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Roundup: Latvian economist warns of employment issues as gov't considers minimum wage hike

Xinhua, August 6, 2016 Adjust font size:

Latvian Welfare Minister Janis Reirs on Friday came up with a proposal to increase the minimum monthly wage by 10 percent, or 37 euros, in 2017, but economists warned that a 10 percent higher minimum pay would not solve the problems of low-paid people and only hamper employment in Latvian regions.

Dainis Gaspuitis, an economist at Latvia's SEB Bank, argued on public radio that instead of increasing wages for the low-income population, the measure would only cause employers to reduce their workload.

A higher minimum wage would not help combat shadow economy either and would make employers to look for ways to adapt to the new situation, the economist said.

Gaspuitis believes that the wage hike would mostly benefit public sector employees as the size of their salaries depends on the minimum wage.

The losers, meanwhile, would be people in Latvia's rural regions where many earn only the minimum pay. The 10 percent increase would undermine competitiveness and hamper employment in the regions, Gaspuitis warned.

The economist said that in the current situation, it would be wiser to leave the minimum wage unchanged or at least raise it by no more than 10 euros.

Reirs said his proposal to raise the minimum monthly wage from the current 370 euros to 407 euros was based on the analysis of the situation in Latvia's regions and the growth of high salaries, which unlike the small wages, have been climbing quite steeply in Latvia.

The minister argued that higher wages would also increase productivity and people's social security.

Trade unions, meanwhile, said they would be ready to settle for a more moderate 20 euro-increase of the minimum wage.

Latvian Economics Minister Arvils Aseradens also backed this as a compromise solution, stressing the necessity to curb further emigration of young Latvians, which, in his opinion, is driven by the large minimum wage gap between Latvia and more affluent Western European countries.

"The faster we will be raising the minimum wage the fewer youngsters will emigrate. At present, we have to compete with foreign countries where the minimum wage is 1,500 euros against our 360 euros," the economics minister said.

Peteris Leiskalns, a social security expert at the Latvian Confederation of Employers, criticized the idea to lift the minimum wage.In his opinion, instead of focusing on the minimum wage, it would be necessary to create conditions for a steady growth of the average wage.

Finance Minister Dana Reizniece-Ozola has also been reserved about raising the minimum wage swiftly and said she could accept an increase by 10 euros.

This year, the minimum wage is paid to 4.4 percent of Latvia's working population, while about 20 percent receive less than the official minimum.(1 euro = 1.12 U.S. dollars) Endit