This is how much wages have increased in Bulgaria from 2017 to 2020 – Economy

For the period from January 2017 to September 2020, the average salary in Bulgaria in the private sector increased from BGN 981 to BGN 1373, or a significant increase of 39.96%.

For the same period, the average gross salary in the public sector increased by 44.16% from BGN 1,019 to BGN 1,469.

This may at first glance seem like a remarkable success and perhaps to a large extent it really is, but let’s look at the factors that led to this growth, writes economist Nikola Filipov in analysis.

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The data clearly show that during the last four years the price of labor in the public sector has been higher than in the private sector. This is a problem because an employer will always be able to more effectively assess the price he is willing to pay for the services of a worker.

That is, the main factor for the formation of wages is labor productivity. The higher it is, the higher the employer would be willing to pay for the person’s services.

It is a natural process that organically increases family income, generates economic growth, and promotes economic efficiency.

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The process of labor price formation in the public sector is on a diametrically different side. High productivity is rarely sought there, and the main factors behind these decisions are primarily political. In recent years, we have seen significant wage growth in the public sector, such as the security, health, education and general administration sectors. There is nothing wrong with this, of course, but only when the increase in wages corresponds to a proportional increase in the productivity of the bureaucracy.

According to Filipov, each citizen can feel for himself if there is any improvement in the services provided by the state to deserve such an increase in their salaries.

The trend of salary increases in the public sector will intensify significantly this year, when the established salary increases of the Ministry of the Interior, the administration, teachers and doctors are released.

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This will lead to a further widening of the wage gap between the latter and the private sector, which will suffer as a result of the economic crisis.

The main problem that public sector salaries exceed those of the private sector is that more and more people would prefer to seek employment in the public administration rather than the productive private sector, which pays the salaries of civil servants.

In other words, we are witnessing an overflow of employment in the unproductive public sector of the productive private sector of our economy. When the state increases public sector wages for some political reason that has nothing to do with purely economic factors, the private sector is forced to raise the prices of labor to keep its workers employed. However, this reduces the competitiveness of the national economy in the medium term, because this increase in the price of labor does not correspond to a similar increase in the labor productivity of those employed in the private sector.

Staff: New – Nikola Filipov

All this is a wonderful example of how the State with its regulatory intervention makes political decisions that in the long run can have a negative impact on the labor market and therefore on our entire economy.

The minimum wage as of today is 650 BGN.

According to the economist, even these political decisions to increase wages in the public sector have a much more negative impact on the economy than the administrative increase in the minimum wage. The minimum wage growth for 2017-2020 is 32%, which is much more modest growth than in the public sector.