site.btaUnion for Private Economic Enterprise Warns that Minimum Wage of BGN 933 Will Be Devastating to Business across Whole Regions

In a statement sent out on Monday, the Union for Private Economic Enterprise (UPEE) has expressed concerns about the economic effects of a proposal by the Council of Ministers to set the minimum wage at BGN 933 from 1 January 2024.

According to the Union, the implementation of the mechanism for calculating the minimum wage as 50% of the average wage could prove disastrous for a large number of small and medium-sized businesses in entire regions of the country, as well as lead to company bankruptcies. It will also increase the informal economy and weigh on the budget.

The cabinet's proposal to increase the minimum wage by more than BGN 150 affects at least 20% of the employed in the country and will negatively affect employers in small settlements and in sectors with low added value. Statistical data by regions show that the minimum wage will become close to the average in the districts of Blagoevgrad, Vidin, Dobrich, Kyustendil, Montana, Silistra, Sliven, Smolyan and Haskovo.

The most serious risks are to employment in tourism, construction, agriculture, forestry and fishery, water supply, and sanitation. The alternative is to force employees in these sectors to work without a contract, which opens the door to the informal  economy.

For employers, in addition to the cost of the salary itself, social security contributions also increase. With an increase to BGN 933, the employer's labour costs will rise to BGN 1109.51. That is, the increase in labour costs would be BGN 181.93 per month (BGN 2183.16 per year).

According to the position, there is a risk not only for the business but also for the state budget. The increase of the minimum wage by BGN 153 per month will lead to an increase in the consolidated state budget expenditure by at least BGN 760 million, according to the most conservative estimate. Such an increase in wages would contribute to a rise in domestic demand and a higher inflation rate. This could negatively affect the possibility of meeting the price stability criterion and hinder a faster adoption of the euro in Bulgaria.