The Labour Market Enters A New Stage of Development
The annual NSI labour market data for 2017 confirm our preliminary observations for continued improvement in large parts of the country. The annual average employment rate of the population aged 15-64 reached a record high of 66.9% and for the first time there are no districts in which this rate is below 55%.
In 2017 the difference between the capitol and the district with the lowest employment rate of the working population is 19 percentage points, compared to 24 percentage points in 2008 and 2009. Similar trends are also observed in regard to the economic activity and unemployment rates. The reduction of this spread is to be expected since the record high unemployment and almost non-existent unemployment in the capitol suggest that these indicators will change more slowly in future periods. At the same time the economic upturn is spreading out to smaller economic centres due to the lower price of labour, land, offices and other factors.
There is also a decrease in the standard deviation of the employment rate across Bulgarian districts – from 5.5 percentage points in 2016 to 5.1 percentage points in 2017, which is also the lowest value recorded under an economic turn since 2005. Lower values have been registered only during the labour market crisis in 2011-2014. Once again, these data show that the ongoing labour market development is more balanced than that in previous periods.
Despite these positive developments, some of the most persistent regional disparities are more visible than ever. The increase in the number of the employed in 2017 is concentrated primarily in the southern part of the country – for every four new jobs created there, there has been only one created in Northern Bulgaria. The largest increase in the number of people employed is observed in the district of Plovdiv (33 thousand people), followed by Stara Zagora and the capitol (16 thousand each); and the largest decline in registered in Haskovo (-2 thousand), Gabrovo (-1.5 thousand) and Vidin (-1.4 thousand). The employment rate of the population aged 15-64 has increased in almost all of the country’s 28 districts with the exception of Gabrovo and Vidin, in which there is a slight decline, as well as Varna Sliven and Haskovo, where the rate has remained unchanged.
Despite the relatively better 2017, it is obvious that the labour market in some regions of the country continues to struggle. Vidin, Montana, Lovech, Razgrad and Sliven are not only the districts in which the employment rate is traditionally lowest, but are also among the handful of districts that are yet to recover to their pr-crisis levels. We may also add Silistra to this group – although the 57% employment rate registered in 2017 is the highest ever for this district, it is still one oft he lowest in the country.
The map below illustrates this process since 2008. Although there are no longer districts in which the employment rate of the population aged 15-64 is below 55%, the general impression of a strong south and weak north remains valid. The data for the first two quarters of 2018 will show to what extend local economies in the poorer regions of the country have managed to deal with the record minimum wage hike as of January 2018.
Expectations for 2018
It is hardly surprising that by approaching EU-average economic activity and employment rations, the Bulgarian labour market has started to experience some well documented in other countries issues such as growing labour shortages. The recently adopted changes targeted at making the hiring of foreign workers easier are important, but insufficient to make a significant difference in the short term.
In 2018 we can expect an even stronger clash between the negative demographic trends, the problem with the qualification and skills of the unemployed (and of some of the employed) and the requirements of the labour market. The current period presents a rare chance for the Bulgarian government to put itself before the curve of labour market developments, by re-evaluating its active labour market policies (ALMPs). In light of the record high employment rate and existing labour shortages, policies targeted at direct job-creation are not only theoretically hard to justify, but can also be viewed as an instrument that hinders the long-term integration of the workers concerned in the real economy. The latter is an important prerequisite for obtaining skills that are valued by businesses and for creating a “qualification buffer” against future labour market shocks.
Concepts such as “VET and lifelong learning” still lack concrete substance and should be put at the centre of the policy debate and the Government’s ALMPs, or we may once again wake up to find that unemployment has surged to the surprise of politicians.
Efforts should also be targeted at general optimization of Bulgaria’s labour market legislation, so that part-time work and flexible employment practices become more popular.
And, frankly speaking, 32 years later – is it time for a new Labour Code?
 Our previously expressed concerns regarding the quality of 2016 NSI labour market data remain, which is important, since these data are used as basis for the comparisons that we make here. NSI’s data showed that, as far as employment was concerned, the labour market recorded no improvements. The second half of the year was marked by a significant and hard to explain drop in the employment rate in a number of districts, which naturally lead to “record increases” in the second half of 2017.