Trade unions press for minimum wage increase
The minimum wage in Lithuania was last increased more than three years ago in January 2008. It is almost the lowest among the 27 members of the EU, currently equal to LTL 800 (€232). Trade unions have wanted to increase it for almost a year, but their demands have been rejected by both government and parliament. Employers’ organisations are also split on the issue. Unions have now approached Lithuanian Members of the European Parliament, ETUC and EESC to ask for their help.
The minimum wage in Lithuania was last increased more than three years ago in January 2008. Currently it is almost the lowest in the EU27 at LTL 800 (€232) per month and LTL 4.85 (€1.41) per hour. In the first quarter of 2011 the minimum wage was only equivalent to 38.6% of the gross average wage in the country. About 10% of full-time employees are currently paid the minimum wage in Lithuania.
According to the trade unions, the very low minimum wage level in Lithuania does not encourage people to take up employment, inhibits natural competition in the labour force, hampers recovery of the domestic market and facilitates a grey economy. It is also one of the factors behind large-scale emigration from Lithuania.
Inflation has been growing at a threatening pace in Lithuania. In May 2011, the annual inflation rate was 5%, prompting a rapid increase in the price of foodstuffs and energy. This has resulted in a significant loss of purchasing power over the last three years. In 2008, the average annual rate of inflation amounted to 10.9%. In 2009, it was 4.5% and in 2010 it was 1.3%. The rising prices of goods and services, and rising living costs, represent a particular burden for those people living in poverty and inflation is also pushing up the number of people claiming benefits.
From 2003 to 2008, the minimum wage was increased at least once a year in accordance with an agreement between the social partners of the Tripartite Council of the Republic of Lithuania (LRTT). However, as the economic and financial crisis hit, all social partners had to admit there was no money to fund further increases in the minimum wage. Wage increase negotiations only resumed between the social partners at the end of 2010 after some stabilisation was seen in the economy and there was some evidence of economic recovery.
In November 2010, the social partners at the LRTT agreed ‘to participate in negotiations regarding the opportunities for a minimum monthly wage (MMW) increase’.
In addition, the social partners agreed to contact the Ministry of Social Security and Labour (SADM) and the Ministry of Finance with a request to prepare and issue estimates for the negotiations. Likewise, the social partners agreed to appoint two representatives each to the negotiating group and to delegate the preparation of a proposal for a minimum wage increase to this group.
Discord among social partners
Unfortunately, the negotiations about the wage increase have since been suspended at the request of employers and those representing small businesses. According to them, some small business owners would not be able to fund a minimum wage increase and would go bankrupt.
With this in mind, in February 2011 a working group was commissioned by the social partners to consider ‘measures likely to mitigate the negative implications of a minimum wage increase on small- and medium-sized business’ and requested additional information from the Ministry of Economy and Ministry of Finance on possible support mechanisms or instruments that could mitigate the consequences of a wage increase on such businesses.
It was decided to hold a sitting of the LRTT on 1 March 2011 to discuss the issue.
The social partners failed to reach agreement and the LRTT recorded their different opinions after the March meeting:
- trade unions represented at the LRTT (the Lithuanian Trade Union Confederation (LPSK), the Lithuanian Labour Federation (LDF) and the Lithuanian Trade Union ‘Solidarumas’ (LPS ‘Solidarumas’) and the Lithuanian Confederation of Industrialists (LPK) proposed an increase in the minimum wage from 1 July 2011 to LTL 900 (€261), and up to LTL 1,000 (€290) from 1 January 2012; while not increasing the amount of income that is currently exempt from tax (TEAI);
- The Lithuanian Business Employers’ Confederation (LVDK) proposed an increase in the wage from 1 January 2012 up to LTL 900 (€261), while concurrently increasing the TEAI and establishing a fund from Employment Fund resources to support enterprises for which the increases would be too heavy a burden;
- The Chamber of Agriculture of the Republic of Lithuania (LRŽŪR) proposed an increase in the minimum wage from 1 July 2011 up to LTL 900 (€261), concurrently increasing the TEAI;
- The Association of Lithuanian Chambers of Commerce, Industry and Crafts (LPPARA) opposed any increase in the minimum wage before an analysis on the likely impact of the increase on small business was complete.
Government and parliament reject proposals
According to Finance Ministry estimates, increasing the wage to LTL 900 (€261), even without increasing the TEAI, would result in additional costs of LTL 85.6 million (€24.8 million) to the national budget per year. The International Monetary Fund (IMF) is also against increasing the minimum wage in Lithuania at this stage.
On 16 May, the issue was put on the agenda of the Government of the Republic of Lithuania (LRV). However it decided to postpone the issue until state budget forecasts are clarified for 2012 and to come back to it in September 2011. In addition, the government asked the LRTT to analyse the possibilities for certain economic sectors to set their minimum wage at different amounts and to submit proposals on this issue.
At an extraordinary sitting of the LRTT held on 17 May the social partners admitted, after long discussions, that the LRTT had once again failed to reach agreement on the wage increase. It was therefore decided to ask Prime Minister Andrius Kubilius to meet the LRTT urgently to help decide by how much and when the minimum wage could be increased.
On 24 May, the issue was also considered by the Lithuanian parliament, but it failed to pass a resolution on the increase of the minimum monthly wage. Therefore, it was proposed that the government raise the minimum wage to LTL 900 (€261) per month with effect from 1 July 2011 and to LTL 1,000 (€290) per month with effect from 2012.
The government held one more extraordinary sitting to discuss the minimum wage increase on 31 May, but again no firm results were reached. According to Prime Minister Kubilius, the issue would not now be dealt with until autumn, when the LRTT would agree on economic, financial and social prospects for the country in 2012.
On 28 June, parliament once again voted on the resolution to increase the wage to LTL 900 (€261) per month with effect from 1 October 2011 and to LTL 1,000 (€290) per month from January 2012, but it failed to adopt it again.
Trade union response
Trade union representatives say they are disappointed at the reaction of the authorities and promise to continue protests that have already begun – on 1 June trade unions picketed the offices of employer confederations, and on 2–3 June the offices of municipal and regional employers’ confederations in different cities and towns across Lithuania. On 17 May, trade unions also protested in front of some government ministry buildings.
On 7 June, the unions sent a letter to Lithuanian members of the European Parliament urging them to influence European debates on minimum wage policy, so workers could receive wages that would ensure a dignified standard of living, and to take efforts to continue discussions leading to the adoption of a minimum wage directive. Likewise, the European Parliament Members were called on to cooperate with Lithuanian trade unions, to meet and discuss wage-related issues.
Inga Blažiene, Institute of Labour and Social Research