Minimum wage battle seethes

IN AN ANNUAL battle, employers and unions, accompanied by the Labour Ministry and now Prime Minister Robert Fico, are clashing over the minimum wage that should be the floor by law for the pay-check of each full-time employee in Slovakia.

IN AN ANNUAL battle, employers and unions, accompanied by the Labour Ministry and now Prime Minister Robert Fico, are clashing over the minimum wage that should be the floor by law for the pay-check of each full-time employee in Slovakia.

This year’s negotiations over minimum wage beginning in 2010 have provoked the first serious “no” from Prime Minister Fico to a request made by the trade unions, many of which supported Fico’s party, Smer, in the 2006 parliamentary elections. However, Fico has also given the same “no” to employers who would prefer no change at all in minimum wage for next year.

Slovakia’s Confederation of Trade Unions (KOZ) asked for minimum wage for next year to be set at €319.50, an 8.1 percent increase. The minimum wage increased from €268.90 to €295.50 at the beginning of 2009.

“Let’s not go for the 8 percent right in the first year, but let’s increase minimum wage by 4 percent in 2010 and then divide the remaining 4 percent in the years 2011 and 2012,” Prime Minister Fico said on September 18.

If the representatives of employers, trade unions and government fail to agree on the amount of next year’s minimum wage the issue will drop onto the table of the Slovak cabinet and the ministers would need to decide on the increase.

Employers prefer keeping the minimum wage for 2010 at its current level and the 8 percent and 4 percent increases appear to them to be a rather irresponsible move. They argue that the contraction by over 5 percent in the country’s economy, along with a decline in labour productivity and the country's ever increasing unemployment do not bode well for such a move.

“The current economic situation does not enable the application of the proposed hike without it having a negative impact on employment and the situation in the companies,” Branislav Masár of the Association of the Employer Unions (AZZZ) told The Slovak Spectator.

As a compromise, the AZZZ suggests that the minimum wage for 2010 be kept at its 2009 level, €295.50. Originally, the association had demanded a cut from €295.50 to €269.00.

The National Union of Employers (RÚZ) maintains that any hike in the minimum wage would further deepen the economic crisis and that the first positive signals of revival seen in western Europe would not begin to surface in Slovakia.

“Unjustified legislative hikes in wage costs lead to cancellation of existing jobs and at the same time prevent the creation of new jobs,” Martin Hošťák of RÚZ told The Slovak Spectator.

RÚZ does not see any reason in times of decline in labour productivity and in the average wage to push up the minimum wage, according to Hošťák. He also warns that a 4 or 8 percent increase in the minimum wage could force many companies out of business and thousands of employees might lose their jobs.

The spokesman of KOZ, Otto Ewiak, said that the unions view Fico’s proposal as an effort to reconcile the positions of employers and the unions and to seek a solution during times of crisis. While KOZ does not view this proposal negatively, according to Ewiak, it will still push for the 8.1 percent increase, based on economic calculations and arguments.

Ewiak said annual increases in minimum wage have been based on an agreed-upon mechanism of calculating them according to the increase in the average wage in the Slovak economy during the previous year.

“Though the unions understand the prime minister’s arguments about the need to respond to the critical situation of our economy, we also believe, based on our analysis, that the increase in minimum wage will not cause the economy to collapse,” Ewiak told The Slovak Spectator.

He added that only a very small number of employees earn minimum wage.

Ewiak said that after making all the calculations and taking into consideration the number of part-time employees earning minimum wage along with the increase to €319.50 and additional wage costs linked to the increase, the total number of people who would receive a higher wage would not exceed 6 percent of employees in Slovakia. He emphasised that the expected increase in the salaries of approximately 6 percent of the workforce could not cause the collapse of the economy.

However in Slovakia, minimum wage is also currently used as a basis for calculating contributions made to the country’s social insurer of old-age pensions, health insurance and disability protection. There have been proposals to link these contributions to average, rather than minimum wages, but this is still in the discussion stage.

PM Fico does not believe that an increase in minimum wage would bring mass layoffs either.

“Only about one percent of employees are paid minimum wage so do not try to tell me that if we increase minimum wage by 8 percent the Slovak economy would collapse,” Fico said, as quoted by the SITA newswire. “That is pure nonsense.”

Masár, however, maintains that unions have been underestimating the potential negative impacts of an increase in the minimum wage. He suggested that approximately 2 percent of all employees are paid minimum wage while an additional 10-15 percent of the workforce earn close to that level.

According to Masár, a minimum wage increase is most problematic in the textile industry but that it would also impact the transportation and agriculture sectors where currently “each hike in the costs poses a direct existential threat both to firms and jobs since labour productivity has recently dropped dramatically.”

“We do not view the negotiations on minimum wage as bargaining the price of a product at a market place,” Hošťák said. “Any increase in wages must be economically justified while any wage increase always has a significant economic impact.”

Hošťák said that he would also like to see the discussions and negotiations have a more professional character, rather than political.

Slovakia has the second highest minimum wage among the Visegrad Four countries with only the Czech Republic being higher, the financial daily Hospodárske Noviny reported.

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