Labor markets and poverty in Bulgaria

Economic transition in Bulgaria has been associated with the emergence of unemployment, the fall in real wages and a substantial increase in wage inequality. The ranks of low-paid workers have grown and their relative wage status has substantially deteriorated. Unemployment is of long duration. A part of the problem is that the unemployed have excessive wage expectations. Their reservation wages far exceed the wages that employers actually offer for people of given qualifications. The reservation wages hardly fall with the duration of unemployment, which implies that job search is not adaptive. The receipt of unemployment benefits does not seem to reduce the job search effort. The transition hit the hardest the low-skilled workers among whom both the incidence of unemployment and low pay is the highest. Poverty in Bulgaria tends to be a result of both low (relative) earnings and low household labor supply, which often go hand-in-hand. However, work does not keep families out of poverty: the"working poor"account for one-third of all poor. Moreover, poverty incidence s quite high even among families with two earners. Thus, Bulgaria does not conform to the usually observed pattern whereby two earners effectively protect against poverty.