Economic Policy Review ISSN 1313 - 0544

Social Policy

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The social policy of the current government can be characterized with several tangible measures. Unfortunately, most of them lead to increased spending from the state budget without any significant reforms in social welfare system. These measures can be summarized as follow:

1. Maternity leave compensations have been increased, as well as the duration of these payments – from 135 to 315 days. Also, a “birth encouragement policy” has been started, the first measure of which was introducing selective determination of monthly child allowances (for the first child it is 18 leva(1) , for each child after - by 11.1% higher). The policy envisaged that child allowance payment be increased in 2007.As we have said many times, the family allowances, as written in the Bulgarian law, are in case the family does not have enough means to survive. This way, according to the state, social solidarity is put in place, i.e. if someone has low or no income should receive help to raise its child. Therefore, we cannot claim that this policy aims at encouraging births at all but support the family in need. This is not the case in Bulgaria however. Certain groups with lower income or incomes earned in the informal sector have incentives to participate in the system for many years and thus the number of recipients never decreases and the monthly payment is miserable.

What should be done?

We should be aware that wherever there is assistance in cash payments from the state, there will always be problems. Administration problems, lack of efficient control over recipients, lack of incentives of participants to go out of the system, etc. are among the most widespread issues that need to be solved. Therefore, reducing of tax burden, and especially the social security contributions, will have significant positive effect on economy. This means increased economic activity, more jobs and increased incomes. And that means greater possibilities for raising a child. Of course, there is always going to have people with low incomes because of lack of education for example. State policy however, should not encourage these people to receive child allowances.

2. Imposing of limited time for receiving welfare cash payments benefits by unemployed has been introduced. It was set to up to 18 months.

This change will lead to positive developments if put into practice for real. The change does not harms the rights of participants and at the same time puts limits for long-term participation.

We have always claimed that lack of time limit for welfare benefits does not stimulate searching for job and leaving the system, does not allow for the state to cut its expenditures and creates a culture of dependence. Future steps for reform should be transferring the labor market intermediation from the state to private companies.

3. Unemployment benefit payment has been increased. The minimum was set from 80 to 90 leva (90 leva is 46 euro) and the maximum amount raised from 140 to 160 leva (82 euro). The plans are for future increase in 2007 by attaching unemployment benefits change to statutory minimum wage in the country.
As we have already said, before you increase any payment one should reform the system first.

4. There is an idea of imposing a requirement to work before receiving benefits.

The idea has been in the air for some time. We fully support it and hope to be implemented in practice.
As a summary, we can say that it is time to make general reforms and the system should help only those that are in temporary need.



(1)18 leva is 9.2 euro.