Radical measure aimed at improving and stabilising Bulgaria’s pension system were agreed on after a four-hour meeting between  Labour and Social Policy Minister Emilia Maslarova, social policy experts and trade unions.

The biggest change might affect more than 110 000 Bulgarians, all getting their money from the state budget. According to one of the discussed changes in the country’s pension system, 110 000 state employees will have to start paying their own social security contributions. At present, the state covers the full amount of social security contributions of state employees. This has made working for the state a very tempting job, which has put people working in the private sector on unequal footing.

“Everyone must bear his own responsibility and pay his or her social security contribution,” Maslarova told reporters after the February 26 meeting. If approved, this change will affect people working for the Defence Ministry, the Interior Ministry and magistrates. According to Bozhidar Danev, chairman of the Bulgarian Industrial Association (BIA), the social security contribution of the 110 000 state employees costs the budget close to one billion leva a year. Maslarova told reporters that this change had been discussed during the meeting, but the final solution had to be found after wide public debate.

Another  change discussed at the meeting was for heavier sanctions and penalties for employers and employees who cheat the tax authorities on their real incomes. At present, it is common practise for employers and employees to have a mutual silent agreement to declare an income lower than the real one. That way, both employers and employees pay lower social security contributions, which eventually affects the pension system. This is visible in the data released by the National Statistical Institute (NSI) on February 19.

According to NSI data, the average annual income for 2006 was 4255 leva. The average in the public sector reached 5265 leva, while the level for the private sector was 3804 leva. This difference can be explained precisely by people employed in the private sector not declaring their real incomes.

NSI said that the financial sector produced the highest incomes, with financial mediation specialists receiving an annual average income of 9951 leva. Electricity production and distribution was the second hightest-paid sector, where the average income reached 7537 leva. The top two sectors were followed by state administration and the social security sector, proving once again that working for the state is, if not highly profitable, at least a highly beneficial job.

Employees of the hospitality sector received, on average, the lowest income. There, the average is 2757 leva, Bulgarian National Radio reported. NSI reported that 673 364 people work in the public sector, and those employed in the private sector numbered 1.534 million.

Because this has become a real trend in Bulgaria, trade unions requested of Maslarova that these actions be criminalised and punished by imprisonment. According to Maslarova, 40 per cent of the real income in Bulgaria is not declared. If caught, people can suffer only administrative sanctions, which has proven insufficient to stop the practice. To reveal this wrongful practice, Maslarova said that she will order the Chief Labour Inspectorate to start regular inspections of the work of companies.

“We want to establish the companies that have a black cash box, so to speak, and are part of the grey economy sector,” Maslarova said.

According to Danev, such checks were urgently needed, but there had to be different responsibilities for the employer and for the worker. Danev said that the BIA will present its views and changes within a month. Danev’s views were shared by Zhelyazko Hristov, leader of the Confederation of Trade Unions in Bulgaria, although he said that employers and employees should share the responsibility for hiding their real incomes.

The holding of a referendum on whether the retainment age should be raised came as proposition from Hristov. At the moment, the retirement age for men in Bulgaria is 63 years and for women it is 59, but only if they have enough work experience. The referendum would decide whether the retirement age for men should be raised to 68 years.

The most recent data of the NSI shows that the discussed measures have their grounds. On February 21, the NSI released data that one working Bulgarian supported a pensioner and a child. The economically active population in Bulgaria was 3 448 000 people in the fourth quarter of 2006, out of a total population of 7.8 million. The active population included 1 834 000 men and 1 614 000 women. The relative share of the economically active population aged 15 and over is 51.8 per cent: 57.4 per cent of the men and 46.6 per cent of the women. Of the total number of employed, 129 500 are employers, 234 100 self-employed, 2 757 300 hired workers and 38 700 family workers receiving no payment.

In the fourth quarter of 2006, unemployed persons stood at 288 400, or 8.4 per cent of the economically active population.

Unemployed men were 147 800 and unemployed women 140 600. The unemployment co-efficient among women was slightly higher than among men – 8.7 per cent compared with 8.1 per cent. Of the unemployed, 10 per cent were university graduates, 50.8 per cent had secondary school education and 39.2 per cent had primary education. Long-term unemployed stood at 161 500, or 56 per cent of all unemployed. According to data from the BIA, 100 working Bulgarians support 82 pensioners. If the negative demographic trends continue, by 2050, 100 working Bulgarians will support 123 pensioners.