Minimum wage increasing in Central and Eastern Europe
6 December 2016
The Central and Eastern Europe region has recently become an attractive area for foreign investments into manufacturing and industry in Europe, due in no small part to the fact that the minimum monthly wage in all former Eastern Bloc countries, except for Slovenia, fluctuates at a level below €500. Paylab has focused on this topic deeper.
Many companies are looking for stable markets to make manufacturing and industrial investments, and the “Made in Europe” and “Made in EU” labels continue to generate interest among potential consumers. Most new EU member states from the former Eastern Bloc recorded a year-on-year minimum wage growth in 2016 but most, in all likelihood, should not exceed the symbolic €500 threshold in 2017 either; interestingly, numerous countries in Central Europe (Slovakia, Czech Republic, Hungary, Poland, Estonia and Latvia) are planning to increase their minimum wage in 2017. These countries are also yet to begin resolving issues related to labour shortages, and the number of open jobs available in some sectors exceeds demand. Only Slovenia (€791) from this group of countries has a minimum wage in excess of €500. The lowest minimum wage, less than €300 a month, is set in Bosnia and Herzegovina, Bulgaria, Serbia, Romania and Montenegro.
What is a minimum wage and what does it include?
The statutory minimum wage is the lowest possible legal remuneration provided to an employee in the given country. The minimum wage is less than half the average wage or salary in most of the countries surveyed.
Among jobs that come the closest to the defined minimum wage in this region of Europe include those requiring a low level of qualification and their amounts vary by country and region. Typical jobs according to Paylab with the lowest remuneration include cleaner, doorman, informant, cashier, clerk, janitor, teaching assistant, housekeeping, shoemaker, seamstress, security guard, postman, garbage collector, hairdresser, pastry chef, baker, packer, orderly, agricultural equipment operator, helper, assistant chef, veterinary technician, pedicurist, manicurist, milker, merchandiser, caregiver, gaffer, etc.
Average salaries in industry and manufacturing are usually somewhat higher than the defined minimum wage. As an example, a labourer or machinery and equipment operator in the CEE Region would do far better than the symbolic €500 threshold. Paylab knows the current salaries of over 500 jobs across a range of industries in Central and Eastern Europe. This encompasses a network of salary portals in 11 CEE countries and provides relevant salary analysis data on the real amount of financial and non-financial remuneration of employees...
Labour is more expensive the farther west you go
Just as a comparison, the minimum monthly wage is more than €1,000 in European countries such as Luxembourg, Ireland, Belgium, the Netherlands, Germany, France and Great Britain. The minimum cost of labour in these countries is often higher than the average monthly wage in Central and Eastern European (CEE) countries – see Table 1. The minimum cost of labour in countries such as Slovenia, Spain, Malta, Greece and Portugal fluctuates between €600 and €800. Compared to CEE countries, services and production costs transposed into higher prices of goods are often and understandably much more expensive given the minimum wage in Western countries. Other countries, such as Denmark, Italy, Cyprus, Austria, Finland and Sweden, have no national statutory minimum wage as wages are subject to agreements at sector or company level between unions and employers.
Does a minimum wage help the economy?
There are several camps with respect to discussions about a minimum wage. The primary complaint from investors and entrepreneurs against a minimum wage is that the government is basically forcing private companies to pay a certain amount for labour, which does not necessarily reflect the true value of this labour. Private companies and investors in the same breath want to gain a competitive advantage by applying pressure to lower costs as much as possible. Hence they are less than enthusiastic about a minimum wage and the upward pressure. This automatically applies by increasing payroll costs. Economists themselves remain unable to agree on the significance of the effect a minimum wage has on reducing unemployment.
Conversely, governments see a minimum wage as a tool for protecting low income groups and guaranteeing them a minimum level of remuneration for their work, a level which employers are forced to respect. Dissatisfaction among rank and file employees and labour unions is palpable in countries with low minimum wages, as the remuneration of all employees in the country is derived from this minimum wage, which serves to keep salaries in the country at an artificially low level. Increasing the minimum wage increases the price of labour among low income employees and employees performing work with a higher degree of difficulty and those working on night shifts. Numerous statutory payments and deductions are also determined on the basis of the minimum wage.
Finally, there is a strong group of banks and retailers that are dependent upon the population’s purchasing power, and rising wages are typically expressed in a greater willingness to make purchases, the volume of deposits, and a willingness to take on debt.
About Paylab
Paylab is an international salary survey platform that collects information on the incomes and bonuses of employees in various positions. Paylab uses a unique methodology for collecting data with a three-phase control and over eight years’ experience. Visitors to the Paylab website or partner sites in their country can easily and anonymously complete an online questionnaire on their salary, and compare their income with the national average for that position. The system always uses current data for the last 12 months. The independent salary analyses are then used by companies for the appropriate internal setting of salary levels for individual work positions.
Sources for Paylab: Slovenia - Placa.si, Slovakia - Platy.sk, Czech Republic - Platy.cz, Hungary - Fizetesek.hu, Croatia - MojaPlaca.hr, Estonia - Palgad.ee, Bosna and Hercegovina - Plata.ba, Lithuania - Manoalga.lt, Latvia - Algas.lv, Serbia - InfoPlate.rs, Bulgaria - Statistical Institute Bulgaria, Romania: Statistical institute Romania, Montenegro: Statistical office of Montenegro
Contact for media:
Daniela Beráková, Pribinova 25, 811 09 Bratislava, Slovakia
Tel.: +421 2 32 20 91 89, Mobile: +421 907 469 314, e-mail: [email protected]
