In its latest macroeconomic forecast, the Bulgarian National Bank (BNB) anticipates that labor costs will continue to rise due to labor shortages, wage increases in the public sector, and heightened economic activity. Despite some media misinterpreting these data to predict a 20% increase in the minimum wage, the BNB does not calculate this indicator. The actual value of the minimum wage for 2025 will be determined by the Ministry of Labor in September, based on the average gross wage for the preceding period.

Impact on the Labor Market

The expected increase in the minimum wage will lead to a 10.2% rise in compensation per employee in 2024, according to the BNB. This will be supported by increased economic activity and higher public sector wages. However, the wage growth outpaces labor productivity growth, which could reduce the competitiveness of the Bulgarian economy in the international market.

Link Between Minimum and Average Wages

According to recent amendments to the Labor Code, the minimum wage for the next calendar year must be 50% of the average gross wage for the last 12 months. This ensures a balance between the minimum and average wage levels, while guaranteeing that the lowest-paid workers receive fair compensation relative to the overall wage level in the country.

Effect on Investment Activity in Ruse

As an industrial and logistics center, Ruse will be affected by these economic changes in several ways:

1. Increased Labor Costs: The rise in the minimum wage will increase labor costs for local businesses. This could lead to reduced profit margins and potentially job cuts if companies cannot pass these costs onto consumers through higher prices.
2. Attraction of Skilled Labor: A higher minimum wage can make the region more attractive to skilled workers seeking better employment opportunities. This can support the development of the technology and industrial sectors in Ruse.
3. Investments in Automation and Technology: To offset higher labor costs, many companies may invest in automation and new technologies. This will increase the demand for highly skilled labor and could create new jobs in the high-tech sector.
4. Infrastructure Improvement: Increased economic activity and the need to attract new investments will stimulate the local administration to improve infrastructure, a key factor for attracting foreign investors.
5. Attracting workers from third countries: Raising the minimum wage can make Bulgaria and the Ruse region in particular more attractive for workers from third countries. This can help address labor shortages and support local businesses that need skilled workers. The high minimum wage can serve as an incentive for migrants to choose Bulgaria as a preferred destination for work, which will contribute to the economic development of the region.

Conclusion

Raising the minimum wage will have a significant impact on the economy of the Ruse region. While increased labor costs may pose a challenge for businesses, they also create opportunities for attracting skilled labor and investments in new technologies. To make the most of these changes, the region should focus on improving infrastructure and supporting local businesses through various incentives and training programs.

The analysis is based on a publication by Vera Denizova in the newspaper Capital.

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