The European Parliament adopted a directive on adequate remuneration
Acting Minister Lazar Lazarov offered BGN 770.
The directive is not mandatory
The minimum wage may become BGN 850 from the beginning of 2023. This will become a fact if a government formed after the elections applies as strictly as possible the new EU directive for determining adequate minimum wages in the member states. The directive was adopted on Wednesday by the European Parliament with a large majority. 505 members of parliament voted “for”, only 92 votes were “against” and 44 “abstained”.
“People are really struggling to make ends meet. We have no time to lose, the work must pay off again”, said Agnes Yongerius, the deputy and co-rapporteur of the directive, during the discussions in the European Parliament.
According to the directive, EU member states must introduce measures to ensure that minimum wages are updated regularly and in a timely manner to maintain their adequacy. Stating that the aim is to ensure a dignified life. This means that with high inflation, the minimum wages must also be raised.
But the EU directive does not introduce an obligation for member states to increase minimum wages, nor does it give an exact formula for determining them. Instead, the directive states that criteria such as 50% of the national average wage or 60% of the median wage may be used as criteria for determining whether the minimum wage in an enterprise is adequate. The median wage is the one where exactly half of the workers receive a lower wage and the other half receive a higher wage. The median wage is much lower than the average because there are few people with extremely high wages, which raises the level of the average wage but has less effect on the median.
Even if the government decides to set the minimum wage as 50% of the national average, there are again different possibilities for interpretation. For example, whether to use the latest available average salary data, or the latest data for a full year. As the EU directive does not specify which data should be used.
The acting Minister of Labor and Social Policy, Lazar Lazarov, said not long ago that the acting government will offer a minimum wage of BGN 770. It is calculated as 50% of the average monthly salary for the whole of last year, that is, for 2020. If it comes into force from January 1, 2023 will actually be determined based on the wages that were received two years earlier. And given that it is supposed to be in effect until January 1, 2024, it turns out that the minimum wage for December 2023 used data on wages received three years earlier. Which, with high inflation and rapidly changing prices, is not very correct. And it contradicts the requirement of the European directive for “timely updating of minimum wages in order to maintain their adequacy”. According to the latest data from the NSI, the average salary for June is BGN 1,710. And 50 percent of it makes BGN 855.
The Ministry of Social Affairs has developed another option for determining the minimum wage. He predicts that in the event of a downturn in the economy, the minimum wage will be 45% of the average for two years ago, but not less than last year. In this case, however, if there is a downturn in the economy in 2023, the minimum wage for 2024 will not be raised, even though by then the economy may be out of recession and people’s incomes may be rising.
Business wants internship ‘class’ canceled
Business and unions are at odds over what the minimum wage should be.
According to business, it is not correct for the minimum wage to be 50% of the national average, because the average wage is gross, together with additional remuneration for professional experience and length of service (the so-called “class”). And the minimum wage is without seniority supplements. This is clear from an official opinion of AIKB regarding the formula for determining the minimum wage.
Therefore, according to AIKB, one of the options is to cancel the supplements for internship. And the other option is for NSI to announce not an average salary, but another value that does not include the additional remuneration for professional experience and work experience.
According to AIKB, a better option for determining the minimum wage is 60% of the median, and not 50% of the average wage. The reasons for this are that people with very high incomes raise the size of the average wage. And besides, as the minimum wage rises, so does the average wage.
In addition, according to the business, it is most appropriate to negotiate minimum wages by branches. And the minimum wage for the country should be the lowest agreed upon for any of the branches.
But according to Lyuboslav Kostov, director of the Institute for Social and Trade Union Studies at the Central Bank of Ukraine, due to the record inflation of 17.7%, the current minimum wage of BGN 710 should be increased by at least BGN 120.