Economists: Minimum wage must rise, otherwise income inequality will increase

“There must be some increase, because it is necessary to increase the income gap between employed and non-employed people. Ideally, when a person enters the labor market and works full time, the salary should be quite high, said Sigismund Mauricas, chief economist. from Luminor Bank, to Eltai. “Of course, there should be some challenges, because MMA does not present many challenges for most large companies or those located in big cities, but for small companies and companies that may not officially show their full wages, this can significantly increase the burden on them. “

“Given the pandemic crisis, its characteristic is that we have a K-shaped recovery.” Some sectors have recovered quite quickly and are above the level before the crisis, and others do not even see the light at the end of the tunnel, “added the economist.

Ž. Maurice also proposes increasing tax-free income (NPD) more next year in addition to increasing MMA. In his view, this would reduce the burden of increasing MMA on small businesses and encourage people to enter the job market.

“The commitment would be not to bend the stick or lift too much. I would say that the Government’s proposal is almost in the top ten and coincides with that of the Bank of Lithuania. Salaries should be considered” in hand “rather than” on paper “, and the government could make a bigger contribution here, possibly increasing the NPD even more next year.

In this way, by carrying a heavier load on his shoulders, it would allow to shoot two rabbits with a single shot, since it would increase the income of the working population compared to the unemployed, it would lead to a decrease in the shade, the official entry into the labor market. It would also reduce emigration, since the wage gap is one of the reasons. Nor would it significantly increase the burden on companies, ”Ž said. Mauricas.

Tadas Povilauskas, chief economist at SEB Bank, also agreed that not increasing the MMA in the country would increase income inequality.

“The first point of reference is the calculations of the Bank of Lithuania, they provide a starting point and it is possible to move from it. I believe that such a precautionary principle should prevail. Another benchmark, in my opinion, is the Ministry of Finance forecast that the average monthly salary will increase by 3.3 percent next year. It is in this box that the final solution should be sought to include the desire to analyze more carefully the coming year.

Not just a possible pessimistic scenario next year, a possible optimistic scenario that the economy will grow next year, we all forecast that growth will be at least 3%, which will increase income inequality next year without fundamentally raising the MMA. Therefore, it is impossible not to move MMA, ”said T. Povilauskas.

According to him, the increase in MMA could be accompanied by additional support to the sectors most affected by the pandemic.

“Small businesses need to remember that if we don’t deal with the epidemiological situation, people get downtime again, then the downtime mechanism is also linked to MMA. Employers will not be greatly harmed by this either, if people have to be inactive.

The compensation mechanisms in this place can only be sought for the obvious suffering in the accommodation and restaurant services sector, where wages are historically low, closer to MMA, and that sector does not recover until foreigners arrive. Here it is possible to look for compensatory mechanisms, but not on a national scale ”, said the economist Eltai.

Wednesday’s tripartite council failed to reach consensus on the size of next year’s MMA and recorded differing views.

The Deputy Minister of Social Security and Labor, Eglė Radišauskienė, said that the amount of MMA calculated by the Bank of Lithuania (LB) and that it will reach 642 euros next year could be a matter of discussion, but stressed that the social partners could discuss and find a solution for another month.

Business representatives agreed that the MMA increase could be discussed for another month, but did not agree with the amount of 642 euros. Ričardas Sartatavičius, executive director of the Lithuanian Confederation of Industrialists, also said that consideration of the issue should be postponed after the elections.

However, the worker representatives disagreed with the proposal to further discuss the MMA increase and called for a faster decision. According to the unions, the size of the MMA should reach 663 euros next year.
MMA has risen to € 607 on paper and € 437 in cash since this year.

In the national tripartite agreement it was agreed that in Lithuania the MMA cannot be less than 45%. average salary and more than 50 percent. average salary.