2014: Lower Unemployment and More Jobs for the Bulgarian Regions

The synopsis of the labor market in 2014 is undoubtedly positive – increasing employment and decreasing unemployment. Although the pace of recovery varies, the majority of the regions show simultaneous drop in unemployment and increased job-creation for the first time since the crisis began.

The regional review shows that:

• Unemployment among people aged 15 and over decreased in 21 districts of the country and increased in 7;
• Employment among the population aged 15 years and older [1] increased in 18 districts, decreased in 9 and one (Gabrovo) remained unchanged;
• In 16 of the districts of the country we observe both a decline in unemployment and an increase in employment compared to 6 such districts in 2013;
• Unemployment increases and employment declines in just 4 districts of the country, compared to 9 in 2013.

Figure 1: Districts, in which employment increases and unemployment falls (green) and districts, in which employment falls and unemployment increases (red)

Source: NSI, IME

However, except for the district of Montana, Northwestern Bulgaria remains in deep crisis. The labor market in districts such as Vidin, Lovech, Vratsa and Silistra (in the North Central region) not only doesn’t show any clear signs of recovery, but also the employment rate among the population over 15 years [2] remains below the critical minimum of 40%.

Sofia (capital) is the good exception of Southwestern Bulgaria, where, despite the relatively favorable last quarter, the labor market in districts such as Blagoevgrad and Sofia (district) continue to experience difficulties in creating jobs.

Despite that, the overview at a regional level for 2014 is markedly positive. In the second half of the year we also observed more rapid job creation in the northern part of the country and specifically – in the districts of Veliko Tarnovo and Varna.

And yet – when will the pre-crisis employment levels be reached?

If the rate of increase of the number of employees in 2014 is maintained, the average annual employment levels from 2007 can be reached this year. The difference is only one percentage point, which can be achieved, according to the variation of the population, with the creation of between 40 and 50 thousand jobs. To reach the record levels of employment in 2008, however, we will need at least another year.

At the regional level, things are a bit different. Some areas such as Kardzhali, VelikoTarnovo, Razgrad and Shumen have already reached the levels of employment of the population of 15 years and older reported in 2008. All of them, however, are areas in which the employment is generally lower than the national average (in some of them even close to 40%).

Of the larger districts in the country Bourgas and Plovdiv are closest to reaching their peak pre-employment levels. Sofia (capital) and Varna are still far away. In the country there are areas, such as Lovech, Kyustendil and Blagoevgrad, where the crisis in the labor market continues unabated.

The question of 2015: “How sustainable is the recovery?”

The answer to this question is not easy. Although the trends in many regions of the country seem stable and are padded with good economic arguments (effective and planned investments in particular regions, improving infrastructure and expectations among businesses etc.), data on the state of the labor market in the country does not inspire much hope that the best is yet to come. Serious problems remain the structural characteristics of the unemployment in our country, the low investment activity and the demographic trends.

For instance, the employment rate of the population over 15 years in Vidin in 2014 was only 38.8%, which is just 0.3 percentage points below the levels of 2008. At the same time, the employment rate of the population aged 15-64 is already higher than that in 2008 – 55.3%, compared to 54.8%.

Higher than pre-crisis employment rates of the working age population is also observed in VelikoTarnovo (60.0% to 58.3%), Razgrad (52.8% to 49.7%), Shumen (58.7% compared to 56.5 %) and Kardzhali (61.1% to 52.9%).

Although there is room for further improvement of the labor market (employment of the population aged 15-64 in 2014 was 61% compared with 64% in 2008), the capacity of the Bulgarian economy to generate employment considering the absence of significant external capital seems limited. A large share of the reserve labor force includes people with primary or lower education, whose employment rate, even though it increased in 2014, remains only 19.2% among the working age population.

The employment rate of people with primary education is 32.3%, while the share of those with secondary and tertiary education that have a job is way higher – 65.2% and 81.7%.

The way forward

If the favorable trends of 2014 continue, soon the topic won’t be the recovery but the expansion of the labor market. The latter definitely needs support from the government. However, the creation of subsidized employment, something relatively common in Bulgaria, is clearly not the way forward. What’s needed is to ensure optimal conditions for the natural creation of jobs.

Increasing the social security burden and the minimum wage (in a period of stagnating consumer prices) is definitely not what the labor market needs at the moment.

The new expansion will need new arguments, including educational reform, revising anachronistic labor laws and improvement of the quality of re-qualification programs.

Something else will be needed as well – a change in the way of thinking of Bulgarians and understanding that personal development does not stop when one finishes school/ university, but is a life-long process.

[1] The employment rate of the population aged 15 and over is somewhat inert indicator, which is influenced strongly by the deteriorating age structure of the population. Due to the increasing life expectancy in the country and therefore the increasing share of the population aged 65+ (two factors which are reflected in the denominator of the equation), this ratio is less sensitive to the increase in the number of employees than, for instance, the employment rate of people aged 15-64. However, it remains representative of the overall social and economic situation of the country’s regions.

[2] Even among population aged 15-64, employment in these areas remains well below the national average.