MINIMUM WAGE AND IN-WORK POVERTY: EVIDENCE FROM BULGARIA

Abstract

The article presents the results of a study on the relationship between minimum wage increases in  Bulgaria and the dynamics of the so-called "working poor". It is assumed that setting the minimum wage amount as a fixed percentage of the national average wage – and therefore imposing it centrally through administrative channels and with limited participation of social partners – weakens the potential of this policy tool to achieve a sustainable reduction of the in-work poverty rate. Applying a single-factor regression analysis of the association between the ratio of the minimum wage to the average wage in the country (Kaitz index) and the share of working poor, it was found that there is a statistically significant positive association between the two variables. In other words, the higher the Kaitz index, the higher the share of working poor. This finding is important for the debate on the procedure for determining and updating the minimum wage in the country. It also highlights the need for public authorities to make targeted efforts in promoting the development of scientific knowledge on the economic and social effects of the minimum wage in a national context.