The Government Increases the Minimum Wage to 90 Lats per Month
Published: 7 December 2005
The increase of the minimum wage is a constant theme of the debate among social partners in Latvia. In 2003, the agreement of social partners resulted in successful approval and adoption of the minimum wage increase concept, which provided for a strict minimum wage increase schedule, by the RL Cabinet of Ministers. According to this schedule, the minimum wage should reach a half of the gross monthly salary of the respective year.
At the end of October 2005 the Government made the final decision on the minimum wage in Latvia to be EUR 128 per month as of 1 January 2006. More than EUR 37 million in the state budget have been allocated for the increased minimum wage. The increased minimum wage was one of the requirements set forth by the trade unions. After the increase the minimum wage is to be 36% of the gross average salary as at June 2005, but only 30% (lower than ever since 1997) of the gross average salary as at June 2006. The other demand of trade unions - to increase the untaxed minimum, is currently not being discussed.
The increase of the minimum wage is a constant theme of the debate among social partners in Latvia. In 2003, the agreement of social partners resulted in successful approval and adoption of the minimum wage increase concept, which provided for a strict minimum wage increase schedule, by the RL Cabinet of Ministers. According to this schedule, the minimum wage should reach a half of the gross monthly salary of the respective year.
The minimum wage implementation schedule is not being complied with, which causes dissatisfaction in social partners. Trade unions closely monitor the compliance with the minimum wage increase schedule, and sustain their demand of the untaxed minimum. The RL Ministry of Welfare agrees with the trade union demands and during the process of developing the decision proposed the increase of the minimum wage to EUR 142 per month. In the mid-August 2005 the Government passed a conceptual decision that the minimum wage is increased by EUR 14 as of January 2006.
Prior to the adoption of the budget for 2006 trade unions launched an active campaign to achieve performance of their demands - organized meetings with the representatives of the Saeima and the Government , trade union seminars, and finally - on 1 October 2005, - an extensive public rally.
On 25 October 2005 the Government made the final decision regarding the issue of minimum wage. From 1 January 2006 the minimum wage for a 40-hour working week is to be EUR 128, but the minimum hourly rate is EUR 0.761. For adolescents and those employed in increased-risk work the minimum hourly tariff rate will be EUR 0.869, because as stipulated by the Labor Law, they are only permitted to work seven hours per day (35 hours per week). The minimum hourly rate is calculated in accordance with the working hour calendar for 2006, taking into account the average number of monthly working hours. For those employees whose salaries are determined on the basis of the minimum hourly rate and who have worked all monthly working hours, but the number of the monthly hours is less than the annual average number of monthly hours, the calculated salary is increased by the difference between the calculated salary and the stated minimum wage.
The Government has allocated more than EUR 37 million in the budget of 2006 for the increase of the minimum wage. This is not more than 5% of the planned budget revenue increase achieved as a result of good economic development and inflation.
In 2004 approximately 10% of the employed received the minimum wage, of whom 86% were employed in the private sector and 14% in the public sector.
The increase of the minimum wage (by 12.5%) lags behind the increase of the average salary during the first half of 2005 (on average in the country by 16.4%). The minimum wage in 2006 will be 36% of the average gross salary as at July 2005 (EUR 355), but only 30.4% (the lowest ever since 1997) of forecasted average gross salary in June 2006 if average increase of salaries remains 17%.
After the increase the minimum wage will be smaller than the minimum cost of living for inhabitants as at September 2005 (EUR 152.56 per month), but bigger than the average of newly allocated pensions in the third quarter of 2005 (EUR 130.22 per month). All the mentioned personal income indicators increase, which means that the average salary will be still very low after the increase in 2006. Under the influence of the high inflation (7.3% in September 2005) the purchasing capacity of the minimum wage is decreasing and the actual income increase is minute.
The other demand of trade unions - on determining untaxed minimum within the amount of the minimum cost of living, is currently not being examined.
| Changes in the national gross wage | Year of inception | Level in EUR (exchange rate in year of inception) | Compared to average gross wage in percent (in year of inception) |
| As of October 1 1994 | 1994 | 42 | 38.9 |
| 1995 | 41 | 31.1 | |
| As of April 1 1996 | 1996 | 55 | . |
| 1997 | 58 | 31.7 | |
| As of January 1 1998 | 1998 | 63 | 31.5 |
| As of January 1 1999 | 1999 | 85 | 35.5 |
| 2000 | 88 | 33.3 | |
| As of July 1 2001 | 2001 | 107 | 37.7 |
| 2002 | 98 | 34.7 | |
| As of January 1 2003 | 2003 | 104 | 36.5 |
| As of January 1 2004 | 2004 | 121 | 37.9 |
| As of January 1 2006 | 2006 | 128 | 36.0* |
| 30.4** |
* (of average gross salary in June 2005),
** (of forecasted average gross salary in June 2006 with average increase of salaries 17%)
This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.
Eurofound recommends citing this publication in the following way.
Eurofound (2005), The Government Increases the Minimum Wage to 90 Lats per Month, article.
