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“Need for a Flexible Labor Market in Bulgaria”

Annual National Forum of the Bulgarian Association for Management and Development of the Human Resources

Sheraton Hotel, SofiaNovember 11, 2004

Gary Reed, Labor EconomistUSAID Labor Market Project

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Recent Improvements in Bulgarian Labor Market

Employment Rate

Unemployment Rate

June 2003 43.1% 13.7%

June 2004 44.5% 12.0 %

Source: Stat.bg

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Labor Market Indicators: Bulgaria vs. the EU in 2003

Bulgaria

EU-25

Labor Force Participation 52.5% 63%Employment Rate for Males

56% 71%

Long-term Unemployed as share of total unemployment

65% 45%

Source: Eurostat, "European Labour Force Survey, Principal Results 2003"

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Youth Unemployment Rates: Bulgaria vs the EU in 2001

EU-15 + 10 CC 18%Bulgaria overall 39%High Bulgaria Region

76%

Low Bulgaria Region

17%

Source: Eurostat, "Regional Unemployment Rates in the Central European Candidate Countries 2001"

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Per Capita GDP: Bulgaria vs. the EU in 2003

EU-15 109EU-25 100Estonia 48Poland 46Lithuania 46Latvia 42Romania 30Bulgaria 29

Source: Eurostat, "GDP per capita in Purchasing Power Standards for EU, Candidate Countires and EFTA," Nowcast 2003.

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Key Variables for Labor Market Flexibility

• Wage setting mechanisms• Geographic labor mobility• Labor policies• Education and training systems• Employment Rules

Source: Brodsky, Melvin, “Labor Market Flexibility: a changing international perspective,” U.S. Department of Labor, Monthly Labor Review, November 1994.

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Percentage of 18-year-olds not in National Education System 2000/2001

EU-15 29

Lithuania 16

Poland 19

Estonia 26

Latvia 27

Romania 43

Bulgaria 52

Source: Eurostat, "Education in Europe Key Statistics 2000/2001," Theme 3-13/2003

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Public Expenditures on education (percent of GDP)

EU-15 5.0

Estonia 7.6

Latvia 7.2

Lithuania 6.0

Poland 5.4

Romania 4.0

Bulgaria 3.6

Source: European Commission, "Progress on the implementation of the Joint Assessment Papers on employment policies in candidate countries," COM(2003)37 final, January 2003.

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Participation in Education or Training Spring 2003

EU-15 9.7

EU-25 9.0

Latvia 8.1

Estonia 6.2

Poland 5.0

Lithuania 4.5

Bulgaria 1.4

Romania 1.3Source: Eurostat, "European Labour Force Survey, Principal Results 2003," 14/2004.

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Vocational Training in Enterprises 1999

Denmark 14.0

Sweden 12.0

Estonia 3.0

Bulgaria 3.0

Latvia 2.0

Poland 2.0

Lithuania 2.0

Romania 2.0Source: Eurostat, "Working time spent on continuing vocational training in enterprises in Europe," Theme 3 -1/2003.

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Employment Protection Legislation Indicators, late 1990’s

EU-15 2.4

Hungary 1.8

Poland 2.0

Czech Republic 2.2

Slovakia 2.3

Estonia 2.4

Bulgaria 2.8

Slovenia 3.3Source: ILO, “Employment Protection Legislation (EPL) and its effects on Labor Market Performance,” I 1 March 2003.

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Bulgarian Labor Code vs. Three other Transition Countries

• Permissible reasons for individual dismissals

• Use of fixed-term contracts• Use of overtime• Organization of working hours

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Labor Market Project Goals

• ADDRESSING THE SKILLS GAP • ENHANCING LABOR MARKET

FLEXIBILITY • COMPLETING THE PENSION

REFORM

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Adressing the Skills Gap

• Promoting internships for students

• Linking professional training and certification programs

• Assisting the Employment Agency in promoting customer service

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Enhancing Labor Market Flexibilty• Educating the population on

labor market flexibility issues • Monitoring and evaluating

existing measures and programs • Identifying labor code

constraints to economic growth, labor and investment

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Completing the Pension Reform

• More efficient supervision of pension insurance companies

• Improved communications between the NSSI, the private pension funds, the insurers and insured

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Results in Institutional Development

• Establishment of a State Insurance Supervision Agency in 2000

• Strengthening of the FSC established in 2003

• Assistance and support to the BASPIC

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Results in Legislation and Regulations

• Mandatory Social Insurance Code – 1999.• Supplementary Voluntary Pension Insurance Act - 1999.• Social Insurance Code - 2003.• Drafting regulations and providing expert opinions.• Developing procedures for supervision of pension companies.

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Results in IT Solutions• Developing and implementing web-

based applications (e-government) for a state-of-the-art information exchange within the state administration and between the different participants in the pension system.

• Providing complex IT solutions for NSSI, FSC, BASPIC, EA enabling improved accountability and transparency of financial regulation, enhanced work efficiencies, and improved fraud diction and corruption fighting mechanisms

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Results in Training Experts• More than 1000 experts from the

MLSP, FSC, NSSI, tax administration, pension companies, labor unions, CPA's, judges, and journalists, have attended Project training programs in Bulgaria, the US, EU member-states, Central and Eastern European and other countries.

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Results in Public Awareness and Education

• Town-hall meetings held in more than 25 towns.• Dissemination of more than 10,000 brochures on

employment programs and measures benefiting employers, workers and the unemployed

• Discussions, roundtables, national and international conferences on important pension reform and labor market issues.

• TV educational films and radio programs, preparation and distribution of brochures, leaflets, posters.

• Pensions hotline launched at the NSSI in 2000 and later expanded into a Social Information Center at the MLSP.

• Customer service Call Center launched at the FSC in 2004.