How (not) to produce personnel for the Bulgarian export industries

Labor shortage is one of the main challenges facing businesses in Bulgaria - both for Bulgarian and foreign investors. Due to ever higher labor costs – sometimes as a result of this shortage – large companies refuse to invest in Bulgaria or close their factories and move production.

According to a study by the World Bank, this is the biggest obstacle for 22% of companies in Bulgaria, and when it comes to the manufacturing sector alone, that share reaches 1/3.

The problem motivated the Bulgarian Council for Economic Analyses to conduct a study to what extent the growth of exports in recent years has resulted in a growth of students enrolling in vocational high school programs specializing in export industries. The analysis also takes into account interregional differences.

The data shows that despite the significant growth of exports since the country's entry into the European Union - from 39 to 56% as a share of GDP - this is not particularly reflected in the vocational high school programs.

There has been growth in vocational secondary education enrollment after 2019, but mainly in information technology programs - not in those linked to export industries, such as machinery, production and processing.

It is important to note that the total number of students in areas related to export industries (agriculture, production and processing, machinery) is decreasing significantly," the authors of the analysis, Teodora Tsankova and Yoto Yotov, point out.

The analysis shows that in 2020, the share of students in export-sector streams constituted only 42% of all students in vocational education, compared to 55% in 2008.

The study cites an example with the German company Volkswagen, which years ago wanted to open a plant in the Balkans. However, Bulgaria missed out and Turkey was the winner, though only for a short time as the car-maker giant abandoned the region altogether during the pandemic and decided to focus on its plant in Slovakia.

Volkswagen had a requirement for 3,000 automotive engineers to work on-site. Only 20 new ones graduate here every year. How many generations do we need to go back to gather the necessary workforce then?", asks the economist Atanas Katzartchev rhetorically.

At the same time, the growth of export activity is a positive change in the labor market, Tsankova pointed out during the presentation of the report, as it leads to

higher productivity and higher salaries”.

Catch 22

According to the study, in areas with more pronounced industrial bases, vocational education is more prevalent and preferred by students.

The growth of local export activity makes vocational training more attractive as it offers quick access to attractive local employment opportunities,” the report states.

The big problem comes in places where there is no such industry and only good intentions. Business in person Rossitsa Steliyanova from the Bulgarian Industrial Capital Association described the situation as a Catch-22: if in certain regions there are well-developed enterprises, then professional training is also developed there - in less populated regions, however, we cannot open new production bases, because we do not have the necessary talent there.

She added that there is no real forecasting system for the business needs at the local level in Bulgaria.

Employers can submit staffing applications to schools when the need arises. For example, say there’s a need for new personnel in shipbuilding. However, there is only one high school where the employer applies and it’s not enough to meet his needs. We don't have a clear picture of the material and technical base of the vocational high schools and what they need so we can invest in them," she explained.

Bulgarian Finance Minister Lyudmila Petkova added that in order to produce qualified staff, the state must look ahead, define strategic industries and ensure greater flexibility and adaptability of the education system to support the development of industry so this will lead to national economic growth.

Translated by Tzvetozar Vincent Iolov