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Minimum wage to increase

The Robert Fico cabinet has increased the minimum monthly wage by €25 to €405 as of 2016, encouraging trade unions but disappointing employers. 

Labour Minister Ján Richter (Source: Sme)

While these parties hold opposite opinions on the issue of raising the minimum wage, they agree that the minimum wage has become a political tool and that they would prefer that its annual increase gets a more predictable form.

The cabinet was deciding about the minimum wage hike on October 7 after representatives of  trade unions, employers and the cabinet had failed to agree on it. While the trade unions proposed to raise the minimum wage to €410, employers’ organisations wanted to keep the minimum wage at the current €380. The Ministry of Labour, Social Affairs and Family proposed a hike to €400, but in the end the cabinet increased the minimum wage to a level exceeding €400, meeting thus its second point from the so-called second social package.

“In this case, there is neither a winner, nor a loser,” Labour Minister Ján Richter said. “It’s important that people who work for a minimum wage will actually feel the increase next year.”

When considering the hike, the cabinet took into consideration recommendations of international institutions for the minimum wage to be at 60 percent of the average salary, according to Richter. This rate currently stands in Slovakia at around 50 percent. Richter calculated that the rate will be 51.03 percent next year, with an average salary of €906, the TASR newswire reported.

The minimum wage in the Czech Republic is €332, in Hungary €333 and in Poland €410, according to the Hospodárske Noviny daily.

Opinions of trade unions and employers

The Confederation of Trade Unions (KOZ) has welcomed the minimum wage increase, claiming that each increase of the minimum wage enables people to live in a dignified way. They see the minimum wage as a motivation for people to work and not live on social benefits and maintain that any minimum wage hike has not caused any layoffs so far.

“We are glad that the cabinet did not listen to calamity howlers’ voices saying that each increase will have a negative impact on companies and employment and that due to the minimum wage competitiveness decreases,” Martina Nemethová, spokeswoman of KOZ, wrote in a press release. “The opposite is true, as also data of Eurostat confirm that the minimum wage acts as a stabilising factor, motivates people to work, reduces fluctuation and has a positive influence on economic development.”

On the other hand, the Association of Employers’ Unions (AZZZ) has pointed out that the cabinet has increased the minimum wage from €352 to €405 over recent years, amounting to a 15-percent increase. In its opinion such a steep increase could result in problems for people with low qualifications to find work. AZZZ claims that an excessively steep increase of the minimum wage balloons wage costs and that companies active in sectors of the economy employing mostly workers with incomes around the average wage could have problems coping with such an increase. Some companies might be endangered by the hike and others will be forced to adopt saving measures.

“It will also affect the long-term unemployed, people with low qualification and people from regions with high unemployment, for whom the minimum wage hike would very much complicate entry into the labour market,” Oto Nevický, AZZZ secretary general, wrote in the press release.

Employers also point out that while the cabinet increased the minimum wage, it has retained the level up to which employers and employees are exempt from payment of compulsory health insurance at the unchanged level of 2015’s minimum wage, i.e. €380. It adopted this scheme last year to ease the burden that employers bear in connection with the minimum wage hike as well as to increase net income of low earners.  

Both employers and trade unions perceive the increase of the minimum wage as a political decision and they would like annual increases of the minimum wage to follow an agreed-upon formula.

“It [the increase of the minimum wage] is rather a political decision than a reflection of the current economic development, with which such a steep increase of the minimum wage is not in line,” the AZZZ wrote in its press release. “This is proved also by the growth dynamics of the average wage and development of inflation.”

Ľuboš Sirota, the first vice president of the Republican Union of Employers (RÚZ) recalled that searching for compromise in terms of the minimum wage has not been taking place since 2008 when the law on the minimum wage was changed.

“Since 2008 this law has become an instrument of political marketing,” said Sirota during a discussion on the public broadcast RTVS, adding that deciding over the minimum wage hike has become an emotional issue. “Until then it was possible to lead a pragmatic discussion.”

The KOZ would like to have an agreed-upon clear formula based on which the minimum wage would increase annually, while its goal is to achieve a minimum wage equalling 60 percent of the average wage, Jozef Kollár, president of KOZ, said during a discussion programme of the news channel TA3.

Rastislav Machunka, vive-president of AZZZ, recalled that in the past KOZ, AZZZ and RÚZ had achieved an agreement over such a formula which was pinned on the average wage for the previous year and inflation. However, when it should have been used for the first time, the cabinet used the possibility to enter this process and changed the formula, which since then has stopped being used.

 

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