News

Yavor Aleksiev

Two weeks ago we showed what would happen to the country’s average levels of  unemployment, employment, and economic activity, provided Sofia was excluded from the calculations. While the deterioration of certain indicators is to be expected, provided the leading economic centre of Bulgaria is not considered, their dynamics suggest some interesting observations. Here we  focus on two additional indicators: the GDP per capita (in current prices) and the salaries of employees. Regarding both indicators, the capital city’s effect on the national averages is considerable.

GDP per Capita

If we exclude the capital, the GDP per capita would decline from 11,283 BGN per capita to 8,347 BGN per capita in 2013, or by 26% (Figure 1). In the period from 2000 to 2010 the effect of the capital city on the average per capita GDP increased steadily. Disregarding Sofia would have caused a drop of 12.1% from the national average in 2000, while this figure would have already been 27.9% in 2010. This effect slightly weakened in 2011 and 2012 to 25.8% in order to increase again to just over 26% in 2013.

Figure 1: GDP per capita (2000–2013, BGN)

Source: NSI, calculations by IME

If the capital city is not considered, a total of seven districts would surpass the national average level of the GDP per capita. These are Varna, Sofia (region), Burgas, Plovdiv, Gabrovo, Ruse, and Vratsa.

Figure 2: GDP per capita in 2013, BGN

Source: NSI, calculations by IME

Salaries of Employees

Wages in Sofia (cap.) play an ever larger role in determining their average size on the national level. While the difference between the wages of employees, including and excluding the capital city, was barely 5.9% in 2000, in 2013 it was as high as 16.7%. The effect of the capital city’s salaries on the national averages considerably increased from 2006 to 2008 because of the economic boom in Sofia.

Figure 3: Average annual salary (2000–2013, BGN)

Source: NSI, calculations by IME

If we exclude Sofia (cap.), the average annual wages would have been higher than the country’s average in the districts of Sofia (district), Varna, Burgas, Plovdiv, and Gabrovo. Compared to the year 2000, the districts of Pernik and Kyustendil have lagged the most. These two districts would have reported higher salaries compared to the country average in 2000 if the capital city was disregarded. A possible explanation for that could be the decline of some local industries and also the intensification of the daily labour migration to the capital city. The reason thereof is that the statistics calculate wage levels depending on the place of work, and not on the residence.

Figure 4: Average annual salary (2013, BGN)

Source: NSI, calculations by IME

These calculations demonstrate that the capital city has an increasing impact on the country’s average values of GDP per capita and wages since the beginning of the new millennium. This effect has increased more slowly since 2008 (regarding wages) and has slightly dropped compared to its peak levels (regarding GDP per capita). Nevertheless, it seems that this trend will also continue in the coming years. One of main reasons for that, of course, is the ongoing concentration of businesses and the increasing population of the capital city. In 2013 some districts, such as Burgas and Plovdiv, succeeded in not only maintaining the growth rate of wages and the GDP per capita of the capital city, but they considerably offset their lagging in terms of investments. Other districts, however, continued to lag behind.

The observations above presuppose higher attention to the implementation of policies based on national-level indicators. Despite the common acknowledgement of this conclusion, its actual implementation has continued to be more of an exclusion than a rule. This constitutes a kind of political and institutional sloth that the regional development of Bulgaria cannot afford.

For the fourth consecutive year the Institute for Market Economics (IME) presented the only one of its scale and depth study of the social and economic state of districts in Bulgaria. The press-conference took place on November 9th 2015 in BTA. The English version of the study will also be available by the end of the year.

Regional Profiles: Indicators of Development 2015 (BG only)

presentation (BG only) | handout (BG only)

The research is published at a time when newly selected mayors are expected to propose the most effective policies for regional development. We believe that the publication would be helpful in resolving these issues because it outlines both the advantages of every district, as well as the challenges they face.

This year’s edition of “Regional Profiles” also includes analysis of the work of local justice systems, due to the undeniable importance of justice for the social environment and the conditions for doing business on local level.

Some of the questions that the study tries to give an answer to are:

• In which districts incomes and salaries are the highest?
• What does the poverty map of the country look like?
• Which territories attract the most investment after the crisis?
• Is there a connection between the level of economic development and crime levels?
• In which districts are local administrative services most developed?
• Where are the demographic tendencies most adverse?
• How does the justice system work on local level?
• Does the quality of education depend on the economy?
• Do the rates of local taxes and fees have an impact on decisions for investments?

9^th November 2015 | 11:00 - 12:00

Pressclub BTA

For the fourth consecutive year the Institute for Market Economics (IME) will present the only one of its scale and depth study of the social and economic state of districts in Bulgaria. The research is published at a time when newly selected mayors are expected to propose the most effective policies for regional development. We believe that the publication would be helpful in resolving these issues because it outlines both the advantages of every district, as well as the challenges they face.

The preconference will be in Bulgarian.

This year’s edition of “Regional Profiles” also includes analysis of the work of local justice systems, due to the undeniable importance of justice for the social environment and the conditions for doing business on local level.  

Some of the questions that the study tries to give an answer to are:

• In which districts incomes and salaries are the highest?
• What does the poverty map of the country look like?
• Which territories attract the most investment after the crisis?
• Is there a connection between the level of economic development and crime levels?
• In which districts are local administrative services most developed?
• Where are the demographic tendencies most adverse?
• How does the justice system work on local level?
• Does the quality of education depend on the economy?
• Do the rates of local taxes and fees have an impact on decisions for investments?

The results from the study will be presented by:

Desislava Nikolova, Ph.D, chief economist, IME

Petar Ganev, senior economist, IME

Yavor Aleksiev, economist, IME

Aleksander Tsvetkov, Ph.D, Director, Regiostat

All analyses, data and other materials related to the study will be uploaded on the specialized website of the project at: http://www.regionalprofiles.bg

For more information: Vesela Dobrinova (02/952 62 66, vessela@ime.bg)

Yavor Aleksiev

The Institute for Market Economics and Infograf are joining the analysis of open data provided by the Open data portal for the Republic of Bulgaria. The results of our work will also be published on the official website of the project "Regional Profiles: indicators of development".

The opening of the Employment Agency (EA) data for job vacancies announced in its territorial divisions allows the implementation of a new approach to the analysis of the labor market processes.

As of September 3^rd 2015 the review of the EA data for the vacancies shows that:

• There are 14 771 vacant jobs advertised in 6 068 adverts;
• Among the active adverts 54% are for permanent contracts, 44.8% for temporary contracts and only 1.2% of the adverts are for civil contracts;
• 82.6% of adverts are for full-time jobs (8-hour working day), the second highest proportion (5.8%) is for working part-time (4 hours);

Announced payment:

• For nearly 70% of the vacancies there is no predetermined payment. This can potentially be seen as one of the factors that hinder labor mediation.
• With respect to the various types of contracts the salary is mentioned in 31% of the adverts for long-term contracts, 29% of the adverts for fixed-term ones and only 6% of the adverts for civil contracts[1];
• Weighted according to the number of vacancies in various adverts (as one advert can apply to more than one vacancy), the average gross salary for job vacancies in the country (based on 8-hour working day) is 536 BGN This is significantly lower than the average wage in the country, according to NSI (868 BGN gross wage by latest data from June 2015). A possible explanation is that the majority of vacancies are for positions involving lower skills and thus lower payments. Another part of the explanation can be found in the characteristics of the employers and the jobseekers, which use employment agencies as a means of securing or providing - public bodies, small- and medium-sized enterprises, which cannot entice prospective workers by offering attractive positions in terms of pay and working conditions. Employers usually resort to the more expensive services of private recruitment agenciesfor positions that require higher levels of expertise and liability where the pay is higher, but finding good staff - even more difficult.
• 421 (24%) of the 1 770 adverts with specified wages and working time and 1 346 (31.5%) of the total of 4 270 jobs with specified wages and working time (some adverts apply to more than one vacancy) were for a payment less than 420 BGN for an 8-hour working day (the level of the minimum wage from January 1, 2016). This relatively high proportion signals for one of the potential negative effects of raising the minimum wage in the beginning of 2016 to 420 BGN The rise in the minimum wage to that level will affect nearly a third of the 4 270 vacant jobs at the moment, for which there is accurate data on wage levels. Raising the minimum wage will not only affect existing jobs, but also the decision of employers to open new ones both at present and in future periods.
• Half of the job adverts with wage over 1 000 BGN (11 out of 22 adverts and 87 out of 122 jobs) are in the capital, while the majority of this type of adverts are for drivers, engineers and erectors.

Chart 1: Average monthly salary calculated on the basis of eight-hour working day, for the active job adverts as of September 3, 2015, that contain information on the duration of working time and the offered payment (number of adverts)

Source: EA, IME calculations

Regional Review

• At the regional level, the average salary (computed for an 8-hour working day) in active adverts and vacancies for which there is data on the level of pay and working time varies from 747 BGN in Sofia (capital) to 428 BGN in Veliko Tarnovo.
• Except for the capital, high level of offered payment can also be found in the districts of Gabrovo - 619 BGN and Pernik - 585 BGN. The salaries offered in Blagoevgrad, Plovdiv and Varna are also above the national average.
• Besides Veliko Tarnovo relatively low levels of pay are also registered in the districts of Sliven (449 BGN) and Pazardzhik (452 BGN).

Chart 2: Average salary for vacancies in the active job adverts, as of September 3, 2015 (BGN)

Source: EA, IME calculations

Number of unemployed competing for one available job

According to the latest official data of the EA on the number of registered unemployed persons (as of July, 2015), they amount to 309 781 people. The comparison of their number by districts and the number of vacant jobs as of September 3^rd, 2015 shows that:

• The biggest number of unemployed people competing for one workplace is in Razgrad - 67 people, while the lowest is in Ruse (9 people). On average 21 people compete for each available job opening.
• 25 unemployed people in Northern Bulgaria and 19 unemployed people in Southern Bulgaria are competing for a single job. The combination of low employment rates and high unemployment rates in the Northern part of the country makes finding a job a serious challenge.

It should be noted that only some of the unemployed are an actual match for the advertised jobs; in some cases there are no unemployed whose qualifications, background and experience fulfill the employer’s demands. I.e. theoretically it is possible to have 67 candidates competing for one vacancy, while all of them are unsuitable for the job.

Chart 3: Number of unemployed who are competing for one vacancy

Source: EA, IME calculations

The quality of life in a society to a large extent depends on the ability of the local administration to effectively enforce the rules and laws in the particular country. Even good policies have no effect if they cannot be efficiently enforced.

One of the ways to measure the effectiveness of local administrations in their task of enforcing the law and regulations, is to evaluate the results (how many) and effectiveness (at what cost) of the collection of penalties and property fines enforced by municipal administrations.

The conducted analysis of the funds collected by municipal administrations in this manner shows that:

• In 2014 five municipal administrations have registered an income from penalties and property fines ten times higher than the value of those actually enforced. This extra income probably came from fines already enforced in a prior period and maybe also due to a reorganization of their operations. These municipalities are Zavet, Plovdiv – central region, Vidin, Simeonovgrad and Nova Zagora.
• Another 19 municipal administrations have also collected fines which were enforced in a prior period, but in a smaller size than the previous group, but even so they reach a collection rate of over 100%. These are mainly small municipalities like for example Zlatograd, Aksakovo, Tutrakan and etc., but there are also some bigger ones like Ruse and Varna.
• A much bigger group of municipalities (a total of 60) reach a collection rate of enforced fines between 80% and 100% - in this group areKardzhali, Panagyurishte, Plovdiv – Northern and Western region, Razlog, Dulgopol, Velingrad and others.
• The biggest number of municipalities (72) have a collection rate between 50% and 80% - some of the biggest municipalities are in this group – Blagoevgrad, Pleven, Veliko Tarnovo, Dobrich, Pazardjik, Shumen, Yambol and others.
• The group of municipalities with a low collection rate (between 10% and 50%) is formed by 64 administrations, including Sofia, Burgas, Targovishte, Asenovgrad, Svilengrad and the capital regions of Izgrev, Oborishte, Poduene, Mladost and Triaditsa.
• 23 municipalities have an even worse collection rate of between 1% and 10% , this group includes Stara Zagora, Sozopol, Silistra, the capital regions of Studentski, KrasnoSelo, Ilinden, Serdika and Iskar, Kustendil and Botevgrad.
• 17 municipalities have registered no income from collected fines, the biggest ones being Lulin, Novi Iskar, OvchaKupel, Vrabnitsa, Hisaria and others.

The data shows that the big municipalities, where most of the population is concentrated, have a very bad record in terms of their regulatory functions, which has an effect on the incentive to abide by regulations and consequently – on the quality of life of local inhabitants. According to various data, about 25% of total enforced sanctions are either appealed in court or simply retracted, but despite this, the size of enforced fines which are not collected remains quite significant, which shows that a large number of offenders remain unpunished for breaking the rules.

The lack of effective control for enforcing local regulations means that even if there is an inflow of investment and a quality infrastructure and even transfers from the central budged towards particular local projects, the big municipalities fail at providing living and business conditions which are good enough.

Source: IME, based on the state and local administration’s official reports for 2014

The top 5 municipalities with the biggest absolute sums effectively collected from fines and penalties in 2014 are Plovdiv, Sofia, Varna, Burgas and Aksakovo. These, however, are also municipalities with a low collection rate (except for Varna), i.e. they have collected only 50% of the total size of the sanctions they have enforced.

The most efficient municipalities (sum collected per employee) are Samokov, GotseDelchev, Tutrakan, Simeonovgrad and Shabla. 

Source: IME, based on the state and local administration’s official reports for 2014

Georgi Vuldzhev*

Bulgaria has been in a state of demographic decline since the 1990’s. Population across the whole country has been progressively shrinking – in the year 2000 it was 8.1 million people, but by 2014 it has declined to 7.2 million.

Of course, the severity of the demographic decline varies across different regions of the country – due to internal migration from scarcely populated areas to more densely populated ones and from underdeveloped to developed ones, the negative effects are being exacerbated in some areas and diminished in others. Considering these differing processes in various parts of the country it is interesting to analyze the dynamic of the size of municipal administrations throughout the years.

For the purpose of this analysis we shall use municipal administrative personnel per 1000 inhabitants as an indicator. By measuring the variations in that number throughout the years we can see how much influence demographic shifts have on the size of municipal administrations.

In this short comparative study we focus on two years – 2010 and 2014. According to the data compiled by NSI and the official reports of the different municipal administrations in the country, during this period total population has declined by 4%, while the total number of municipal personnel stayed almost the same – declining only by 0.1%. This leads to a rise in the number of administrative personnel per 1000 inhabitants from an average of 2.90 in 2010 to 3.02 in 2014.

Source: Official annual reports of the municipalities, NSI, IME’s calculations

As we can see in the table, the districts in which the size of the municipal administration relative to the population is the highest, i.e. we can assume a waste of municipal resources (and consequently – of state resources through state transfers to municipalities) are the same for 2010 and 2014. These provinces are Vidin, Dobrich (without the city itself) Kardzhali, Smolyan and Yambol. The provinces with the lowest number of administrative personnel per 1000 inhabitants in 2010 keep their spot in 2014 as well: Sliven, Ruse, Varna, Stara Zagora, and Pernik. When we take a look at the third column, where we can find the change in the value of the indicator in 2014 as compared to 2010, we notice that the relative size of municipal administrations has declined only in four provinces. These are Yambol (-0.37; -7%), Pleven (-0.19; -6%), Varna (-0.13; -5%), and Sliven (-0.06; - 2%). In all other provinces, the number of administrative personnel per 1000 inhabitants has grown. The provinces where it has grown the most are Lovech (+0.96; +24%); Smolyan (+0.53; +10%), and Blagoevgrad (+0.52; +16%).

It is interesting to also note the size of which particular municipalities underwent the greatest change during the period. On the next two tables you can see exactly this data compared to the shifts in population and the size of the municipal administration in 2014 as compared to 2010.

Source: Official annual reports of the municipalities, NSI, IME’s calculations

It is immediately obvious that the municipalities with the biggest growth in the proportion of local administration size and population size are located in the Burgas province – Sozopol, Sredets, Sungurlare, and Tzarevo. The other two municipalities – Belitsa and Kovachevtsi are located in the provinces Blagoevgrad and Pernik respectively. In five municipalities from the first table the rise in the value of the administrative personnel/1000 inhabitants indicator is caused both by population decline in the municipality and the rising number of employees in the municipal administration. Only in Kovachevtsi is the rise due entirely to the decline in the number of inhabitants and in Belitsa despite the fact that population growth has been positive, the size of the municipal administration has ballooned by 133%!

On the second table we see a very different picture. In all municipalities the number of personnel per 1000 people is lower, with 20% to 40%, despite the poor demographic situation.

Optimally, the rest of the country should be moving in the same direction as the municipalities listed in the last table. The gradual decline in population numbers, combined with the introduction of e-services provided by municipal administrations, suggests that less and less local personnel should be required. The administration has to take steps towards cutting down the numbers of administrative employees, especially in those areas and municipalities where the demographic decline is most serious, and consequently the need for administrative personnel is the lowest.

* Georgi Vuldzhev is an intern at the IME.