Pay increase could jeopardise contract and cause price hikes, according to economists

They say that the minimum wage increase is necessary and necessarily, but warn that growth can increase informal employment as well as cause price hikes.

At the meeting held on 13 April, the Kosovo government adopted the bill paving the way for minimum wage growth to 250 euros in net.

The minimum wage ʹ unchanged since 2011 is currently 130 euros for employees under 35 and 170 euros for over 35-year-olds.

To effect growth, the bill must be adopted in the Kosovo Assembly.

Kosovo Prime Minister Albin Kurti said the increase will benefit 300 thousand workers.

With the new bill, workers receiving minimum wage will also be released from taxes.

Kosovo has no precise data on how many employees receive minimum wages, but is believed to belong mostly to employees in the private sector.

The private sector in Kosovo is counted as the biggest employer -- with more than 220 thousand workers.

Economics Professor Musa Limani says the minimum wage value, despite growth, will be insufficient for the monthly basket at a time when inflation in Kosovo is on the rise.

Limani says businesses facing financial problems or higher costs of spending will not be able to pay rising salaries.

According to him, they could increase the prices of products or services or maintain workers without contracts.

With the minimum wage increase, the number of workers without contracts will increase, because some businesses do not have material opportunities to pay the worker at the minimum wage value. This is going to be a separate problem... there's going to be a regular or hidden employment. On the other hand, there will be a shortage of workers, because no worker will work any longer under the cost of the minimum wage”, Limani tells Radio Free Europe.

According to him, the Government of Kosovo has its mechanisms, such as market inspectors, which should control private businesses.

The chairman of the Afarism Oda in Kosovo, Skender Krasniqi, says the government should help businesses implement the minimum wage growth decision.

The government, he says, could temporarily create fiscal facilities, instead free businesses from TV payments U.S. for some articles, or subsidize some of the minimum wage.

Businesses in Kosovo have complained of major losses, due to several closing stages that have imposed their pandemic and coronaryism.

In order not to risk getting away from workers and businesses to have consequences, the Government must categorise businesses with the worst financial situation to provide support. On the contrary, the number of workers without labour contracts will increase, obligations will not be paid to the Kosovo Pension Savings Trust and pay on pay. Consequently, there will be fewer access to the Kosovo budget”, Krasniqi tells Radio Free Europe.

Independent Private Sector Union Chairman Yusuf Azemi said at a news conference Wednesday that the 250-euro minimum wage value is unacceptable. According to him, it should have been at least 400 euros.

“... because, based on a done analysis, the monthly basket of a four-member family in Kosovo amounts to about 470 euros”, he said.

Because of the coronary pandemic, the prices of products in Kosovo, as in other countries of the world, have begun to rise since last year.

The increase has continued even after Russia started the war in Ukraine in February, as both countries are among the biggest exporters of wheat and other products.

According to official data, inflation in March in Kosovo has reached 10 percent, compared to March 2021.

Azem, also, said Kosovo's market currently has <x0mage stressed” of the workforce.

“From the lack of labour force, many private companies have begun to close and this is a distressing situation for the country”, he said.

Representatives of workers have said earlier about Radio Free Europe that low wages, long working hours, as well as job insecurity are just some of the problems driving workers from Kosovo to European countries.