National Tripartite Council supports proposed increase in minimum wage

Once again, wage-related issues were a central focus of the National Tripartite Cooperation Council’s autumn meetings. The council supports the government’s plans to raise the minimum monthly wage to €170 and increase the tax-free allowance threshold to €70 in 2007. However, the council has rejected the government’s proposals to reduce the personal income tax rate. The social partners also support amendments to the state budget law.

Following a short break, Latvia’s national institution of social dialogue – the National Tripartite Cooperation Council (Nacionalas trispusejas sadarbibas padome, NTSP) – has resumed its work. Two NTSP meetings were held in autumn 2006.

Council supports plan to increase minimum wage

At a meeting held on 12 September 2006, the NTSP expressed support for plans to increase the minimum monthly wage to €170, the tax-free allowance threshold to €70 and tax relief for dependent persons to €50 in 2007 (LV0607029I).

The NTSP voiced its opposition, however, to proposals to reduce the personal income tax rate. These proposals are contained in a bill that has the support of the government and that has already been passed twice by Parliament.

Trade unions meet with NTSP

On 27 September 2006, shortly before the parliamentary elections and the adoption of the budget amendment law, the board of the Free Trade Union Confederation of Latvia (Latvijas Brivo Arodbiedribu savieniba, LBAS) met with the head of the NTSP, Prime Minister Aigars Kalvitis. At the meeting, Prime Minister Kalvitis stated, ‘there is dialogue between the government and the unions. The government is able to keep to its promises because the basis of agreement between the parties is realistic. The goals, which both parties are striving to implement, are justified socioeconomically. Good dialogue must be promoted’.

The talks included an appraisal of cooperation in the NTSP since the council began working directly under the leadership of the Prime Minister. The results of this assessment were not publicly disclosed, however. Although the NTSP’s statutes stipulate that the council is to meet every two months, this requirement has not been met. The September council meeting, which had only a single item on the agenda, was the third of the year, two others having been held in early spring 2006. In 2005, the council held five meetings.

Social partners approve proposed draft budget

Over the past two years, the social partners have only had a nominal role in the budget process since they were given insufficient time to study the draft budget and were thus unable to make a meaningful contribution to the debate. An NTSP meeting on 14 September 2005 discussed ways to improve the participation of the social partners. It was decided that the position of the NTSP in the state hierarchy should be changed, and that the Prime Minister should act as chair of the council. Since 2006, the NTSP secretariat has been under the State Chancellery (Valsts Kanceleja), whereas previously it had operated through the Ministry of Welfare.

Immediately after the September meeting, the social partners had the opportunity to debate the proposed amendments to the 2006 budget. At the NTSP meeting of 9 October 2006, LBAS and the Latvian Employer Confederation (Latvijas Darba Deveju konfederacija, LDDK) expressed support for the bills drafted by the government.

The amendments include an allocation of additional funds to the healthcare system, the uptake of EU structural funds, local government investments, an increase in wages for teachers and public sector workers and passenger railway subsidies. The budget amendments show that a large part of the unions’ demands have been met, mainly thanks to rapid economic growth.

Commentary

The minimum wage is used to calculate a number of other wage levels. For example, the wages of managers and employees in Riga City Council (Rigas Dome, RD) are linked to the minimum wage. Deputies are paid an hourly rate, set at 0.1% of the minimum monthly wage. Teachers’ wages are also tied to the minimum wage. It can thus be predicted that an increase in the minimum wage will prompt further escalation of wages, which are already the fastest growing in the EU.

Raita Karnite, Institute of Economics, Latvian Academy of Sciences