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Minimum wage plans disappoint workers

Government officials say economy cannot support higher wage hike
SLOVAK labour leaders have expressed surprise and disappointment over government proposals to raise the country's minimum wage by 6.8 percent.
While the proposal still faces tough negotiations with unions and employers before it is voted on in parliament, the Confederation of Trade Unions (KOZ) labour umbrella organisation is calling for a minimum wage hike of 45 percent, saying that minimum wages as a proportion of average wages have been falling in the country.
"In the interests of raising the price of work and maintaining minimal living conditions for people dependent on minimal pay we will try to persuade our social partners to provide a higher rise," said KOZ vice-chairman Peter Gajdoš.

SLOVAK labour leaders have expressed surprise and disappointment over government proposals to raise the country's minimum wage by 6.8 percent.

While the proposal still faces tough negotiations with unions and employers before it is voted on in parliament, the Confederation of Trade Unions (KOZ) labour umbrella organisation is calling for a minimum wage hike of 45 percent, saying that minimum wages as a proportion of average wages have been falling in the country.

"In the interests of raising the price of work and maintaining minimal living conditions for people dependent on minimal pay we will try to persuade our social partners to provide a higher rise," said KOZ vice-chairman Peter Gajdoš.

"We were unpleasantly surprised by this proposal, because it is worse than last year from the point of view of the comparison between minimum and average wage," he added.

According to the KOZ, the government proposal, which would raise the minimum wage from Sk5,570 (€134) per month to Sk5,950 (€143) from this October, would mean that minimum wages would fall to 44 percent of average wages, from 45 percent under the last collective agreement.

Union leaders would like to see minimum wages at 60 percent of average wages, which would mean raising the minimum monthly salary to Sk8,100 (€195).

Officials from Slovakia's Labour Ministry, however, say that the proposed wage hike combined with tax reforms set to take effect from January 2004 would effectively increase Slovaks' net earnings by around 10 percent.

According to Miroslav Beblavý, state secretary at the Labour Ministry, raising the minimum wage is also one of the main methods the ministry has come up with to motivate people to leave unemployment and join the workforce.

An estimated 1,300 workers receive the current minimum wage, according to the Labour Ministry, but after the increase this number is expected to rise to over 5,000, or 0.72 percent of the total workforce. Government documents suggest that most minimum-wage earners are employed in agricultural and textile industries.

Nonetheless, experts maintain that some workers are officially paid the minimum wage while receiving extra cash-in-hand payments above that level, particularly in the construction industry.

While this saves the employers money by reducing payroll taxes, the workers themselves are at risk of receiving lower pensions when they finish working.

While union leaders have included minimum wage rises in a package of grievances that they say could lead to a general strike in September, employers say a higher minimum wage hike would increase unemployment and hamper economic recovery in more vulnerable regions.

"An unreasonable rise in the minimum wage, as requested by unions, is a typical show of lack of solidarity, because the problem of the minimum wage is not only concerned with western Slovakia but will mainly affect the weakest regions and areas of the country," said Karol Pavol from the Association of Slovak Employers on state television channel STV.

"In effect it will mean an increased number of unemployed in Slovakia. We therefore have to ask ourselves what true solidarity means. The employers have to support the opinion of the ministry," he said.

According to Beblavý, the ministry also considered warnings from the European Commission (EC) against excessive minimum wage hikes when preparing the proposal.

"I would like to stress that even the EC in its last report on the state of employment in [EU] candidate countries called for intensive consideration of how wage levels can contribute to the growth of employment.

"In this case the faster the growth in wages is, the slower the growth in employment will be because employers will have to consider whether they can afford to hire new people," said Beblavý.

Economy Minister Róbert Nemcsics also warned that Slovakia's labour market would not accept higher increases in the country's minimum wage.

According to Nemcsics, business profits in Slovakia are around 5 percent, compared to levels around 12 percent in EU countries, putting further pressure on Slovak lawmakers to choose an optimal minimum wage.

Not all European countries have minimum wage legislation, although in some countries, such as Denmark, the minimum wage is effectively set through locally binding collective bargaining agreements.

In those EU and EU-candidate states where a minimum wage is set, it ranges from 26 percent of the national average wage in Spain to 73 percent of average wage in Malta, according to figures released in May by the Federation of European Employers (see table, left).

After its 1993 independence, the minimum wage in Slovakia fell as a proportion of the average wage to as low as 28 percent at the beginning of 1999. In recent years it has been climbing back its current level of 43 percent, below the EU average of 51 percent, but comparable with the United Kingdom and Greece.

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