leave school at an earlier
age. The number of school droppers is increasing : according to
data from the Ministry of education, in 1992 they were 12 000. This
poses problems to the quantity, as well as the quality of the
labour force.
And yet, there is a tendency of increase in the number of
university and semi-higher institutions graduates over the past
five years. In 1985 their share was 8.2 percent , and at the end of
1992 the figure was 10.2 percent . The share of high-school
graduates rose from 24.7 to 31.0 percent, and the share of
junior-high school graduates and lower decreased. (Table 2)
Labour Demand and Employment
The fall in the economy by 9.1 percent of the 1990 GDP, 16.7 of the
figure for 1991, and 18 percent of the 1992 GDP resulted in a
dramatic decrease in labour demand and employment. There is hardly
any other post communist country where employment in the state
sector has decreased by 39.5 percent over a period of only three
years, which if expressed in numbers means that 1 723 121 employees
have left the state sector. It obviously is an extremely
wide-ranging restructuring of employment.(Table 3)
Employment figures are lower in industry whereas the same figures
for services and procurement are on the increase. Labour demand in
the private sector is concentrated mostly in this branch.
Uneven reform and restructuring processes result in a wave-like
mass layoffs. Following the dissolution of the cooperatives and the
fact that it preceded the actual restitution ( that is, giving the
land back to its former owners), a total of 100 percent of the sand
became state property at the end of 1989. It was another source of
tension at the labour market in the spring of 1992. Former
land-owners had not taken their land yet but as their jobs in the
cooperatives had already been lost they had to register as
unemployed in the labour offices.
Staff reduction is still a major mechanism for reducing employment
in the state and the cooperative sector. Going on unpaid leave
because there is no work to do in the enterprise is an ever
spreading phenomenon with already threatening proportions. Only
during February of this year some 30 000 were on unpaid leave on
the employers' demand. The closing-down or reorganisation of
loss-making enterprises has not started yet practically. The single
experience of the uranium industry proved to be a failure.
Loss-making enterprises and those which have temporarily suspended
work because of lack of supplies and markets, are still getting
bank credits and budget subsidies. There is insufficient courage
and expertise in the country's government to close down or
reorganise loss-making state enterprises. It is the most painful
and also the crucial issue of the reform.
Data on labour demand through the offices show that over the last
year the monthly vacancies do not exceed 10 000. There were 7 674
vacancies in February, with 32.6 per cent skilled blue-collar
vacancies , 16.0 unskilled blue-collars, and 40.4 percent white
collar vacancies.
Unemployment
The level and structure of unemployment since official registration
began in 1989 have been changing dynamically and the overall
tendencies have remained rather ambiguous. For instance, during the
second half of 1990 and the first half of 1992 female unemployment
was higher than male. It topped 67 percent of all unemployed and
consequently misdirected the policy in this sphere. In this context
the LMP should be based on long-term rather than short-term
forecasts and tendencies. The policies in this sphere should be
based on global economic and social analyses, for which there is an
obvious shortage of financial resources.
The main tendencies of development of unemployment during 1991 and
early 1993 are the following(Table 4):
- be it more slowly, the number of unemployed and the level of
unemployment are on the increase. By the end of February, 1993 the
unemployment rate was 15.3 per cent from the active population.
- starting from early 1992 , the number and the percentage of
unemployed without profession and of uncompleted education has been
on the increase. While in 1990 it was 9.2 per cent, in February of
1993 it was 52.1, that is we could postulate a transition from the
previous unemployment of the 'educated'.
- the irregularity of the factors for unemployment determines the
uneven regional distribution of unemployment . Unemployment figures
in certain municipalities is a mere 3 -4 percent whereas elsewhere
it exceeds 45 percent.
- although young people tend not to register with labour offices,
existing data prove their increasingly disadvantageous position on
the labour market. At the end of February they are 41.8 percent of
all registered as unemployed.
- 1990 outlines a stable tendency of engineers being the largest
professional group in the labour market . In March of this year
they were about 15 000.
- The share of unemployed receiving unemployment benefits is
decreasing. In the beginning of 1990 they were 56.7 per cent of the
total, and in February of this year they are a mere 36.1 percent.
- Unemployed women over the past year are a stable 51 per cent .
These tendencies map the priorities and tasks of LMP.
2. The Evolution of the LMP
Bulgaria has had four Governments voted in since the beginning of
the reform. They stood up for the interests of different political
forces whose programmes were different and even contradicting each
other. Each of these governments, however, created an element of
LMP and the labour market. Thus it went through several stages of
where the pace and nature of the economic reform was different , as
well as the changes in the social policy, the unemployment
legislation and its regulation.
Stage ONE. End of 1989 - beginning of 1991. The first large-scale
layoffs began and the communist Government was forced to admit to
the existence of unemployment through the adoption of Regulation
No.57 of the Council of Ministers for redirecting and the effective
use of free labour force. The process of establishment of the
institution of the labour market began , and of labour offices in
the first place. These offices were formerly within the "Labour and
labour force" departments of the municipal councils. The labour
market was formed as a result of the lay-off of employees
artificially kept in enterprises.
The centralized mechanism for the formation of wages was retained,
however, and therefore a true labour market was virtually
non-existent. The Government made its first 'breakthrough' in the
planned economy by 'freeing' the prices of fruits and vegetables. A
tripartite commission was established which assumed an important
role in the LMP. This stage was completed when the government
resigned after a general strike of the trade unions in December
1990.
Stage TWO. The beginning of 1991 to September of 1992. A coalition
Government was formed, the so called "Government of Hope", which
sped up the reform taking the most unpopular measures - price
liberalisation, restricted compensation for the run-away inflation
(which in 1991 topped 483 per cent), the initial demonopolisation
of the state sector and the structural changes in government
administration. These radical changes brought about an even larger
number of layoffs, mostly through staff cut-downs. And the economic
crisis deepened as a result from the losses following the Gulf war
incurred to Bulgaria as a creditor and economic partner to Iraq.
On the initiative of the trade unions and under their pressure a
significant step was made in the LMP: Regulation No. 110 of the
Council of Ministers was adopted, which introduced a number of
measures, such as youth measures, subsidised employment, support
for the unemployed to start their own business, labour mobility
support, measures for the disabled, etc.. The introduction of these
measures through a regulatory act made them obligatory, an yet
until the end of 1991 they remained practically inapplicable as
there was no institutional framework.
Two components of the LMP became subjects of public debate. The
early retirement measures which were aimed at the economic
sanctioning of employers who hire staff entitled to retirement
pensions, met with the disapproval of professors in higher
education and a number of other professions. The Government, with
the support of the trade unions introduced the measure nevertheless
and as result some 39 000 pensioners were laid-off, without the
expected hiring of an equal number of young people. Another subject
of public discussion was the issue whether private labour offices
should be allowed. Under the pressure of the trade unions they were
legalised, the argument being that they will stimulate competition
and therefore work for the improvement of employment services. A
draft law for employment was prepared and discussed by the
tripartite commission. However, it was not submitted to Parliament.
The procedure of the payment of unemployment benefits was changed.
At the end of 1991, after the Union of Democratic Forces won a
majority in the parliamentary elections, the first non-socialist
Government was formed.
Stage THREE. In 1992 the economic reforms were spurred and
Parliament adopted several essential laws: The Law for land, the
Privatisation Act, the Law for Restitution, etc.. These processes
resulted in mass layoffs. Two regulations were adopted in 1992 for
the closing-down of enterprises in mining and in the uranium
industry, but as the reaction of the trade unions was very sharp,
none of the targeted enterprises was actually closed down.
Considerable steps were made in the LMP: the unemployment fund was
separated from the state budget, a new unemployment compensation
scheme, public works schemes were introduces through a Regulation,
the scope of those eligible for unemployment benefits was widened,
a new structure of labour offices was introduced, etc.. This is a
period of complete stagnation in social partnership, which had a
detrimental effect upon the newly adopted Law for the Protection
against Unemployment and Employment Promotion. The beginnings of
immigration policy and protection of the domestic labour market
were set.
A new coalition Government came in office at the beginning of 1993.
Its three-month work so far does not mark any progress in LMP.
3. Institutional Framework (Who Makes the Labour Market
Policy?)
Parliament
debates and adopts LMP legislation , pursuant to the annual budget
Laws it allocates state expenditures on unemployment, as well as
the amount of the unemployment contribution of employers to the
unemployment fund. It also controls the actions of the executive
power on unemployment and employment , including the execution of
every citizen's constitutional right to labour .
The Council of Ministers
debates and adopts labour market Regulations subsumed under the
Laws. Through its functional and branch ministries, it coordinates
the implementation of the LMP, it outlines the basic directions of
social partnership and its role in and the operation mechanisms
influencing LMP, it signs contracts and distributes in accordance
to its priorities technical assistance, debates an approves
employment programmes. In order to coordinate the policy on
different issues the so called interministerial boards are set up,
such as the one on territorial development , on small and
medium-size enterprises, on structural and technological policies,
on agriculture, etc.. At the end of 1992 joint-action employment
programmes between the Ministry of Labour and Social Welfare and
the Ministry of Industry and between the Ministry of Labour and
Social Care and the Privatisation Agency were developed. These
links among the Ministries were established in order to regulate
processes which result in tensions on the labour market.
Unfortunately, due to the change of Government the action on these
programmes has been suspended.
Pursuant to a Regulation of the Council of Ministers (January 1992)
specifying the structure and responsibilities of the the
Ministry of Labour and Social Welfare
, it is in charge of the coordination and the pursuit of the LMP,
which includes the wage policy, the provision of the legal
framework, the development and implementation of employment
programmes, labour market analyses, protection of the domestic
labour market, developing the employment policy, as well as
training and retraining policies. The most important disadvantage
in this structure is that wage policy is not viewed as a
constituent component of LMP. The institutional and political
isolation of these issues results from the lack of understanding
for the regular macroeconomic links between employment and income,
wages included. This is the responsibility of specialized
departments of 'Employment and Labour Market', 'Training and
Retraining', 'Income and Wages' working in coordination with the
Social Security and Social Policy departments within the Ministry.
Another disadvantage is the lack of units for assessment and
analysis attached to the Ministry to process information coming in
from all Social Security departments. The Institute of Labour was
closed down in 1992 as it failed to respond to these needs
adequately. The difficulties in the course of the transition and
the crucial importance of labour and social issues call for a
specific research and strategic unit within the Ministry.
The
National Employment Service
at the Ministry of Labour and Social Care is headquartered in
Sofia and has a network of six regional labour offices and 122
local offices. The agency is responsible for the pursuit of LMP as
developed in the departments of the Ministry.
The
local authorities
do not have explicitly stated responsibilities in the
implementation of LMP, and the municipal councils do not host
experts in this area. The involvement of the municipal councils in
the LMP implementation obviously depends on the local labour market
situation and on the initiative of the local authorities and the
local labour office. The labour and work force departments within
the municipal councils which were in existence prior to 1989 have
been dissolved and the local offices are under the Labour Ministry
and there is therefore no institutional link between the offices
and the municipalities. Last year's experience, however, revealed
that the development and implementation of employment programmes
does have a positive effect, among everything else, in that it
contributes to the involvement of local authorities into issues of
employment policy.
Social Partnership
in the LMP is regrettably within a comprehensive social
partnership scheme established as each successive Government takes
over. For instance, under the previous Government social
partnership bodies were set up as late as 7 months after it took
office. Frequent changes of government and national bodies of
social partnership result in instability and circular negotiations
among employers, trade unions and the state on the LMP. At the
national level the dialogue is very often politically dominated,
which constitutes yet another difficulty.
The past year has witnessed the spontaneous setting up of regional
and local bodies of social partnership in employment policy: the so
called employment councils. Evidently the gravity of the problems
has forced local partners to work jointly in order to solve them.
The tacitly agreed principle to manage all programmes on a
tripartite basis at the local level has had a positive effect on
LMP.
However, social partnership in LMP, and its funding in particular,
should be provided for legally.
4. Legislation
LMP legislation is based on the Labour Code whose revised version
was adopted by Parliament and came into effect on 1 January, 1993.
The Code, however, provides only general labour relations
regulation and does not treat specifically issues of unemployment
and employment policy. They are currently regulated by rules issued
by the executive power - those are regulations and orders of the
Council of Ministers and the respective Ministries. These practices
contribute to a flexibility of the executive power, and allow for a
number of alternatives to be tried out at the initial stage before
the best policy approach is found. It is common opinion among
policy makers that the country does not need an explicit law. They
are joined by the upholders of economic neoliberalism, who claim
that the state should not commit itself to unemployment issues and
even less so through the adoption of a law to provide for unneeded
market intervention.
Taking no sides in the debate we should note that the central
argument in favour of the law is the need for legal regulation of
the relations of employers, the state and employees, and for
defined responsibilities inunemployment benefits and support,
employment services and in encouraging self-employment and
training, as well as protection during mass layoffs, of the
domestic labour market and of Bulgarian citizens working abroad.
The institutional structure of the policy and funding mechanisms
need to be constituted. The issues are currently regulated by a
number of individual rules subject to constant and unambiguous
changes. The law itself will not create employment, as is the
common belief, it will nevertheless contribute to the creation of
fair conditions for protection of the unemployed and encourage
employment. It would constitute ones component of a whole package
of social welfare laws, including the laws on social security,
social support and pensions, aiming to lay the foundations of a new
social policy. Unlike the above mentioned laws, the Law on
Employment is an unprecedented legislative act: the lack of
experience and tradition in this sphere additionally hinders the
process of its preparation and adoption.
The Draft Law for Protection in Unemployment and for Employment
Promotion discussed by the Employment Board last year is currently
being viewed by the newly formed Board which implies that the Draft
is likely to be submitted to Parliament in two months time at the
earliest.
There are no laws for the liquidation and bankruptcy of enterprises
in Bulgaria, as there is no law regulating collective lay offs. The
question of the employees' job security in such cases is very
painful and unanswered as yet.
4. Technical assistance from abroad.
The technical assistance granted to Bulgaria by international
organizations and countries with developed LMP is one element of
the general technical assistance aimed at facilitating reform in
the country. There are three main sources of assistance:
- the
World Bank
credit for technical assistance. It has not been put to use yet,
as the needs assessment procedure and the negotiation with World
Bank experts which have been going on for more than a year and a
half now, are still underway. It is not very likely for the
financial resources to be available earlier than the autumn of
1993. The World Bank will grant technical assistance for the
elaboration of the general strategy of the employment policy, as
well for training and retraining. World Bank experts exert a
considerable influence on employment policies in this country,
given that each stage of the negotiations is related to reviews of
legislation and funding. The most frequent issues of dispute are
budget expenditres allocated to unemployment policies, as well as
the amount of the contributions to the unemployment fund. The views
of the World Bank on the issue could very easily be guessed at.
- The technical assistance under the
PHARE
programme relevant to the employment policy last year was
concentrated in a number of significant projects: Local Employment
Strategies - Sofia and Montana; The REDEV Project for Regional
Development and Employment - Smolyan and Bourgas; technical
assistance for the small and medium-size enterprises fund, etc. The
programme this year will extend to cover employment projects for
the disabled, youth employment, as well as training and
retraining.
- Technical assistance for empoyment plicy and services granted by
the
Know-How Fund
. Apart from financing the two-year stay of a resident advisor to
the Minister of Labour in this country, the Fund also supports a
wide range of initiatives, such as the setting up of Job clubs, the
development of a public works programme, labour market design,
labour market intelligence, etc. These initiatives came under a
formal cooperation agreement signed by the Bulgarian Minister of
Labour and his British counterpart.
In 1992 the MLSW signed a number of cooperation agreements with the
respective counterpart Ministries of Belgium, USA, germany, France,
and others. They envisage exchange visits, expert assistance,
seminars on LMP, etc.
The ILO technical assistance is directed towards legislayion and
the training of Ministry experts and members of the tripartite
Commission.
On the request of the Labour Minister an OECD mission visited
Bulgaria in 1992 to provide assistance to Ministry experts in the
drafting of the Law for the Protection in Unemployment and the
Encouragement of Employment.
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