Union representatives have requested an increase in the minimum wage in Croatia from 2,496 to 3,080 kuna net.
– We are not satisfied that workers with the lowest wages will receive the least. Therefore, we will talk about increasing the minimum wage, which the minister will have to propose for next year in the coming days. Our proposal is that it amounts to the same as the non-taxable wage base, which is 3,800 kuna (gross), that is the minimum. The current minimum wage now represents the poverty line – said the president of the Independent Trade Unions of Croatia, Mladen Novosel, adding that an increase in the minimum wage would “correct the injustice caused by the tax reform.”
In response to the proposal, economic analyst from the company Arhivanalitika, Velimir Šonje, wrote on Facebook:
– The minimum net wage in Croatia currently amounts to 2,496 kuna net and is constantly adjusted so that it does not lag behind the cost of living. However, the unions proposed at the meeting of the Economic-Social Council that the minimum wage be increased by about 23%, to 3,080 kuna net per month. They believe that such a measure should accompany the tax reform so that everyone feels some benefit from the wage growth.
The Croatian Employers’ Association estimates that between 30,000 and 50,000 workers receive the minimum wage, mostly employed in the textile, wood, or metal processing industries.
Proposals to increase the minimum wage are popular in public and seem logical to many, as the increase in the minimum wage is viewed through the lens of distribution between capital and labor. It is acceptable for workers to receive more, and employers less. However, relatively few workers receive minimum wages. They are concentrated in traditional, labor-intensive, and low-profit industries, such as wood and textiles. Therefore, excessively raising the legally mandated minimum wage could drive many companies out of business in those sectors. Production and sales would not be able to keep up with the strong rise in labor costs, forcing companies to reduce the number of workers or close down.
Therefore, care must be taken that increasing the minimum wage does not cause more harm than good. This does not mean that minimum wages should not be increased. On the contrary, I advocate experimenting with minimum wages to see their real effects and shape the best policies through that.
For example, increasing the minimum wage makes sense when the economy is growing. Even if the minimum wage is set too high, causing some people in traditional industries to lose their jobs, it is easier to find another job in growth conditions than in recession conditions. Following the same logic, in recession conditions, minimum wages should be reduced. This would increase the chances that the lowest-paid workers retain their jobs, as others cannot find work in a recession. Unfortunately, it is precisely in recession conditions that mistakes are often made by raising minimum wages, which ultimately harms workers whose jobs become threatened at the worst time.
The lesson is that in matters of minimum wage, egalitarian intuition should be restrained, and caution should be exercised, with thorough analysis to foresee all effects in advance – weighed Šonje.
“Encouraging Layoffs”
Meanwhile, the Croatian Employers’ Association has also offered its perspective, with its CEO Davor Majetić stating that employers oppose the increase in the minimum wage because the proposed amount is too high and could jeopardize business in certain industries.
– We must find a way to allow those industries to raise wages without jeopardizing their business and encouraging them to lay off workers. What should we do with 5,000 women who work for minimum wage in Zagorje, should we tell them to go home or let them earn those 3,100, 3,200 kuna? – asked Majetić after meeting with Minister Ćorić.
In this week’s Fight Club, we ask whether you support the view that the introduction of minimum wage threatens jobs in low-profit industries?
