Bulgaria is undergoing both a rapid demographic transition and a significant structural shift in its economy. Increasing longevity combined with low fertility and emigration have made Bulgaria’s age structure increasingly top-heavy and its dependency ratios higher. At the same time, the economic sectors that absorbed low-skilled workers during the high-growth early 2000s, such as construction and manufacturing, were those that contracted most during the 2008–09 economic crisis and they have not yet recovered. Meanwhile, activities demanding high-skilled labor, such as financial and business services and information, communication, and technology (ICT), have been faring relatively well.
The labor market is not yet responding adequately to Bulgaria’s demographic challenge, mainly due to rising skills mismatch. Bulgaria’s demographic situation implies that its economic future will depend in large part on how well it can utilize the available human resources. Though the country has an opportunity to mitigate the challenge of rising dependency ratios by bringing into the labor force currently under-utilized groups, such as youth (particularly Roma) and older adults, Bulgaria seems not to be prepared to meet this challenge, largely because its labor market has not performed well in recent years. The country has a relatively low labor force participation rate (LFPR) of 68.6 percent, and the second-highest rate in the EU of youth not in employment, education, or training (NEET). In several surveys, employers in Bulgaria have indicated that finding candidates who are appropriately educated and skilled has become increasingly difficult, particularly in such innovative sectors as IT and high-value-added manufacturing. The widening skills mismatch is also reflected in the growing gap between the unemployment rates of higher- and lower-skilled workers and the rising number of long-term unemployed. How well prepared the next generation will be for Bulgaria’s new labor market is also in question—40 percent of its 15-yearolds are functionally illiterate and innumerate.
This study uses a new dataset with direct measures of cognitive and socioemotional skills to examine the relationship between skills and labor market outcomes in Bulgaria. For a long time, labor market studies had to rely on formal educational attainment as a measure of an individual’s skills. However, the correlation between formal education and skills is not perfect, and not all diplomas are equal in terms of imparting certain skills to students. Moreover, valuable skills can be acquired without formal diplomas, for example through on-the-job training or learning-bydoing. In addition to using educational attainment this study therefore looks at direct measures of two types of skills that employers value: cognitive skills, such as functional literacy and numeracy, and socioemotional skills, such as self-discipline, perseverance, and ability to work well with others. The objective is to assess the extent to which these direct measures shed light on what matters for labor market success, defined as being in the labor force, being employed, and earning more. This analysis relies on original data (the Bulgarian Longitudinal Inclusive Society Survey, BLISS) collected by the World Bank and Open Society Institute–Sofia in the spring of 2013, which for the first time in the country included nationally-representative information on the cognitive and socioemotional skills of the working-age population.
Full text of the report Skills for work in Bulgaria.