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Monday 18.06.2018 | Name days: Madis, Alberts
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Lithuanian employers bristle against minimum wage raise to 450 euro

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Linas Jegelevičius for the BNN

The disparities of the socio-economic development of the regions are very high in Lithuania, so raising the minimum wage from 400 euros now to 450 euros as suggested by the Lithuanian Government would cripple many small and medium-sized business owners in the less prosperous regions and the municipalities, Lithuanian economists caution. The minimum wage was raised in Lithuania by 20 per cent to 400 euros last year.

«The idea of raising minimum wage is good and many local employers would have no other choice than to comply with the decision. Moreover, the raise would encourage them to invest into the modernisation of their technologies. However, for the local service sector as well as many small business owners, the raise would be unbearable,» Giedrė Sugintienė, head of the Businessmen Association of the Tauragė County, told BNN.

«Government should set different levels of minimum wage in every region according their actual economic situation. It is unfair to put the Vilnius region and the far-flung Kretinga district in the same basket due to the huge differences in the potential and the growth,» Danutė Rubavičienė, head of the Small Vendor and Businessmen Association of the Kretinga district, told BNN. «For the majority here, the raise would be disastrous,» she added.

Lithuania’s Tripartite Council, representing the Government, part of employers and trade unions, continued this week negotiations on the raise of minimum wage.

With the trade unionists seeing it at 450 euro from 2019, employers meanwhile caution that, if enacted, the legislation would take a heavy toll on small and medium-sized employers in the provinces.

Likewise the Kretinga employer representative, Danas Arlauskas, head of the Lithuanian Confederation of Employers, argues that raising the minimum wage should be pegged to a different average salary in the regions.

In his words, if the minimum wage was raised to 420 euros, the different between the minimum and average wage would stand at around 65 per cent in around 15 municipalities.

«Who will assume responsibility for the worsening of business environment?» he asked rhetorically.

Meanwhile, Robertas Dargis, president of the Lithuanian Confederation of Industrialists, told BNS Lithuania raising the minimum wage would be a blow to service companies in the regions.

«The minimum wage is an important phenomenon in the regions, especially in the service sector, where livelihood is not very high. Raising the minimum wage would be a blow to such companies. The minimum wage is not that popular at industrial enterprises as a large part of those enterprises use robots, are introducing digital technologies and they need a qualified workforce,» he said.

Gražina Gruzdienė, chair of the Trade Union of Lithuanian Food Producers, says that trade unions see all possibilities to raise the minimum wage to 450 euros early next year.

Lithuanian PM says minimum wage hike is a matter of negotiation and does not say by how much it could be raised in early 2019.

«The Tripartite Council will now sit down for talks and we’ll listen to what expectations the trade unions and employers have… The government, as an active member of the Tripartite Council, will stick to the principle…that the minimum monthly wage should be between 42 and 48 percent of the average wage,» Skvernelis said on Monday, June 11.

After the Seimas approves the proposed tax reform, which provides, among other things, for merging employee and employer social insurance contributions, the formula for the ratio between the minimum and average wage be adjusted as well, PM added.

This time, the minimum wage is expected to be set based on a formula, but some employers want it to be improved.

The Tripartite Council decided last year that the minimum wage should account for 45-50 per cent of the average wage. The minimum wage was last year raised by 20 euros to 400 euros.

Earlier the year, the Bank of Lithuania has proposed to raise the minimum wage by 20 euros to 420 euros so that it makes 47.3 per cent of the average monthly salary, a proposal that received support of the Government and employers.

According to the Labour Code that went into force in the middle of the last year, the minimum wage can be paid for unqualified work only.

The International Monetary Fund (IMF) has also called on Lithuania to approach further minimum wage increases with caution and to maintain a moderate ratio of the minimum wage to the average salary.

Borja Gracia, head of the IMF European Department’s mission that completed its work in Vilnius last month noted that Lithuania’s minimum wage had been rising at a fast rate in recent years.

«Minimum wages have been increasing rapidly since 2013 until 2016. For example, if you look at minimum wages relative to average wages, they were around 40 per cent more than ten years before 2013 and then in a few years they increased to 50 per cent. In our assessment, we do not see the increase to 50 per cent as providing enough gains to justify such a high level relative to the average wage,» he was quoted as saying.

Gracia underlined that the IMF did not propose that Lithuania cut the minimum wage.

«We are not proposing to reduce the minimum wage, but we are proposing to gradually get the ratio of the minimum wage to the average wage closer to what used to be level in Lithuania prior to 2013,» the IMF expert said.

«We don’t see any negative overall impact (on the economy), but we think that for particular groups, in rural areas, where wages are lower because productivity is lower (…), the impact can be negative and that’s our concern,» he added.

In the first quarter of 2018, it was Lithuania that reported the steepest year-on-year growth of the average gross monthly wage among the three Baltic states, according to Latvian Central Statistics Bureau (CSB).

In the first quarter of this year, the average gross monthly wage in Latvia grew by 8.6 per cent from the same quarter in 2017, while the gross wage in Lithuania rose 9.5 per cent, and the gross wage in Estonia climbed 7.7 per cent.

The highest gross monthly wage in the first quarter of 2018 was recorded in Estonia where employees received 1,242 euro on average. Latvia was second with 960 euro gross monthly wage and Lithuania was in third place with 895 euro.

The minimum wage went up in all three Baltic states early this year. In Lithuania it was raised by 5.3 per cent to 400 euro, in Latvia by 13.2 per cent to 430 euro, and in Estonia by 6.4 per cent to 500 euro.

The average gross monthly salary in Lithuania’s economy, excluding sole proprietorships, stood at 884.8 euros in the fourth quarter of 2017, according to figures from the country’s statistics office.


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