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| New Social Policy Strategy
PREFACE
The adoption of a new social policy is an important element of the Executive Program of the coalition Government of the Simeon ²² National Movement (SNM) and the Movement for Rights and Freedoms (MRF). A key priority of this Program is the new approach in social policy. The need for a change is conditioned by the pursuit of alleviating the burden of the transition and improving the socio-economic status of the Bulgarian citizens.
The Strategy is part of the integrated approach of the Government to implement reforms in the economy and the social life. It takes into consideration both the national experience and the tendencies, recommendations and guidelines of the European Commission and the Council of Europe in this area. The Strategy sets forth the future activities of the state, the local governments, the employers, the social partners, and the NGO, which are the key stakeholders in the social field and highlights the utmost importance of the unification of their efforts for the success and efficiency of the social policy.
The Strategy outlines the concrete MLSP policies and actions aimed at achieving the objectives outlined. Its extremely broad range turns it into a kind of a social contract with the Bulgarian citizens with a view to improve their social status over the next three years, namely through:
For people of working age – providing active job brokering services for permanent job placement in the real economy sector; enhancing their employability through vocational training and retraining; improvement of the social insurance system; modernization of the industrial relations;
SOCIO-POLITICAL CONTEXT
The objective of the Strategy is to provide the Bulgarian society with an overarching and coordinated policy approach, which will assist Bulgarian citizens in facing the new challenges resulting from the radical transformation both in the economy, and the society. The Strategy aims at controlling the changes accompanying the work life and personal life of all Bulgarian citizens – to minimize the disadvantages, and benefit the most from the advantages.
The social policy has an impact on such key factors as:
The object /client group/ of the social policy are the people of Bulgaria – workers and employees, employers, pensioners, unemployed persons, children and mothers, families and people with low incomes and/or disabilities, disadvantaged people, ethnic groups The agents of the social policy are persons, groups of persons and the institutions implementing the relevant measures of the social policy. This broad range of the social policy necessitates its close interrelation with the economic, budgetary, tax, foreign and interior policies, the regional development and the legislation. If all these elements do not operate in harmony the success of even the best strategies, programs and action plans is impossible. If the economy does not create the necessary growth, it would be hard to implement a satisfying social policy. Economic policy should be designed to both promote sustainable growth and reduce inequality and be complemented by social policy. Neither can function alone nor compensate for the failures of the other.
PRIORITY OBJECTIVES OF THE POLICY OF MLSP
THE NEED FOR SOCIAL POLICY CHANGE
The main challenge now is to create preconditions for increasing employment, reducing poverty and overcoming social exclusion under the conditions of still unfavorable economic environment. Another challenges are: getting under control the negative tendencies in the labor market, where labor supply exceeds substantially labor demand; existence of a relatively large share of informal “grey” economy; insufficient foreign investment; substantial discrepancy between work force qualifications and the needs of the restructuring economy for well-trained professionals.
Until recently, the social policy has been guided by the principle of passive social protection. We want to turn it into an active social policy influencing the causes, not the effects, which will facilitate the creation of a just social order.
The scope of the policy hitherto was aimed at the minimum wages, guaranteed minimum income, minimum pension, ensuring compensation and social assistance for the unemployed. In fact, compensation mechanisms for the existing incomes were sought.The new highlights result from the integration of different policies and instruments on the basis of target surveys. For example, the results of analyses of the unemployment structure have led to a change in the approach towards programs and active measures, as well as their target. The efforts were shifted from providing compensations and benefits to providing employment opportunities. The emphasis now is on the prevention of long-term unemployment so that the already unemployed do not slip into long-term unemployment and therefore need social assistance. Under the existing circumstances of insufficient labor demand the measures are predominantly directed towards sustaining and promoting employment through subsidizing the employers and encouraging entrepreneurship.
Regarding raising incomes, the efforts are aimed at creating opportunities for increasing the personal disposable net income. To a large extent this is related to the tax policy, but of substantial significance is also the implementation of funded active labor market policies, ensuring employment for people of working age living on social assistance benefits. At the same time, increase of pension is possible through expanding the social insurance base through fight against the informal “ grey” economy.
In the area of social assistance a change is needed in the overall philosophy of social protection for the people in Bulgaria. This means re-thinking of the form of social protection through transforming it from direct money assistance to providing employment assistance and delivering professional and specialized social services. The means-tested cash benefit should be paid only after all other alternatives were tried.
The amount of the Guaranteed Minimum Income benefit should be substantially increased for the most vulnerable groups, such as lone elderly people, disabled persons, lone parents.
The amount of the Guaranteed Minimum Income benefit for the unemployed who are eligible for receiving social assistance should not discourage them from seeking employment.
Overcoming poverty and social exclusion, which is our major objective could be done by establishing a specific “social contract”, defining clearly the functions and the engagements of all parties concerned – state, communities, NGO and every citizen. The active approach will be manifested mainly through introducing new social services and deinstitutionalization of persons in social institutions.
SITUATION ANALYSIS AND THE NEED FOR A NEW CONCEPT
The cornerstone of the new concept is the view that social policy should be considered globally, taking into consideration the interrelation of its separate elements and all the trends of overall state policy.
In practice to date there exists certain disconnection, incoherence and lack of coordination among the various policies. The interrelation between the economic and social development, between the economic and social policy is weakened, and often “the economic” dominates over the “social”. Overcoming this problem requires the adoption of a new concept for the relationships among the various policies, so that in case of major changes a preliminary assessment is made to what extent the policies and measures envisaged are harmonized and consistent with each other, and do not hinder the achievement of the outlined goals. The main disadvantage of the past practice was that the social policy faced the necessity to deal with the consequences of the economic policy, which determined its passive nature. The emphasis of the new social policy is placed on the implementation of a more active policy, which addresses the causes, not the effects. This implies, that carrying out a preliminary assessment of the social impact in cases of major changes in the legislation should be an indispensable part of the social policy itself.
High unemployment is one of the most acute problems in Bulgaria. Its solving is connected with a number of activities and measures that the Government has already initiated.
Among the changes already made was the division of the financial resources for unemployment compensation payments that actually are social insurance payments and the resources for financing active labor market measures. Till recently these resources were unified in the Vocational Training and Unemployment Fund. The National Employment Agency was funded only through it and suffered from permanent deficit that had to be covered by the state. Furthermore, over the last two years, NEA operated without an approved budget and this led to a lack of whatever funded employment programs and respectively to increase in unemployment. Together with that, the unemployment compensation policy was structured in a way that led to a decrease in the motivation of people receiving compensation payments to start searching for a job. One of the first steps taken by the Government of SNM and MRF was the amendment of the Employment Promotion Act. The compensation Fund was transferred to NSSI and for the first time the state engaged fully in funding the active labor market policies through the state budget. This provided opportunities for the implementation of vocational training programs, programs for temporary and permanent employment, programs for enhancing the employability. These measures were initiated as early as the end of last year and have been very productive.
Now we focus on each citizen with his/her own problems and needs. We will apply a differentiated approach in order to more effectively deliver support for those who really need it. We will pay special attention to the unemployed person – the one actively looking for a job. He is the target of a number of measures for employment, training and retraining envisaged in the Employment Promotion Act. The goal is to reintegrate him socially and economically in society. In support of this, we are initiating active measures for development of a new strategy in the sphere of vocational training in the utmost degree relevant to the economic situation, labor market demand and European requirements. The unemployment insurance principle will be maintained under new conditions. Special attention will be paid to the discouraged workers and ensuring equal access to employment for women and other disadvantaged groups such as ethnic minorities, older workers, the handicapped, school-leavers, and the rural unemployed, against which there are acts of discrimination or other barriers to entry to the labor market.
An essential component of the social policy is the continuation of the pension reform. As is well-known the labor market situation, social assistance system and the pension system are closely interrelated. The analyses made in the recent months reveal, that the share of the informal “grey” economy regarding the labor market is now critically large. According to some assessments it is over 40% and this has a strong negative impact on the pension system. The fact that a large number of the workers do not have employment contracts violates their labor rights. In this case they are not protected at all with regard to short-term social insurance, as well as the pension insurance. Likewise the widespread concealing of the real wages leads to a number of negative consequences:
MLSP, as the institution directly responsible for the observation of the labor and social insurance legislation initiates measures for ensuring an environment favorable to the normal development of labor and social insurance relations – and this is one of the main tasks of the ministry. Along these lines the new intentions are concerned with focusing public attention on the problems of the informal sector and enhancing the mechanisms for combating it. The sought ways for counteraction are in the direction of increasing the revenue collections in the income tax funds and stricter control over the observation of labor legislation through the establishment of Unified Revenue Agency, registration of employment contracts, starting negotiations for determining the minimum insurance thresholds or minimum (monthly) wages by sector/branch and profession/trade. This will create a better and competitive environment for business and ensure social protection for the working population.
The Government’s efforts are aimed at identifying the persons on really low incomes. We will elaborate a program of positive measures for providing compensations, including tax credits, in order to raise the total taxed income to the poverty line.
Active steps are also taken for concluding bilateral agreements in the area of social insurance with a view to guarantee the social insurance rights of many Bulgarian citizens working abroad.
A highlight in our policy is the opening of Bulgaria to the European labor market and our integration in the process of ever increasing mobility of labor force. That is why, signing of bilateral agreements on labor force exchange should be regarded as an opportunity for self-realization and enhancement of Bulgarian citizens vocational training and language skills. Besides this practically starts the preparation process for our incorporation into the future integrated European labor market, which also coincides with our aspiration to EU accession.
Regarding incomes, the measures taken are aimed at ensuring their growth. The state will retain its regulatory functions in the sphere of labor remuneration.
The concrete parameters will be negotiated at sector or firm level on the basis of elaborated systems and mechanisms for differentiated approach to labor remuneration and criteria for its matching with labor productivity.
Incomes policy is directly dependent on the government budget policy. The main principle is to limit the redistributional function of the state and therefore people and business to command larger sums of money. That is, the emphasis is not to collect money in the form of taxes and later to give them back as increases or other kinds of compensation, but to lower taxes in order to increase the personal disposable income.
This policy will lead to restricting the redistributional role of the budget. Having in mind the budget prognosis for 2002-2003 and the available opportunity for tax cuts, the salaries /wages/ in the real sector should rise if labor productivity is good. Thus the state will stimulate incomes since it could not directly affect the employment relationships in private companies. As far as civil servants are concerned the state will take measures to increase their incomes in keeping with the rate of economic growth.
Social protection in the context of the overall state policy shifts from subsidizing enterprises producing goods and providing services at fixed prices to state subsidies directly to the needy. The various targeted social assistance programs are designed to meet this very requirement – social assistance payments for people on really low incomes and in need of state assistance.
The social safety net to date has lead to an increase in the number of unemployed persons in working age receiving social assistance benefits, and an increase in the share of the long-term unemployed who have lost working habits, training and motivation for work. The new idea is to direct social assistance towards persons who have lost ability to manage independently or with the help of their relatives. On the other hand, people in working age and in good health will be offered an opportunity to work for their incomes, to maintain their working habits and be integrated in society. This idea will be realized through the new program “From social welfare to employment”.
The state being the governing factor in the social assistance policy has the obligation:
The municipalities should have understanding and desire for joint activities in the field of social protection as an active and equal partner, concerned in the utmost degree with increasing the well-being of people, their employment and abilities for overcoming difficulties in everyday life independently.
The Non-governmental organizations also play a particularly important role in the field of social protection, since they represent and defend in most of the cases the interests of specific disadvantaged groups of people. The familiarity with the specifics in the particular communities – way of life, culture, religion, labor and social skills and habits, health and similar problems, assigns to the NGOs the place of equal counterparts in developing and implementing the social protection and ensures that assistance will reach every single target. We attach particular importance to partnerships with NGOs delivering high-level professional services.
We would like to point out some of the main engagements expected to be undertaken by each Bulgaria citizen:
We believe that developing and implementing this new philosophy will enable us to attain the maximum concern and involvement of all partners in the process of carrying out the social protection for people in Bulgaria.
The role of MLSP in the development of the social dialogue is essential. A Charter and an Agreement for cooperation between the Government and the social partners have already been prepared, coordinated and signed. The Ministry works in close cooperation with the regional and municipal administrations, trade unions and employers’ organizations, and with the nongovernmental sector. Apart from the formal meetings in the National Council for Tripartite Cooperation, a number of forums are also held discussing all questions of national importance related to the policy and activities of MLSP.
A. FACTORS
Prospective labor market developments towards the creation of an environment favorable for increasing employment and reducing unemployment are related to the following positive expectations:
Parallel to these positive expectations we should deal with the consequences of a number of negative factors:
The expected tendency for 2002-2005 is that overall labor supply will continue to exceed substantially labor demand.
B. OBJECTIVES
C. ACTIVITIES FOR DELIVERING THE KEY OBJECTIVES OF THE LABOR MARKET POLICY
The Republic of Bulgaria has done the relevant preparation regarding the transposition of the achievements of EU legislation. A founding document for the employment policy in the short-term and medium-term are the guidelines of the European Employment Strategy and the EU directives in the field of equal treatment, professional training and other issues related to employment. Negotiation Chapter 13 ”Social policy and employment” was closed in April 2002, and Chapter 2 ”Freedom of movement of persons” in June.
Objective 1 – Ensure a well functioning labor market that guarantees higher rate of employment for the economically active population.
Measures
The economic environment is of key significance for the realization of this intention, and it has to be improved by removing the barriers to company development, bureaucratic obstacles and limiting the complicated and often conflicting requirements of the legislation. In this respect, MLSP makes its best to support the liberalization of the licensing and regulatory regimes. Under the condition of a substantial increase of job vacancies in the real sector the active labor market policy will be overwhelmingly directed towards ensuring employment for the risk groups in the labor market and equal access to job opportunities.
In case, limited company demand for labor is maintained the active policy funds will be directed with priority to the development of entrepreneurship and promotion of subsidized employment. Both alternatives for development envisage maintaining of the targeted encouragement of professional training for the employed and unemployed persons.
The active labor market policy is to be implemented through an effective use of the pre-accession instruments of the EU, and in particular Phare Program as a predecessor of ESF.
Objective 2 – Implement a new, individual-based approach to each unemployed person Measures Identifying the needs of employers and unemployed as stakeholders in the labor market increases the effectiveness of the job brokering services. The implementation of the new approach tailored to meet the needs of each unemployed person makes possible the systematic observation of the process of searching and providing employment. The introduction of an Individual action plan is not only aimed at making the best to ensure some form of employment for the respective person but also at turning the temporary positions into permanent jobs. This will be realized by choosing and matching the most appropriate forms of training and the employment preferences envisaged in the Employment Promotion Act. Besides mechanisms for developing joint schemes between the state and the employers for financing vocational training programs will be sought.
Objective 3 – Enhance employability
Measures
In order to overcome the consequences of the structural unemployment it is necessary to orientate the unemployed to relevant training to acquire professional skills and qualifications in line with the new requirements of the employers. Achieving higher quality and effectiveness of vocational training, and respectively, a higher rate of job placements should be ensured through increasing the duration of the training process and the allocated funds.
With a view to prevent unemployment and achieve adaptability of the labor force, including in restructuring enterprises and companies, the employed persons should also be qualified and maintain up-to-date skills in order to satisfy the ever growing requirements of the employers. This can be delivered by providing periodical training for the employees.
The measures for enhancing the employability of certain groups of unemployed people, which are a priority for the Government’s policy will be supported by the ongoing and some planned nationwide programs, including:
Objective 4 – Encourage entrepreneurship
Implementation of programs and measures of economic effectiveness Their main objectives are ensuring permanent employment through creation of new jobs in micro-enterprises and self-employment. For the success of this business the counseling services for its starting and development should be promoted to the highest degree.
It is necessary to implement programs encouraging entrepreneurship, especially in the field of the traditional local crafts and manufacture, making the best use of the opportunities provided by the Business centers and Business incubators, which foster permanent employment. Appropriate instruments for creating a functioning business environment are the established Agro-business Centers and Information Business Centers under the project “Employment through support to the business-JOBS”.
To facilitate the starting and development of small and medium-size businesses the scope of the Guarantee Fund for Micro-crediting should be expanded to the maximum. Besides, the disabled persons to whom have been extended loans could also participate in the National program “Promotion of the disabled persons’ entrepreneurship”, which will facilitate the payment of interests.
The promotion of entrepreneurship among women and young people is also strategically motivated.
The implementation of infrastructure programs also supports both the economic reintegration of unemployed people and the municipalities creating preconditions for a future sustainable employment.
Objective 5 – Create employment for disadvantaged persons
Measures
This objective will be delivered mainly through creation of subsidized employment directed to the unemployed disadvantaged groups in the labor market (young people, women, disabled persons, lone mothers, mothers with up to 3 year old children, orphans, long-term unemployed with no vocational training and elementary or lower education, unemployed over 50 years of age), etc. As noted above, this requires alternate care provision (day care, elder care, etc.) National Programs, aimed at particular groups of unemployed which are a priority for the Government Program, such as:
Several regional programs are also under way reflecting the socio-economic priorities of the regions and taking advantage of the opportunities provided by the Employment Promotion Act.
Measures for streamlining of structures in line with the economic, social and financial restrictions are also envisaged to achieve the objective outlined above, namely:
D. EXPECTED OUTCOMES
The founding principle guiding the elaboration of the new incomes policy is related to the conclusion that the legislation and experience EU member states prove that the state retains its regulatory role in the field of labor remuneration.
A. PRIORITIES AND OBJECTIVES OF THE SOCIAL POLICY IN THE FIELD
OF INCOMES:
B. MAIN DIRECTIONS OF ACTIVITIES AND MEASURES THAT SHOULD BE TAKEN:
For determining the functions of the minimum wage two groups of factors should be taken into account – economic and social:
At the national level the fixing of the minimum wage is related to the ambition to sustain and increase the purchasing capacity of the employed, and hence to sustain and increase the employment; to create conditions for reducing and removing the unfair competition in the labor market and to stabilize the function of the wage in macro-economic perspective. With regard to this, the Government envisages the elaboration of mechanisms for determination of minimum wages for sectors and professions that will diminish the significance of the minimum wage overall. These mechanisms will be worked out together with the active participation of the representative employees’ and employers’ organizations.
The state regulation of wages in the budget organizations and activities comprises the bodies of the state administration, local self-governance and local administration and their structural units irrespective of their financing source; state and municipal organizations financed through the state or municipal budgets; the specialized organizations and units financed through extrabudgetary accounts, as well as the funds created by a law or other normative act.
The wage/salary in the budget organizations and activities is determined by government decrees in keeping with the adopted State Budget of the Republic of Bulgaria Act, the implementation of the incomes policy and the agreements with the International Monetary Fund and the trade unions. Likewise a CM decree regulates the mechanism for the formation of the wage bill, within the framework of which are determined the individual monthly wages/salaries. A mechanism for evaluation of the individual labor performance of the employed in the public administration is already being introduced on a step-by-step basis providing both a possibility for assessing the level of vocational training and fair remuneration of the employees in conformity with their skills and personal contribution. The introduction of a new system for determining the basic monthly remuneration for state employees, as well as for setting the maximum level of monthly wage for the state administration employees is also envisaged.
With reference to the transposition of the achievements of the EU legislations and the obligations of the Republic of Bulgaria under Chapter 13 “Employment and social policy” it is envisaged to be established a Guarantee Fund for protection of workers and employees in case of insolvency of their employer. Representatives of the trade unions, employers and the Ministry of Labor and Social Policy have been working in close cooperation for the implementation of this project. The main objective of the project is the creation of normative guarantees for the workers and employees that in case of insolvency of their employer they will receive their labor remuneration within the time stipulated in the law. The establishment of such a guarantee institution is supported by the social partners and would play an important role in the market economy situation.
The main objective of the fiscal policy is to achieve a high and sustainable economic growth through ensuring the necessary resources for maintaining fiscal and macroeconomic stability while at the same time providing substantial relief promoting economic activity. The emphasis of the new policy is on the usage of indirect and unconventional instruments for influencing the personal incomes. Such instruments are the mechanisms for increasing the fair competition in the economy through a simpler and clear scheme for taxation and limiting the bureaucratic barriers to business by streamlining the registration, licensing and regulatory regimes. The systematic reduction of the rates of the personal income tax with an emphasis on the low and medium incomes is also of importance.
In times of macroeconomic stability and growth the necessity of accurate assessment of the welfare of the households under generally adopted standards, as well as following the tendencies in that field attains an ever growing significance. Reliable welfare indicators are needed which will serve for strengthening the (inter)relation between the objectives of the economic growth and the state programs for reduction of poverty, inequality and economic uncertainty. The Government of the Republic of Bulgaria works on a broader and more comprehensive strategy for poverty reduction with the assistance of institutions such as the World Bank and UNDP. The Ministry of Labor and Social Policy intends to increase the effectiveness and sustainability of its programs for social protection by improving its capacity for medium-term planning, analysis and policy development. With regard to this The European Bank for Reconstruction and Development and the MLSP signed in December 2001 a Letter of Agreement on financing the project “Survey, Assessment and Development of Policy on the Issues of Poverty”. The objective of the project is to establish the institutional foundation for a reliable and permanent mechanism for survey, assessment and development of policy on poverty issues based on the Living Standards Measurement Survey (LSMS). It will serve for timely gathering of reliable and useful statistical data for analyzing issues of poverty, surveying poverty, and assessing the impact on it. An opportunity will be created for development of policy anticipating the tendencies in this area (proactive policy). The process of institutional building will be supported by assigning concrete institutional responsibilities, strengthening the governance and technical expertise of the state for targeting and assessment of social programs and expenditures. Regular poverty surveillance is to be carried out, including by preliminary assessment of the poverty level, the distribution of incomes and the social dimensions of all government decisions and programs.
The implementation of this project will be a component of a more comprehensive and more intensive approach to combat poverty and will make possible the development of a unified strategy that will rely on the full support of the government, the municipalities and civil society, and will pursue the goals of international development, where Bulgaria is a concerned party.
Active engagement of civil society organizations and community based organizations in poverty monitoring, evaluating the cumulative effects of policy interventions and active participation in the social policy formulation and planning process in addition to the LSMS.
PART THREE
MLSP’s principled position regarding this field is to ensure the observance of the labor legislation and seek mechanisms for control and sanctions. The Government’s principled position is that social insurance funds revenues should be increased not through increasing the social insurance burden, but through improving the collection of the social insurance contributions and expanding the basis i.e. including more insured persons. Sustaining the pension reform is an essential condition for the success of the social policy.
A. PRIORITY OBJECTIVES
B. IMPROVEMENT OF THE SOCIAL INSURANCE SYSTEM
C. IMPROVEMENT OF LABOR LEGISLATION A working group on negotiation Chapter 13 “Social policy and employment”, is formed with the task to prepare a project for amendment and supplement to the Labor Code consistent with the directives of EU. The deadline for this project is March 2003. The working group has a broad representation from the social partners and also from other ministries and departments.
The envisaged amendments to the Labor Code refer to:
Parallel to that other changes to the Labor Code are discussed with the social partners, namely:
D. ENSURING OCCUPATIONAL SAFETY AND HEALTH Main objectives:
CHANGING THE SOCIAL ASSISTANCE PHILOSOPHY – INTRODUCTION OF A DIFFERENTIATED APPROACH
A. PRIORITY DIRECTIONS OF SOCIAL ASSISTANCE ACTIVITIES ARE:
B. ACTIONS AIMED AT MEETING THE CENTRAL PRIORITIES
Objective 1 – Changing the philosophy of social assistance Measures
Objective 2 – Giving priority to the development of the social services aimed at overcoming social exclusion Measures
Objective 3 – Introducing a new approach to people of working age
Our principled position on this issue is to make the transition from the philosophy of "assistance" to a philosophy of "assistance for self-assistance". This will enable people of working age to become active participants in the labor market instead of being just passive receivers of social assistance benefits. Similarly, budget expenditures will be transformed- from cash allocated for social assistance benefits to expenditures on real wages, social security and participation.
Objective 4 – Improving the governance structure and the financing of the social assistance system: Measures
PART FIVE
Measures
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