The automatic increase in the minimum wage with a formula tied to the average creates economic imbalances and seriously burdens the budget. This was stated on bTV by Lyubomir Datsov – a member of the Fiscal Council and former Deputy Minister of Finance.
According to him, the system introduced two years ago is “the most harmful thing“ that can be applied to the labor market. The reason – such a formula strengthens procyclicality: during economic growth, it creates unnecessary tension by preemptively raising incomes, and in a recession there is no adaptation mechanism.
“What will we do in a crisis – "Will we reduce incomes?" the economist asked, adding that the minimum wage should be the result of economic analysis, not automatism or social pressure.
About 600 thousand people will have their incomes increased if the proposal of the Ministry of Social Affairs to increase the minimum wage to 1,213 leva comes into force.
Currently, a total of over 450 thousand people in our country receive the minimum wage of just over 1,000 leva.
The fiscal risk is also deepening. According to Datsov, if serious measures are not taken, our country's budget deficit could exceed 3% of GDP.
“The deficit will be as large as the government decides to make it“, Datsov said, hinting that there are still mechanisms for correction. However, he warned that systematic practices such as automatic salary increases in the Ministry of Interior, education and administration generate pressure on the budget and inflation.