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Social Assistance and Poverty Alleviation in Bulgaria 
Dr. Georgi Shopov
Club "Economika 2000", Bulgaria
e-mail: club2000@primasoft.bg

The purpose of this paper is to:
•	outline the most important parameters of the impoverishment of the population since the beginning of the nineties;
•	evaluate and present the most important aspects of policy development in the field of social assistance in general and analytical  aspect and, more specifically, its legislative framework, of which on the basis of data from the  sociological survey of the opinions of the beneficiaries and experts in that area;
•	make some conclusions and proposals concerning the future development of the social policy for poverty alleviation.

1. Poverty Scale Since the Early 1990s
Since the beginning of 1990s the growing scale of poverty has been one of the most typical trends of development of the living standards. These processes have been the focus of many surveys and publications. Therefore only the most important parameters of these socio-economic phenomena are presented here (see Table 1)  with a view to outlining the challenges before social assistance.

- See for instance Beleva I. et al “Bulgaria and the European Community: Labour Market Transformation and Social Policies With a View To Europe”, S. 1993; Noncheva T. “The Process of Impoverishment of the Population: Assessment, Factors and Prospects”, Labour Problems Journal, 5, 1993; Gocheva R et al “Social Protection of the Poor, Unemployed and Consumers in the Transition to a Market Economy”, S., 1994; “Poverty and Fragmentation of the Bulgarian Society and the Role of Non-Governmental Organizations in the promotion of Social Integration”, S., 1996; Stoyanova et al. “Social Reform”, S., 1996; UNDP reports “Bulgaria. Human Development” after 1995; “Poverty in the Conditions of Transition”, UNDP, S. 1998 etc..

Table 1. Impoverishment of the Population
Indicators/          Years | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999
Share of households with incomes below   Social minimum | - | 67.4 | 67.8 | 70.3 | 68.6 | 77.3 | - | - | -
Share of households  with incomes below Existence minimum | - | 49.8 | 50.3 | 54.3 | 53.7 | 63.9 | - | - | -
Share of Households with incomes per member below 50% of the country average income | | 7.9 | 9.1 | 11.4 | 15.0 | 12.2 | - | - | -

Real av. wage growth as against: 
     the end of 1990 ã. - %
     the end of the previous year - %

-41
-41

-50
-16

-60
-20

-69
-23

-68
3.72

-82
-44

-78
28

-76
9

-78
4.5

Growth of real average pensions as against: 
     the end of 1990 ã. - %
     the end of the previous year - %

-51
-51

-60
-18

-59
3

-72
-31

-69
9

-84
-47

-79
25

-77
13

-77
13

Growth of the real  GMI as against:
     the end of 1990 ã. - %
     the end of the previous year - %

0.35
0.35

-30
-31

-25
8

-53
-38

-54
-2

-77
-51

-72
22

-67
19

-69
8.5

Note: The table was drawn up using data from the Ministry of Labour and Social Policy and the publication “Poverty in the Conditions of Transition”, UNDP, S., 1998, pp 18-23.

The data in the Table show unambiguously that the impoverishment and the scale of absolute and relative poverty in the beginning of the 1990s affected an ever growing part of the population. The real incomes decline is drastic. The so called real average wage dropped by 69% in 1994 as compared with 1990, 82% in 1996 and 76% in 1998. For the average pension these figures are  - 72%, -84% and -77% respectively. The degree of income differentiation of the population is also increasing: Geany’s coefficient was 0.217 in 1990, 0.306 in 1992, 0.366 in 1994, 0.340 in 1996, 0.321 in 1998. 

- According to NSI data

The growing scale of poverty increased the contingent of the National Social Assistance system. About 10-12% of the population received social assistance from the municipal social welfare centres in the last years. 
The principal factors for the impoverishment of the population are: economic decline, inflation, unemployment, the method and progress of the economic reform, the pension dependency ratio and the health and family status. The major external constraints before the social assistance policy are the rigid budget restrictions, the shortage of budget resources and the state of change in the other elements of the social protection system. 

- For further details see Noncheva T. “Status and Prospects of the Social Welfare System in Bulgaria: Legal Framework and Terms of Eligibility” in “Parliamentary Demovracy” 9/1998, p. 49 as well as the author’s research published in “Social Reform” p. 85 and “Bulgaria 1995. Human Development”, UNDP, p. 24 and others.

Development of incomes in 1997-99. As it can be seen from the above table, the main trend in the period is the rise of the real incomes of the population as compared with the previous year. However, there is no significant improvement in the level of real incomes compared to 1999.  That is an indicator for a continuous and ongoing decline in the purchasing capacities of the population, which is  a strong constraint on the domestic demand and the chances for revival of the economy. 
There are two key factors for  real incomes growth:  (à) relatively low values of monthly inflation  (for instance in seven months of 1998 it had negative values and up to May 1999 positive inflation was registered only in January); (b) anti-inflationary protection of incomes in which the nominal size of the incomes set by the government was increased several times (at the end of 1997, twice in 1998 and the beginning of 1999  plus the payment of additional “Christmas” and “Easter” amounts).
The negative effects of the continuing deflation of the type being observed should also be noted as it is a product of the contraction of the consumer market and lower sales rather than any higher productivity. In this case price reduction has a negative effect on the companies-producers with an unfavourable subsequent impact on  production and supply of the products concerned. 
Moreover, the higher purchasing power does not necessarily mean higher consumption of these goods. In the winter period and especially after the electricity price rises the costs for heating  of the population are higher. The reduction of consumption, especially for the low-income households brings down the sales of the production with all consequences for the producers and employment resulting from that.
The attempt to assess the above two factors in terms of the immediate economic effects from the introduction of the Currency Board points to a  stronger inflation controlling. The immediate result is higher purchasing capacity of incomes even when their nominal size is preserved. In assessing the development of inflation after the introduction of the Currency Board one should bear in mind the fact that due to the open nature of the Bulgarian economy the domestic price level logically comes close to the international level.  In some estimates “the positive outcomes from the  financial stabilisation of the country increased the general price level by the end of 1997 to about one third of that in Austria” whereas in 1993 it was 26.6%. 

- See Minasian G.”The Monetary Board: Hopes and Fears”, “Economic Thought” Journal, issue 1/1998, p. 6-7.

However the nominal incomes growth failed to compensate for the decline in the purchasing power of a large part of the incomes as compared with the beginning of the 1990s. Still the higher purchasing power of incomes in 1997, 1998  and 1999 is an positive change as compared with the beginning of 1997.  
The growth of nominal incomes and the stabilisation of the exchange rate after the introduction of the Currency Board resulted in a higher dollar estimate of incomes (see table 2). Nonetheless the dollar equivalent of incomes in Bulgaria has retained its very low level as compared with a number of other countries in Central and Eastern Europe.  Thus in the first quarter of 1997 the average wage in Slovenia was 915 US$, in Poland - 346 US$, the Czech Republic - 342 US$, Hungary - 308 US$ and Romania - 95 US$. 
Table 2. Dollar Equivalent of Some Incomes
| January' 97 | December' 97 | August' 98 | April'  99 | February'  2000
Minimum Wage | 3 | 25.6 | 28.4 | 33.3 | 37.5
Average Wage | 12 | 100.2 | 100.4 | 105.4 | 111
Social Pension | 2 | 21.9 | 18.4 | 18.9 | 36.3
Average Pension | 3 | 34.9 | 32.9 | 33.8 | 80
Base Min. Income | 2 | 15.2 | 17.2 | 20.4 | 18.7
Source: Ministry of Labour and Social Policy

The insufficient effect from the positive changes discussed above becomes apparent in the responses of the people interviewed within the framework of the sociological survey conducted by the Centre for Study of Democracy in March 1999. 
The data show that the interviewed persons spend a large part of their incomes to meet vital needs. Highest (23.7%) is the percentage of the people who  answered that they spend between 40 and 50% for food followed by those who spend 50-60% of their incomes for food (20.7%). Only 16.4% of the respondents spend less than 1/3 of their incomes for food, i.e. under that criterion almost 83% of all people live below the poverty line. 
Distribution of Respondents According to the Share of Their Food Expenditures (in %)

Another significant item in people’s expenditures is the payment of energy: more than half of the persons interviewed have answered that the share of these expenditures is over 56%. At the same time 2/3 of the respondents report that they had no expenses for clothing and shoes in the past month.  Added to that is  the alarming figure of over 40% of them not buying any medicines, a fact that could not be explained with the good health status but rather with  not being able to afford such expenses.
These findings show that a large number of people limit themselves to the most vital expenses involving the satisfaction of urgent physiological needs.
2. Changes in the Poverty Alleviation Policies
They can be traced out through a chronological analytical overview and evaluation of the most important key changes in the  legal frames of the policy of poverty alleviation.
2.1. Changes Over the 1991-1996 Period
Since these changes are a subject of detailed analysis and evaluation in a number of publications, here we outline only the most important among them as far as the scheme of income maintenance in case of poverty is concerned. The most characteristic features of the development of social assistance in that period are the following:

- See for instance Beleva I. et al: “Bulgaria and the European Community: Labour Market and Social Policy Transformation With A View to Europe”, p.p. .63-68; Stoyanova K et al: “Social Reforms”, S., 1996, p.p 88-90; Noncheva T. “Status and Prospects of the System of Social Assistance in Bulgaria: Legal Framework and Eligibility”, “Parliamentary Democracy”, 9/1998, p.p. 58-61.

•	in the beginning of the nineties it adjusted itself to the drastic changes in the conditions and to the rapid growth of the scales of poverty in the country;
•	it often rested on the principle of trial and error;
•	the political measures were reactive in nature in terms of the urgent solution of emerging pressing social conflicts and problems;
•	the policy implemented in that area was based on supportive legislation (Decrees of the Council of Ministers).
Meanwhile some political and practical experience was accumulated and some new features of social assistance were taking shape.
The main accent in the development of the income maintenance scheme in case of poverty concerned  the conditions for access to social benefits, their amount, duration, type and way of funding. 
In the course of change some major characteristics of the social benefits were preserved in terms of their economic form (cash, in kind and services) and interval (monthly and periodical). Up to 1991 the main conditions for access to social benefits were: level of incomes and belonging to some strictly defined categories of the population (disabled, incapable to work and single elderly, some groups of children and youths at risk, large families). As early as in the spring of 1991 this inadequate  income maintenance scheme was subjected to changes. Instead of absolute values the minimum income line below which a person was eligible for access acquired relative dimensions - 65% of the minimum wage. Some access constraints were introduced resulting from the property status of the persons in need. Thus an important step forward was made towards a higher degree of social benefit targeting.
The shortcoming of this scheme was the preserving of the functional dependence of the amount of social benefits on the amount of social benefit based on the minimum wage. The strict requirements for  property status turned out to be a factor for higher expenditures in the form of “non-calculated” lump and periodical benefits granted in the opinion of the social welfare centres.
Some new modifications of the social assistance system were necessary in 1992. The main accent was put on the development of a flexible income maintenance system for poor persons and families under which  social assistance was granted after a means-test. That is a way to achieve benefit targeting.
The following more important changes of principle character were made:
(à) abolishing the direct dependence of social benefits on the amount of the minimum wage;
(b) guaranteeing a base minimum income (BMI) to persons proved to be in need of regular social assistance;
(c) the BMI amount is differentiated through a system of coefficients in accordance with the composition of the family;
(d) regulating the amount of benefits in order to encourage the persons being assisted to be active in offering their working capacities on the Labour market;
(ä) bringing the amount of the BMI in conformity with the amount of the other minimum incomes (minimum pension and wage, unemployment[ benefits) in order to preserve the ratios between their values and not to allow a mass entry into the social assistance system of persons having certain incomes.
In this situation the BMI acquired the following characteristics determining the nature of the now operating income maintenance scheme for the poor:
•	universal benefits designed for the poor regardless of the reasons for their current condition;
•	a targeted assistance to individuals meeting certain requirements;
•	incorporation of elements encouraging the beneficiaries to offer their labour force on the Labour market;
•	resting on principles and containing a number of elements recommended by European structures.. 

- See  Council Recommendation of 24 June 1992 on common criteria concerning sufficient resources and social assistance in social  protection systems  (92/441/EEC).

The major financial sources of social assistance funds remain practically unchanged. The financing is based on the principle of national solidarity and vertical income redistribution through the system of taxation. It is made available through and at the expense of the local budgets with the central budget providing targeted transfers.
Practice has shown the following main weaknesses  of the scheme. 
First, the strict nature of the eligibility criteria that greatly reduces the number of beneficiaries of monthly cash benefits.
Second, the inadequate opportunities for monitoring the declared property and (especially) income status of   the beneficiaries. 
Third, the financial instability of the municipal budgets leading to delays in the payment of social benefits.
After the price liberalisation for energy carriers in 1995, when the expenses of the population for payment of energy had grown considerably, the so called “target energy benefits” were introduced. They are a typical example of a specific program complementing the universal income maintenance scheme in case of poverty. The target energy benefits are also granted to low-income persons and families. However the income line in this case is higher than that of the monthly social benefits and is formed by adding the leva equivalent of the heating rates to the  base minimum income - BMI (and respectively its differentiated amount for the family). In contrast to the monthly social benefits the target benefits are granted only in the autumn and winter seasons. Thus the administration of the programme is facilitated and it covers a broader circle of beneficiaries. Its introduction turned out to be an important element of the social assistance to the population covering its growing expenses as a result of the restriction (or gradual abolition) of the government subsidies for goods of vital necessity (in this particular case - electric and heating energy).
2.2. Amendments after 1 July 1997.
The most important amendments in the legal framework of social assistance and respectively in the poverty alleviation policies are related to the adoption of the Social Assistance Act. Just as any other legislative act it has its strengths and weaknesses.
The most important strengths and positive aspects related to its adoption are that it:
•	revoked the archaic Decree on Social Assistance of 1951 and introduced a modern legal framework of social assistance in the country;
•	defines the goals, terms and forms of social assistance;
•	changes the structure of management of the national social assistance system towards its higher centralisation;
•	expands the sources of financing and takes steps towards greater financial independence of social assistance;
•	creates the general regulations for the participation of the third sector in the supply and delivery of social services and in the public control over the activities of the national social assistance system;
•	sets up a mechanism of control and administrative penal responsibility that is more reliable than the previous mechanism.
The main  weak points  of the law proceed from:
First,  the elements of dualism in social assistance management and financing. From the point of management the principle of centralisation has been adopted: the district and municipal social assistance offices are subordinated to the National Social Assistance Agency. This has its indisputable grounds and advantages. On the other hand however the municipal social assistance centres continue (as before) to be supported from the municipal budgets. It can be presumed that in view of the financial state of most municipalities the support of these centres will not be among the priorities in the drafting of the local budgets. The same applies to the monthly benefits projected to be paid out at their expense. 
Second, too general funding sources. The principal sources continue to be  the subsidies from the state budget and  funds from the municipal budgets. That means that the current revenue insecurity will be preserved and in consequence there will be a danger of recurrences of the phenomenon of “calculated but unpaid benefits”. A phenomenon which is one of the indicators of crisis in the system. 
The third main weakness of the law is determined by external factors related to the need for a radical reform of the financing mechanisms of the social protection system of the population.  In essence  this reform will is reduced to synchronisation of the nature of the sources of funds with the nature of benefits. In the case of social assistance based on the principle of national solidarity it generally means  introducing revenues from targeted taxes on the broadest possible taxation base for the incomes and property of the population.
The Regulation on the Implementation of the Social Assistance Act  develops its positive aspects still further, but also reproduces some weaknesses. The more important ones among them are as follows:
(à) the introduced 6-month waiting period before the unemployed become eligible for  welfare benefits. That requirement (although it does not deprive the family members from their entitlement to welfare benefits) contradicts to the universal nature of the welfare benefits which ought to be granted regardless of the cause generating poverty and should not be limited in time. This requirement is also contradictory to the recommendations of the Council Recommendation of 24 June 1992 on common criteria concerning sufficient resources and social assistance in social  protection systems.
(b) This Regulation also establishes an equal amount of targeted energy benefits for all beneficiaries - equal to the full amount of the norms for energy needs. Consequently it does not resolve the problem of the overlapping of benefits for the same beneficiaries, for instance, monthly welfare benefits and target benefits for heating in the winter period.
This overlapping brings the incomes of the beneficiaries well above the incomes of persons and families below the line of the minimum income base and the differentiated minimum. The overlapping of different kinds of benefits activates the “poverty trap” and hence the social exclusion which is one of the most important problems and tasks before the poverty fighting programmes.
An important legislative change was the fact that the principle of financing was modified with the State Budget Law for 1999. For the first time  municipalities were allocated target subsidies for social assistance to the amount of 50% of the welfare benefits under the Social Assistance Act and Birth Promotion Decree. In  drafting the local budgets for 1999 the amount of funds for social benefits under the above two acts could not be less than double the amount of the target subsidies intended for that purpose. That was a way to seek for financial stabilisation of social assistance.
The amendment of the Regulations on the Implementation of the Social Assistance Act in the beginning of May 1999 made it possible to provide part of the monthly welfare benefits in kind. This change sought for a dual effect: on the one hand, to improve benefit targeting and on the other, to guarantee a market for the canning industries, to increase the domestic demand and to provide access to the circulating capital of the respective enterprises.
2.3. The Opinion of The Beneficiaries.
The findings from the survey conducted in March 1999 by the Centre for the Study of Democracy showed that 11% of the respondents received welfare benefits in 1998. Over 1/5 of the respondents stated that welfare benefits formed more than half of their incomes, 10% - that they were between 30 and 50% and more than half of the respondents shared that welfare benefits formed up to 30% of their incomes. Consequently nearly one third of all beneficiaries were highly dependent on the system of social assistance as a major source of their incomes. Moreover, that was a permanent kind of dependence (permanent lapse in a state of poverty), since 45.5% of the people received such benefits for more than 6 months.
At the same time some conclusions made in other surveys that the social services were still poorly developed and limited in scope were reconfirmed.  The percentage of people who reported that they had used the services of the social patronage at home or of public kitchens is extremely low (between 0.3 and 3.9%). What makes impression is that about 25% stated that they were not aware of the availability of such services. Another probable reason for this low coverage is the low purchasing power of the population: 16% of the respondents pointed out that they could not afford to pay for social services.
The data from the survey point to a significant positive approach in the assessments concerning the work of the social assistance centres. 
About 2/3 of the respondents have positively assessed the benefits granted as timely. That tempts us to recall the saying that assistance rendered in time is  double assistance (Bis dat qui sito dat), which however does not mean at all that the low amount of the  GMI  is doubled. 
The positive responses are certainly predominant among the questions concerning the promptness and quality of services and the qualification of the social workers (see the Diagram below).

It is impressive that the predominant part (80%) of the respondents would not refuse assistance from non-governmental organisations. That can be explained on the one hand with the trust the third sector enjoys among the population; however, on the other hand one likely reason for this high figure is the degree of impoverishment of a large number of people making any assistance acceptable. Still it should be noted that 1/5 of the respondents state that they would accept assistance from a non-governmental organisation only after some investigation..
The findings of the survey giving some idea of the attitudes and evaluations of the respondents regarding the measures and kinds of policies seeking poverty mitigation and alleviation  and solutions to social problems deserve special attention. There is  overwhelming scepticism that passive measures could yield lasting results. Approximately the same is the attitude to some active measures, such as provision of concessions for individual business development, provision of arable land, retraining etc. That is explained by the fact that after 10 years of “transition” people do not believe in the efficiency of the declared “structural policies”, especially in the field of agriculture and retraining.
 Against this background the opinion that new job creation would have a positive effect is quite prominent: over 60% of the respondents assess its role as very strong.  The likely reason for that is that a growing number of people perceive hired labour as their most reliable source of incomes. On the other hand however about half of the respondents believe that the introduction of relief for business would also have a positive effect.
This matches the responses obtained concerning the question whether the government should look after people or they should rely on themselves above all. The distribution in this case is 54.3% : 42.6%.
On this ground it can be concluded that people believe that the measures involving incentives to the economic activity and the demand for labour can provide employment and permanent incomes and in protecting people against poverty. Some signs can also be observed of overcoming the view inherited from socialism that the social policy and social protection should be primarily (etatist) paternalist in nature.
3. An Attempt to Assess the Impact of the Currency Board Regime on Social Assistance
A question logically arises: are the social policy changes in the field of poverty alleviation in the second half of 1997 related to the introduction of the Currency Board (and eventually to what extent)?
One obvious conclusion is that the policy implemented after the second half of 1997 achieved some positive changes in the existing trends in the development of incomes and their purchasing power (including incomes from social benefits). The decline in consumption and the livings standards of the population was halted. However, there has been no improvement yet compared to levels reached in previous years even though these levels are quite low in themselves and receive negative public assessments.
As already noted one of the major factors for positive effects is the decrease of the monthly inflation (and in some months even deflation) which has a direct effect on the amount of real incomes. The controlling of inflation was one of the indisputable immediate effects from the introduction of the Currency Board. The other major factor is linked with the policy regarding the so called minimum incomes which went up each quarter since October 1997, three times in 1998 and each half of the year in 1999. Along with the achievement of a positive turn in the movement of incomes towards a gradual rise of their levels one of the goals of this policy was to make the measures related to the Currency Board and particularly to the strengthening of the budget restrictions more acceptable and tolerable for the population. 
In the assessment of the previous development and especially in the projection of these factors the following expectations seem well justified. Since the prices of food products are first to react (due to the weaker elasticity of demand) to any price tensions, they have largely come close to the international prices while those of  non-food products and services remain considerably behind.  For that reason it is precisely these prices that will be in the basis of the future price alterations and the maintenance of a higher level of inflation. The processes in the countries with a Currency Board (Argentina, Lithuania, Estonia) confirm these expectations.

- see Minasian, cit. Coll.., p. 9

The chronological analysis of the amendments in the legislative  framework of social assistance does not yield any indisputable grounds to claim that the introduction of the Currency Board was critical for the changes so far. The development of the national system of social assistance followed its previous logic without any interruption or drastic reorientation of policies “in the conditions of the Currency Board”. Nonetheless, it is indisputable that under these conditions the financial stability of social assistance remains as a key problem along with the chosen way of its financing. Unfortunately the preservation of the current methods as a matter of principle will reproduce the existing problems regardless of the trend towards stronger centralism in the administration of the system. 
In the context of the above attempt at analysis of the link between the changes in the legal and institutional framework of social assistance and the introduction of the Currency Board people’s opinion of how far this regime has influenced their sense of security may be of interest. Only 21.7% of the respondents in the special sociological survey of the Centre for the Study of Democracy responded that its introduction has had a positive effect on their sense of security. Thus the predominant  number of respondents do not see (or find) any direct connection between the regime of the Currency Board and their own social security.
Conclusions and Recommendations
On the basis of the survey conducted one can draw the following conclusions and recommendations regarding the  tasks and goals of  social policy in that area.
Major Long-term Tasks and Goals: 
•	steadily controlling  the decline of real incomes and their purchasing power;
•	gradual rise of real incomes and their purchasing power and approximation of the levels of previous years;
•	development and application of active measures for restriction of poverty and for the economic and social (re)integration of the poor persons and families.
Short-Term Tasks and Measures:
•	in the field of minimum incomes: bringing out and maintaining their levels through active compensatory measures compatible with the budget capacities;
•	in the field of direct social assistance and poverty alleviation:
- increasing the efficiency of the system and reducing the distinctions between legal and real rights of the beneficiaries through  the financial stabilisation of the system, institutional and organisational measures;
- a radical change in the previous mode of accumulation and targeting of budget resources for social assistance financing is needed. The main goal of this effort should be to bring the methods of budget resources accumulation in conformity with the nature of benefits (social benefits). The universal nature of the social benefits and the implementation of the principle of national solidarity in this segment of the social protection system require the introduction of target revenues from tax sources (for instance through the introduction of a general targeted social tax to finance all non-contributory expenditures of the social protection system). The implementation of this idea however calls for substantial changes in the current system of taxation of the population’s incomes.