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Latvian gov't to raise minimum wage by 10 euros to 380 euros per month

Xinhua, August 19, 2016 Adjust font size:

The Latvian center-right government on Thursday agreed to raise the minimum wage next year, public radio reported.

The decision to up the minimum monthly pay by 10 euros to 380 euros (430.6 U.S. dollars) drew criticism both from the Latvian Chamber of Commerce and Industry and trade unions.

The increase, however, is far less than the 37 euro rise proposed by the Welfare Ministry, which Finance Minister Dana Reizniece-Ozola and Prime Minister Maris Kucinskis rejected as being too steep.

The finance minister said on public radio that raising the minimum wage for public sector employees will cost around 11 million euros, of which 5 million euros will have to be spent on health care employees' wages.

Reizniece-Ozola, however, expects tax revenues to grow as a result of the increase in the minimum wage.

Arguing against the minimum wage hike, head of the Latvian Chamber of Commerce and Industry Janis Endzins said that productivity growth has not been fast enough to justify the increase.

He admitted, though, that the 10 euro increase would be "less disastrous" than the 37 euros rise proposed by the Welfare Ministry, which in Endzins' words would have pushed up unemployment and fueled the shadow economy.

Martins Kazaks, an economist at Swedbank Latvia, said that Latvia's lowest-paid employees would benefit more from an improved business environment rather than a higher minimum wage.

"Raising the minimum wage is like giving the poor fish instead of fishing gear. The government should be giving them fishing gear, not fish," the economist said.

Peteris Krigers, leader of the Latvian Confederation of Trade Unions, said that those who earn the minimum wage will not see their income grow substantially next year. The union leader believes that instead of raising the minimum wage, the government should have raised the nontaxable minimum income from the current 75 euros a month to 130 euros.

The minimum wage in Latvia is currently the lowest in the Baltic states and the third lowest in the European Union. (1 euro = 1.13 U.S. dollars) Endit