Estonia’s experience shows that there can be significantly larger minimal wages and significantly lower unemployment level than what is found in Latvia, Diena was told by Welfare Minister Janis Reirs.
He explains that although the Saeima has refused the introduction of minimal social fees, Welfare Ministry intends to search for solutions to prevent the possibility when approximately 300,000 employed people in Latvia remain socially unprotected.
Reirs once again said that the idea of social fees is supportable on its own to help increase social protection of Latvian residents. He added that socially unprotected people face serious problems in the event of unemployment, because unemployment benefit is minimal at best.
«We are committed to searching for a solution. We should say, however, that Estonia’s minimal social fees system functions successfully. In Estonia, employers have to pay a specific social fee amount for each employee with whom there is an employment contract. This also applies if people are employed part-time. Estonia has it very strictly – if an employer signs an employment contract with someone, there is a specific amount the employer has to pay for that employee,» – the minister says.
Reirs adds that Estonia’s minimal wage is currently EUR 90 larger than the one in Latvia. Average minimal wage in Estonia is EUR 470 and the one in Latvia is EUR 380. On top of that, Estonia’s unemployment level is nearly two times lower than Latvia’s – 8.4% in Latvia and approximately 4% in Estonia. It is often mentioned in Latvia that raising minimal wages and strengthening social protection of employed people would result in employers, especially those in regions, reducing their number of employees, increasing overall employment in the country.
According to the minister, the fact that opinions of Unity and Prime Minister Maris Kucinskis in regards to the minimal social fees differ does not mean the government is unstable: «We have discussed this matter with the prime minister. Speculations voiced in regards to the risks to the government’s stability were unjustified. Discussions regarding conceptual matters are not a threat to the government. Although some political powers use the discussion to shake the government, this was not one such case when the government was at risk of collapse.»
«The discussion is not over yet, because the matter of residents’ social protection needs to be resolved. It is not about the collision of two concepts. 300,000 employed Latvian residents remain socially unprotected. Numbers show that social budget revenue of 2019 will be lower than expenditures. So, you see, the matter is not resolved yet,» – the minister continues.
Welfare Ministry believes the matter regarding residents’ social protection should be resolved in a complex manner. «There have been attempts claiming establishment of social fees is but another tax. It is not. It is an attempt to involve all employed people in the social protection system. There are approximately 900,000 jobs in Latvia. Approximately 600,000 employed people perform social fees in full amount. Around 300,000 people do not pay social fees in full amount.
In parallel to the social security problem it is also necessary to talk about justice. For example, an opinion has been voiced in the discussion regarding healthcare – if 300,000 people already do not pay social fees in full amount, what is the point of raising social fees? It is first necessary to make sure those 300,000 pay social fees in the first place! It is also important the keep in mind that some of those 300,000 people also receive wages in envelopes.»
Reirs emphasized that what he said does not mean he supports complete liquidation of the micro-enterprise tax regime. «The tax system is good, but it only applies to those who need it. Unfortunately, in most cases the tax system is used for tax optimization,» – said the politician.
«I know there are people who unjustifiably claim that Latvia has risen against ME and that Estonia will have ME. However, Estonia has a different model in mind – it is planned that there will be special conditions for companies whose maximum annual turnover does not exceed EUR 20,000, companies that employ no more than none person and ones that provide services only to private persons. If Latvia were to introduce such a model, there would be approximately 7,000 micro-enterprises left, which is bearable for the social budget,» – Reirs said.