Social partners agree minimum wage rise

The minimum wage in Estonia is to be increased after an agreement between social partners. The deal was finalised on 19 September 2013, when the Estonian Employers’ Confederation and the Estonian Trade Union Confederation signed an exceptional minimum wage agreement. It will increase the national minimum wage from €320 to €355 in 2014 – about 36% of Estonia’s average wage – and to €390 in 2015. The social partners said the increase was necessary for the lowest wage earners.

Background

The national minimum wage in Estonia has been fixed annually by tripartite agreement since 1992. Since 2002, it has been negotiated between the Estonian Trade Union Confederation (EAKL) and the Estonian Employers’ Confederation (ETTK) and then brought into effect by government decree (EE1201019I).

The minimum wage is low compared to the national average wage. Statistics Estonia figures show that between 2000 and 2013 it stood at between 29% and 35.5% of the average wage, reaching its highest level in 2009. This is much lower than European Union’s recommendation that a national minimum wage should be at least 60% of the national average monthly wage (EE1107019I). Data from the Estonian Tax and Custom Board (EMTA)suggest that 3% of Estonia’s workers were earning the minimum wage in 2012.

In 2007, social partners agreed the highest-ever rise in the minimum wage, an increase of 21% from 230€ to 278€ on 1 January 2008. Then, however, during the first three years of the economic crisis between 2009 and 2011, the minimum wage remained unchanged. The employers’ confederation ETTK refused to consider an increase despite persistent pressure from EAKL. The employers argued that economic circumstances were too unpredictable and the economy too fragile to increase the minimum wage (EE0902039I, EE1107019I).

At the end of 2011, social partners finally agreed on a 4.2% increase in the minimum wage from 1 January 2012, raising it from €278 to €290 – although this increase was much lower than the 15% demanded by EAKL (EE1201019I). In 2012 it was agreed that the minimum wage would increase by 10.3% to €320 from 1 January 2013.

Terms of the agreement

On 19 September 2013, the social partners announced that they had signed a two-year minimum wage agreement for 2014–2015. The deal will see an increase in the minimum wage by 10.9% in 2014 – up to €355 – and by an additional 9.9% in 2015, to bring it up to €390.

ETTK and EAKL issued a joint statement explaining the background of their agreement. The social partners stated that their aim was not to encourage ‘wage rallies’, but to ease the situation for low wage earners who have had to struggle to make ends meet and often live in poverty.

Social partners also emphasised that poverty among people in the lowest wage bracket affects not only employees earning the minimum wage but also the whole quality of life of Estonian society. The partners agreed that the average wage should in future increase at a reasonable pace and follow production growth.

Statistics Estonia estimates suggest that the agreement will bring the minimum wage up to 35.7% of the average national monthly wage in 2014 – the highest it has ever been.

Commentary

At the beginning of 2013, new leaders were elected to the main national-level social partner organisations EAKL and ETTK. In February 2013, Peep Peterson was elected the new Chair of EAKL, replacing Harri Taliga who had been in office since 2003. In May 2013, Toomas Tamsar was elected as new Chair of ETTK, replacing Tarmo Kriis, who had been in the office since 2004. This meant that the new agreement was the first major deal struck between the social partners involving their new leaders.

The two-year agreement came as something of a surprise. Usually the minimum wage is negotiated annually, and there have generally been problems every year in reaching an agreement.

EAKL, ETTK and the Estonian Employees’ Unions’ Confederation (TALO) are currently also negotiating over industrial relations reforms in Estonia. The reforms will cover various aspects of industrial relations such as collective agreements at company level, sectoral collective agreements, and the role of the Public Conciliators’ Office (Riiklik Lepitaja). However, the main focus of the reform talks has been the right to strike and labour dispute resolution.

Liina Osila, Ingel Kadarik, Praxis Center for Policy Studies

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