The labour market reserve indicates that the expansion of employment is becoming increasingly difficult
The supply of labour in Bulgaria remains extremely tight against the backdrop of record demand, and accessing the remaining free resources seems increasingly difficult. This is the main conclusion from the data published this week by Eurostat on the overall free reserve in the labour market in EU countries.
The assessment of ‘labour market slack’ for 2023 is interesting for two reasons. On one hand, the data includes an expanded concept of the working-age population—15-74 years old, instead of the more commonly analyzed group of 15-64-year-olds, acknowledging the growing role of older people in the labour market amid aging and shrinking supply. On the other hand, the concept is as comprehensive as possible, including both the unemployed and the inactive who are willing to work, as well as people working part-time—presenting the full potential for labour market expansion.
The distribution of overall reserves shows that in EU countries, labour markets are still operating at different speeds after the pandemic, with several countries—Spain, Italy, Greece, Sweden, Finland—having labour market slack exceeding 15% of the population aged 15-74. On the other hand, Central European countries, such as Poland, Malta, Hungary, and the Czech Republic, have managed to nearly exhaust their free resources due to high demand and successful activation and retraining policies, with reserves around 5-6%. Bulgaria is close to these values, with a 7,1% reserve.
It is interesting to note that the nature of the reserves differs greatly among countries— in some (Hungary, Poland), unemployment is predominant, while in others, especially in Western Europe (Netherlands, Ireland, France), there is a high share of part-time workers, and in others (Italy, Czech Republic, Germany), the most significant share is from inactive individuals who are willing to work. This highlights the fact that the transfer of policies and practices within the EU is difficult due to the very different characteristics of national economies and labour markets.
In 2023, Bulgaria achieves the lowest size of labour market reserves in the last 15 years. While during the global crisis the value of the indicator reaches its peak at 21%, mainly due to the significant share of unemployed individuals, but also many inactive people willing to start working, in 2023 it is already 7,1%. Unemployment (4,2%) again plays a leading role, as well as those inactive but willing to work (2,1%), while the other two groups are very small – part-time employed are only 0,3% of the population aged 15-74, and those seeking work but not able to start immediately are 0,5%.
This distribution and dynamics give a clear direction to the policies for labour market expansion in the country. There are known reserves both in the group of unemployed and among those inactive individuals willing to work. The fact that they are not able to realize themselves against the increased labour demand, however, means there are significant barriers – low qualification and skills, location in regions with few available jobs and low mobility, lack of orientation. These barriers need to be overcome – focusing on qualifications and skills, expanding adult education, and addressing the individual needs and challenges of the inactive and unemployed.
[1] Human capital is one of the main focuses of the newly published “White Paper of IME: Unlocking Growth.” Additional measures concerning education, the labour market, and social policies can be found in the relevant chapter of the publication.