The EU is tackling the minimum wage issue: how would the wage change in Lithuania?

Has the ice cream moved?

European Commission President Ursula von der Leyen said on Wednesday (September 16) that the Commission will shortly present proposals for MMA across the EU.

“Dumped wages deprive a worker of dignity, penalize an employer who pays living wages and distorts fair competition in the single market,” von der Leyen said in an annual report. – Therefore, the Commission will present a legal proposal to help Member States establish a minimum wage framework. Everyone should have the right to a minimum wage, both through collective agreements and through the minimum wage. “

The debate on the “EU minimum” has been going on for a long time and was one of Mr von der Leyen’s promises to the Commission from the beginning.

“It just came to our notice then. Again, he stressed that this was a matter for the Member States. This is perhaps a more symbolic call, but methodological and recommendable things will be provided in the near future. Apparently, the Member States They will be able to consider and discuss this further. That approach, I think, was really important and necessary today. I hope there will be momentum, “Stasys Jakeliūnas, MEP and economist, commented on the Commission President’s report.

What are Scandinavians afraid of?

On Tuesday, the European Commission presented a traditional review of employment and social development in Europe, which noted that the introduction of the MMA reduces the risk of poverty, gives workers the opportunity to increase wages, enter the labor market and protect workers in crisis like COVID-19.

Currently, 21 of the 27 EU countries (including Lithuania) apply the established MMA, and in 6 of them the minimum is established through collective bargaining. The minimum established varies several times in different member states. For example, in Lithuania the MMA (before tax) is 607 euros, the highest MMA is in Luxembourg, up to 2,142 euros, in Belgium and Germany, around 1,600 euros, and the lowest minimum is in Bulgaria (312 euros ) and Latvia (430 euros). Eurostat does not offer MMA in countries where it is determined by collective bargaining (eg Sweden, Denmark).

It is the Scandinavian countries that have so far been the most opposed to the establishment of an MMA across the EU. One reason is the tradition of collective bargaining, which has been around and worked well for about a century.

“I am strongly in favor of collective bargaining and the proposal will take into account national competences and traditions,” promised the President of the Commission.

Scandinavians also fear that the Commission’s proposal will reduce the cartel and make it more difficult for them to negotiate current wages, which are reportedly among the highest in the EU. Eastern Europeans, for their part, probably expect the Commission’s proposal to increase their MMA.

However, the Lithuanian minimum would increase

At the moment, one thing is clear: the European Commission will not provide a specific amount for MMA at the EU level, that is, it will not specify that the minimum should be 500, 1000 or 2000 euros. However, the Commission is expected to propose some criteria.

“If there are no frames for certain parameters, it will be an empty declaration. The differences between the members of the EU are quite large. On the other hand, the subsistence minimum is approaching, prices converge. Therefore, the economic capacity of the Member States must be taken into account when setting or paying the minimum wage, guaranteeing a decent standard of living.

The difference between the largest and the smallest is reduced; one of the parameters could also be. Now there are several thousand in Luxembourg and several times less in Lithuania. These are preliminary considerations here, but I think one or the other parameter will be proposed, otherwise it will be a declarative document to which there will be no response, ”said S. Jakeliūnas MEP.

Labor relations experts Torsten Müller and Thorsten Schulten argue that the Kaitz index, which links the MMA to the national median salary, is most commonly used to determine the MMA.

According to experts, MMA is adequate and avoids poverty by 60 percent. average wages. 2019 only France, Portugal, Slovenia and Bulgaria (with the lowest MMA) met this indicator. It is true that the Commissioner for Labor and Social Affairs, Nicolas Schmit, said in February that the EU’s MMA criterion should be 70% to 80%. average wages.

Experts also remember another criterion: calculate MMA on the basis of the average salary, that is, the minimum should be 50%. of the average salary. This criterion, like the median and others, is mentioned by the European Commission in its discussion proposal. The idea of ​​calculating MMA from average salary is also supported by the Lithuanian Free Market Institute (LFMI), as the median in Lithuania is calculated only once every four years, so it is not reliable. MMA reaches 50 percent. median wages are only available in France and Slovenia.

In Lithuania, MMA is 44 percent. average salary. According to LFMI, if 50 percent. criteria, then our MMA would increase to € 690.5.

“Currently, MMA in some regions of Lithuania, where the average salary is low, already reaches more than 60 percent. Average salary. In areas like Skuodas, Zarasai or Kalvarija, increasing the minimum salary will bring MMA even closer to the average salary. .

The consequences for the large cities of the country would not be so great, but for the regions the wage increase would be disastrous. And first of all, for those who are going through more difficult times, where unemployment is higher, it can increase even more, ”said LFMI analyst Lukas Stravinskas.

Defenders of the free market are therefore in favor of 40%. Criteria and then the MMA in Lithuania would be 552.4 euros.

The recommendations of the International Monetary Fund emphasize that the minimum wage should not exceed 40%. median national wage to avoid these negative consequences as much as possible. In any event, it would be important that this recommendation be followed, “noted L. Stravinskas.

Lithuania tends to agree, but …

Diplomats familiar with the Brussels corridor believe that the Commission may not even include such specific criteria or limit itself to non-binding recommendations, otherwise it will be difficult to find a consensus among the 27 EU countries.

Lithuania, like her, tends to support the idea of ​​an EU MMA. Of course, a lot depends on the details: what criteria will be provided, how the document itself will look, etc.

“Lithuania is generally positive about the Commission’s proposal for an EU MMA as regards the MMA determination procedure, but only if the Commission does not seek to regulate the size of the MMA and the size of the MMA configuration indicators. Specific MMA.

We agree that the collective bargaining process should be promoted, the capacity of the social partners should be strengthened and the tax and benefit systems should continue to be developed, taking full account of national competence, ”said Eglė Radišauskienė, Deputy Minister of Social Security and Work.

The Deputy Minister also noted that the procedure for establishing MMA in Lithuania already meets the goal set by the Commission – to achieve a fair minimum wage – and Lithuania already has almost all the measures listed by the Commission.

Lithuania’s main requirement is that there be no minimum wage, no lower or upper limit.

According to LFMI experts, the idea of ​​an EU MMA can have both positive and not entirely positive consequences for Lithuania.

“In a situation where the minimum wage is set at the state level, the EU initiative to ‘link’ the minimum wage to the median wage or median wage may be beneficial as it would reduce the politicization of the MMA, especially before the The elections. Politicians would lose the leverage to increase MMA unreasonably in the hope of attracting voters with what looks good at first glance, “said L. Stravinskis, an analyst at LFMI, but reiterated that workers.

“So, on the one hand, all measures to protect the MMA scenario from politicization should be welcomed and, on the other hand, setting a ladder too high will have very bad consequences for the economy,” the analyst said.

Vice Minister E. Radišauskienė also acknowledges that raising the minimum wage is not the only and best way to promote work. According to her, the net minimum wage can be increased by reducing labor taxes, especially for low-income people, or by increasing the amount of tax-free income.

The European Commission is expected to present its MMA proposals across the EU in October.

“We firmly believe that the future initiative should not establish any minimum wage limit, neither the lower nor the upper limit,” the Vice Minister reiterated Lithuania’s position.