Additional budget costs jeopardise minimum wage growth

On Thursday, resolutions were adopted in the Kosovo Assembly for minimum wage growth from 170 euros to 250 euros. In spite of this, caution is being required and through literal analysis to apply in practice.

Although the minimum wage increase affects the private sector, through some decisions about pension schemes related to veterans may cost about 35m euros annually for the state budget.

Despite that, the minimum wage increase is being considered to change even the basis of private sector competitiveness. But from labour unions, there is no optimism for minimum wage growth.

The Kosovo government says they are, in principle, for a minimum wage increase, but indicated they have hesitations in the share of the budgetary cost increase due to a decision dealing with war veterans.

Haki Shatri, the prime minister's adviser, Ramush Haradinaj, says the only problem for implementing such a decision is the possibility of increasing veterans' pensions and being equal to the minimum wage.

The government has the only problem with the part where it connects and the obligation for war veterans to the minimum wage. It's not in the law, but when it's set up for the veterans' compensation, someone at some point has been called to what compensation for veterans is the minimum wage, which is this 180-euro share... the requirements continue to go from what compensation is forwarded to the minimum wage. Because there's been a tradition even now this has an effect, additional budget costs. When we knew there was still a dilemma for the number, they were still unexplained by the institutions of justice. In this part, the government has hesitations and has little reserve”, he says of KosovaPress.

Meanwhile, the director of the American Chamber of Economics, Arian Zeka, says that minimum wage should not be raised without a literal analysis, since this will affect the aspect of employment among young people within the private sector.

The Zeka, among other things, stressed that such a decision would burden the country's budget on pension and social schemes that are related to minimum wage altitude.

We have been happy that the country's government has not made a decision for two years, in reality, to raise the minimum wage. Not without a literal analysis, not based on the real economic growth parameters of our country. Based on the level of average wage at the country level, which naturally affects us greatly in the public sector. It's not the right criterion, it causes other problems. Especially in terms of youth employment within the private sector. Without including the other aspects that have such minimum pay raises in social schemes and other pension schemes that are related to minimum wage altitude... such a hike would burden the country's budget, increase the pressure on the income level to existing businesses and, of course, burden the environment and do business”, Zeka says.

That there is a need for greater analysis of the minimum wage raises and economics connoisseur Muhamet Sadiku says.

The growth of the minimum wage implies other economic implications that the government should take into account and should make due accounts. But what is current is that this level of wages is low, and it doesn't nearly cover the consumer price basket of Kosovo families. So I'm really saying that there's still a need for relevant analysis that connects with the macroeconomic situation with the long-term development trend of Kosovo. But this analysis should deal with income inequality among families”, Sadiku has indicated.

Scepticism on the rise of the minimum wage has also been on the part of BSPK Chairman Avni Aydin, who says there have been continued promises of institutional leaders, but without any results.

For Aydin, the growth of the minimum wage of up to 250 euros as stated is insufficient, and for this he demanded that, due to increased citizen baskets, it be up to 300 euros.

“I've had a lot of promises starting with the prime minister who has promised me chairman this job is done... the minimum wage must now be 300 euros. That's how it needs to be modified because the standard of life has been raised and it has now reached the minimum wage of 300 euros. To be taken from relevant institutions and corrected on the basis of schemes that have the parameters of institutions I say appears at 300 taking into account the citizen basket”, Aydin said.

The minimum wage in Kosovo has not been raised since 2011.