The proposed increase in the minimum wage, its impact on the economy and the need for changes in the pension system were commented on by economists Assoc. Prof. Shteryo Nozharov and Prof. Nikolay Shterev on the air of “Your Day“ on Nova News. The reason for the conversation was the possible changes in incomes announced by the Minister of Social Affairs Natalia Efremova next year.
According to Assoc. Prof. Nozharov, the discussed increase in the minimum wage by between 40 and 50 euros means a growth of about 6.5 to 8%. He warned that such a pace is ahead of the long-term growth of labor productivity and could intensify the cooling of the labor market.
“Employment has fallen by 0.5% over the past year. We have a definite cooling of the labor market“, Nozharov pointed out. According to him, an excessively rapid administrative increase in the minimum wage could also accelerate the replacement of low-skilled labor with automation.
Prof. Shterev defended a different view of the minimum wage. According to him, it also has an important social function and should allow workers to cover their basic expenses. According to him, its increase can also become an incentive for businesses to invest in technology, and for workers to improve their qualifications.
„With excessively high wages, we can create precisely this wave in which companies replace workers with equipment, new technologies and systems with artificial intelligence. This should be an incentive for people to improve their qualifications“, commented Shterev.
Assoc. Prof. Nozharov also drew attention to the effect on state finances. According to him, the increase in the minimum wage leads to the need to increase the remuneration of some employees in the budget sector, and in the longer term it also affects pension costs.
Therefore, according to him, the increase should be moderate. „I would say that an increase of about 40 euros is acceptable, but not more“, said Nozharov.
Prof. Shterev also emphasized the large regional differences in income. According to him, Sofia is significantly closer to European levels, while in the rest of the country wages are significantly lower. According to him, a higher minimum wage can be a tool for limiting this difference.
The two economists agreed on the need for reforms in the pension system, especially in the first and second categories of labor. Nozharov believes that the current rules do not sufficiently take into account the changes in working conditions that have occurred as a result of automation and technological development.
„The list of labor categories is literally copied from the socialist list. In all these years, automation and artificial intelligence have advanced a lot and the risks are no longer the same“, he said.
According to Nozharov, the options for early retirement and some of the privileges upon leaving the system should also be reviewed.
Prof. Shterev also supported changes. “In order to have more money for pensioners, the way in which retirement is carried out in the country should be reconsidered“, he said. According to him, people who have worked in one place for a long time could receive additional incentives during their working life, instead of large payments upon retirement, which would reduce the pressure on the state budget.