Romania: Latest working life developments – Q4 2016
The general election results, the debate on the draft law on public sector pay, tripartite discussions on setting the statutory minimum wage and its possible increase are the main topics of interest in this article. This country update reports on the latest developments in working life in Romania in the fourth quarter of 2016.
Parliamentary elections and a new government dominated by social democrats
The general election on 11 December 2016 resulted in an overwhelming victory for the Social Democratic Party (PSD), which won 46% of the votes. However, the friction between the winning party and the President of Romania, Klaus Iohannis, led to the formation of a new government being postponed until the beginning of 2017. On 4 January 2017, the Parliament gave a vote of confidence to the new government led by Prime Minister Sorin Grindeanu (PSD). In their election campaign, the government coalition parties – PSD and the Alliance of Liberals and Democrats (ALDE) – promised significant wage and pensions increases, as well as changes in the taxation system. However, ALDE received only 6% of the votes in the election.
Disputes on unitary pay in the public system
The election campaign coincided with tense relations between the government and public sector trade unions, triggered by the draft law on public sector pay. Negotiations on public sector pay had begun between the government and the unions in the first quarter of 2016 and, after several street protests and the resignation of the Labour Minister Ana Costea in April, an emergency ordinance was adopted in June (EO 20/2016). This was meant to eliminate the wage gap in the public sector, but its final version left many professional categories, such as medical staff and public administration employees, deeply dissatisfied.
Negotiations were relaunched in September, when the Ministry of Labour submitted a new draft law for public debate. However, these resulted in a series of protests organised by the Sanitas Trade Union Federation, culminating in a General Strike involving 82,000 employees from the healthcare and social assistance sector. The action was declared illegal by the Bucharest Tribunal, the city’s municipal court, as it did not meet the legal requirements of calling a strike. Nevertheless, in the aftermath of this and in the context of the electoral campaign, Parliament voted to amend EO 20/2016 and to increase wages in the healthcare and education system by 15% from 1 January 2017.
The government criticised Parliament’s decision because of its impact on the budget and finalised its own draft law on unitary pay in November. However, it postponed its adoption until 2017, leaving the bill to be reviewed by the in-coming government. Currently there are 1,217,000 employees in the public sector, out of a total number of 4,700,000 employees in Romania, according to the National Institute of Statistics (Insee). The government’s draft law provides for the ratio between the lowest and highest wage in the public sector to be 1:13 rather than the current ratio of 1:17.
Statutory minimum wage-setting mechanism
The statutory monthly minimum wage increased by 19% from RON 1,050 (€233 as at 25 January 2017) to RON 1,250 (€277) in May 2016. In November 2016, the government initiated a consultation round with social partners for setting a minimum wage mechanism, saying it would be based on clear, measurable criteria that would create predictability and eliminate potentially economically harmful effects. The consultations were held in the framework of the National Tripartite Social Dialogue Council, which was created in 2011 but which became effective only at the end of 2015.
The consultations also addressed the minimum wage increase for 2017. While the trade union representatives insisted on a 16% increase to the minimum wage (RON 1,450 or €322) as of 1 January 2017, the employer organisations pledged a smaller increase starting from 1 May 2017. Due to the political context and the December elections, the negotiations were not finalised, although the social partners discussed criteria that should be taken into account when setting the statutory minimum wage:
- general remuneration and social benefits level;
- economic growth;
- reasonable redundancy terms.
Nor was the level of the minimum wage for 2017 established during the consultations. The trade unions had suggested three different scenarios, including increases in the minimum wage of between 4% and 20%, but the outgoing Prime Minister Dacian Cioloș decided to freeze the minimum wage until the new government was formed. Shortly after the new social democratic government was installed, it announced a minimum wage increase of 16%. Starting from 1 February 2017, the minimum wage will increase from RON 1,250 (€277) to RON 1,450 (€322). This is the sixth year in a row of minimum wage increases; in total it has increased by 141% from RON 600 (€133) in 2010 to RON 1,450 (€322) in 2017.
The debates on both the minimum wage and on public sector pay are attempts to address some of the most pressing problems in Romania: income inequality, in-work poverty and low wages. While it is already evident that the new government remains firmly committed to its promise of raising the minimum wage, it is not clear whether it will take into account the draft bill on unitary pay prepared by its predecessor or whether it will re-open the negotiations with the social partners.