Economic Policy Review ISSN 1313 - 0544

Unemployment in Bulgaria

Author: Peter Ganev / 29.06.2009
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At the end of May the registered unemployed in the country went beyond the limit of 250 thousand people, which is actually sending us beck to the levels of the previous year. The official data of the National Employment Agency indicate that from October 2008 we have a continuous increase of the number of unemployed in the country, which is in contrast to the trend from previous months. During the period January - September 2008 the unemployment was reduced significantly - by 60 thousand people. Since that time, however the number of registered unemployed has increased by nearly 50 thousand people.

If we just look at the data it could be misleading, since in this case we must take into account the seasonal trends. If look at what had happened in the previous years we would note many similar variations and the month with the highest unemployment was always the same - January. What we find troublesome in this case, which is indicative for the situation, is that after January 2009 the number of registered unemployed continue to increase, which had not been observed before. Actually the number of unemployed during May 2009 is greater by 33 thousand people than the registered a year earlier (May 2008).

Source: National Employment Agency

 

The problems of the labor market are apparent from the above diagram, as well as from the news about job cuts, which we hear often from the media or simply from friends. Regardless, one should not forget, that based on the background of the development in recent years, these negative trends could not erase the achieved good results. In the beginning of 2007 for example, the registered unemployed have been over 350 thousand, in other words with almost 100 thousand more than at present. This is unlikely to be very soothing, but any way shows a much clearer picture. The problems facing the labor market exist, but at least for the moment are not very dramatic, as they are presented sometime. In spite of that, we should not overlook the apparent problems and the coming negative trends.<0} Just for that reason it is normal that the policies directed toward protecting jobs and/or creating new jobs fall in the epicentre of the public attention and are being reviewed in great details.

The possible policies in that direction are basically two, same as the choice between two stimuli - fiscal and taxation. Under fiscal stimuli we understand expansion of the Government spending with the intention of directly achieving higher employment, while under taxation stimuli we understand reduction of the tax burden (in this case on labor) and achieving higher employment on an entirely market principal. This exactly is the key question that we are facing at present - whether the Government or the market to guarantee the jobs of the people?!

The experience from recent years gives a clear answer to this question. The fiscal stimuli in Bulgaria has only a short term effect on employment, in other words only the so called subsidized employment is created. The taxation stimuli on the other hand plays a more important role, since exactly the low (direct) taxes during recent years led to these 100 thousand unemployed less.

Implementing policies to achieve higher employment just before the elections is without doubt a highly delicate topic. The danger of large government spending just before the election aiming to provide employment for the voters (at any costs) is hanging over our economy. We could only hope that the Government would chose lower taxes and more flexible labor market as an alternative and thus would make it easier for all of us.