Business: Higher minimum wage will bankrupt small businesses
The caretaker government plans to raise the minimum wage and the maximum insurance income from January 1, 2022, while preparing the following year's budget.
Currently, the maximum insurance income is BGN 3,000. Тhe trade unions and BSP proposed to raise it by BGN 300 to BGN 600. Then the Bulgarian Association of Software Companies sent a letter to the Minister of Social Affairs Galab Donev stating that nearly 34 thousand highly qualified specialists are employed in this sector. Their companies contribute to the budget with over 4% of GDP and pay some of the highest insurances and taxes.
One employee in the sector generates more than BGN 22,400 for the budget in taxes and social security contributions, which is three times higher than the national average. That is why the association is firmly against it.
On Sunday, however, Finance Minister Valeri Belchev explained that raising the maximum insurance income was being discussed.
"During the discussion of the budget update in the summer, the employers' organizations said they would accept the increase in pensions if we don't raise the maximum insurance income. Then, suddenly, it turns out that the government might raise it. So this contradicts our agreement," Shteryo Nozharov, economic advisor at the Bulgarian Industrial Association, stated.
This is an "education tax" on businesses and workers who invest in qualifications. "The gap in the insurance system is about 50%, separately the budget covers the insurance contributions, i.e. the second and third pillars cannot be activated effectively, and therefore the business is punished," he explained. There is a ceiling on pensions, and people can not receive their actual money.
Currently, the minimum wage is BGN 650. It should have remained frozen according to the medium-term forecast for 2022. CITUB required BGN 764 as a minimum. A week ago, Social Affairs Minister Galab Donev signalled that the caretaker government would propose an increase in 2022, but it was unlikely to reach BGN 764.
"We are against the increase in the minimum wage. First, it wasn't mentioned in the medium-term forecast; second - the motive for raising it is unclear. Currently, there is no increase in inflation - the BNB forecast is 3.5%., if this could be the motive. "What will we do with the deflation we had two years ago? Will we reduce the minimum wage?" Nozharov asked.
He gave the example that many EU countries had given up the minimum wage in the 1980s. According to him, 30% of EU countries do not have a statutory minimum wage, which is agreed upon collectively - Denmark, Austria, Italy, etc. Also, producers' costs have risen sharply with expensive electricity, which, if they increase and the minimum wage, many small companies will go bankrupt," Nozharov warned. He gave the example that electricity and salaries cover 60-70% of the expenditures in a chain of stores.
An ILO convention requires that the salary increase not distort the competitiveness of companies, Nozharov reminded. He gave a further example that there is no increase in labour productivity, which is on average below 1%. According to the BNB, economic growth next year is 4.5%. Indeed, this could not compensate for the minimum wage growth of 12%, he concluded firmly.
