Shadow Economy in Bulgaria Remains at 33%, Study Reveals Alarming Tolerance Among Youth

According to a study presented to MPs by Prof. Emilia Chengelova, from the Institute of Philosophy and Sociology at the Bulgarian Academy of Sciences, the shadow (grey/informal) economy in Bulgaria remains high at 33%. The study highlighted a concerning trend in the country, with Bulgaria showing the highest tolerance for the shadow economy compared to the rest of the European Union. This tolerance is especially pronounced among younger individuals, aged 15 to 24, who often disregard employment contracts, not seeing it as an issue.

Employers also report a growing issue where employees demand higher wages without concern for how these payments are made, often seeking “clean” salary amounts with no regard for proper contracts or tax compliance. Some employers argue that both parties—employers and employees—should be sanctioned for such arrangements. However, this view was challenged by MP Tsvetan Predov, who disagreed with placing the responsibility of the sanction on the employee. He argued that even if such measures were introduced, employers should face higher fines.

Chengelova also pointed out significant issues with financial discipline in the economy, with certain sectors reporting only 30% to 40% of actual sales. When compared to other developed countries, Bulgaria's share of the shadow economy is notably high. For instance, in Germany, it stands between 7% and 11%, and in the United States, it is between 5.6% and 6%. In contrast, Bulgaria’s shadow economy has remained consistently around 30% to 33% in recent years, although it was higher—up to 40% to 50%—in 2010. The sociologist assured MPs by noting that Bulgaria fared better than some neighboring countries, like North Macedonia, where the shadow economy reaches 45%.

The study also revealed that younger people, especially those under 30, display an alarming tolerance for these “gray” practices, with a tolerance index for the shadow economy among young people reaching 91.5, compared to 54 for adults. This high tolerance, combined with practices such as working under fictitious contracts or receiving part of their wages “under the table,” is one of the key factors contributing to the prevalence of the shadow economy. According to Chengelova, such practices make it difficult to combat the issue, as both the employer and employee benefit—employers save on insurance and taxes, while employees receive more money in hand.

Economic pressures, low incomes, and a lack of effective sanctions are key drivers of this behavior, and many individuals continue to perceive that it’s possible to outwit the state, avoiding detection. In addition to stricter sanctions for those engaging in the shadow economy, Chengelova recommended the introduction of labor law education in schools to raise awareness about the importance of formal employment contracts and taxation.

Chengelova’s presentation painted a bleak picture of Bulgaria’s economic situation but also proposed some solutions. These included enforcing stronger penalties, educating the population, and reversing the current trend where those in the informal economy appear to be benefiting more than honest employers.