The happy news that unemployment in Bulgaria has dropped over the past 12 months from 7.25 per cent to 5.96 per cent, as the National Employment Agency announced on August 20, was overshadowed by the analysis by the Federation of European Employers (FEE), which portrayed Bulgaria as the country paying the lowest salaries in the European Union.

And not only the EU. FEE data showed that employers in non-EU countries such as Croatia pay three times more than what Bulgarian workers get.

The FEE, using figures from February this year, said that the average weekly pay in Bulgaria was 48 euro (1.20 euro an hour) while neighbouring Romania pays its workers an average of 89 euro a week (2.20 euro an hour). Slovenia and Croatia topped Eastern Europe with their 235 euro a week (5.80 euro an hour) and 205 euro a week (5.10 euro an hour), respectively.

According to FEE, employers in Western Europe, where Germany leads with an average weekly salary of 809 euro, were looking to save on salary costs and were increasingly relocating operations to Eastern Europe, Asia and Latin America.

Eastern Europe’s main attraction was the lower corporate taxation, which in Bulgaria was reduced to 10 per cent from 15 per cent in 2007, the lowest in the EU. Further, a 10 per cent flat tax rate was also introduced. Social security payments, however, remain higher than in most EU countries and that, according to FEE, was one of reasons for the low level of wages in the country. Still, employers had little to worry about, since “corporate taxation is usually low enough to offset such [wage] costs”, FEE said.

The situation gets worse if one compares the data from the European Union’s statistical body Eurostat on labour costs from 2006, which again put Bulgaria at the bottom of the table. According to Eurostat, in 2006 Bulgarians were paid 1.65 euro an hour, which, coupled with FEE data from February 2008, could suggest that the country’s EU membership has had a more of a negative, rather than positive, effect on salaries.

The discrepancy between the two sets of data could well be because of the different methodology used by Eurostat and FEE, but what they both have in common is the conclusion that Bulgarians are still the lowest-paid workers in the EU. This was one of the reasons why Prime Minister Sergei Stanishev’s main fear recently has been euro-scepticism. The latter can only grow stronger after the European Commission’s decision to freeze more than 800 million euro in funding to Bulgaria because of doubts about the country’s ability to fight corruption.

FEE’s data on minimum salaries in Europe is not very encouraging either. Bulgaria, with its 112 euro a month as of January 1 2008, is again at the bottom of the chart. Even Albania, with its minimum salary of 131.46 euro, ranks higher.

Naturally, low salaries have led to a situation where Bulgarians are looking for job opportunities abroad and thus creating a demand for qualified workers in their home country, but also helped prop up Bulgaria’s economy. In a June 12 report, EU news portal EurActiv quoted economists as saying that “the money being sent back home by these workers is equal to the amount of foreign direct investment entering the country over the same period of time”.

The 10-year record high year-on-year inflation rate of 15.1 per cent, recorded in June, could only add to the frustration of Bulgarian workers. At least there Bulgaria did not top the chart, but among the 27 EU member states, only Latvia managed to outsprint Bulgaria, with an inflation rate of 17.4 per cent.