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THE MINIMUM WAGE UP FOR DEBATEPM Boc and the wages of the public sector workers: after cutting them, he is now considering raising them again

Ziarul BURSA #English Section /

PM Boc and the wages of the public sector workers: after cutting them, he is now considering raising them again

How much will the minimum wage increase? This seems to have become the main issue of the economy, as the government is negotiating with the unions raising wages even though its pockets are empty.

The government is proposing raising the minimum wage by 40 lei, from the current level of 600 lei to 640 lei. Unions consider it is not enough and claim that a raise of 150 lei would be the most adequate alternative, because in their opinion a minimum wage of 750 lei would be needed to eliminate the black market labor.

The unyielding position of the unions relies on the government"s commitments taken in the previous years that by 2014-2015 the minimum wage should reach 50% of the average wage for the gross average wage.

If the minimum wage is raised, this would cause a spiraling increase of all the wages in the public sector, just after they"ve been cut by 25%. It"s completely nonsensical.

In the public sector, revenues and expenses of the general consolidated budget are expected to drop 

The private sector has cut back on its spending and considers that the raise of the minimum wage would be an aberrant decision

Talks about wage hikes, even if such a hike would only apply to the minimum wage, are really coming at a bad time, and are unsustainable in these times of crisis, as the budget is strapped for cash, and the economic forecasts for this year expect the economy to contract by as much as -1.9%.

The negotiations come just after the government cut wages in the public sector by 25%, has increased the taxation base and has taken 4.36 billion lei from the social security budget and transferred it to the state budget.

The lack of sustainability comes just as the government estimated, in last week"s budget revision, that its revenues to the consolidated general budget, as well as its spending would drop by 3.44 billion lei, and 714.6 million lei, respectively.

What the government is after

What would the government have to gain by raising the minimum wage is a question that specialists are having a hard time coming up with an answer for, given the current budget deficit. The conclusion of the experts that we talked to is that the government is playing with a double edged sword.

By raising the minimum wage, the Government is hoping to raise more money for the public budget, as this would increase the taxable income of the population.

But the same experts warn that without restarting the engines of the economy, such a measure could actually backfire, by generating higher deficits in the public sector and encouraging black market labor in the public sector.

A new blow for the private sector

A raise in the minimum wage will be strongly felt by the private sector, which for now hasn"t attended the negotiations between the government and the unions.

It is the same private sector about which president Traian Băsescu, said that it was the first to react to the crisis and cut expenses, but was nevertheless dealt several blows by the through the raise of the VAT and the widening of the taxation base.

Although there aren"t many employees making the minimum wage of 600 lei, the main issues for private companies stem from the fact that the wage grids (ed. note: as provided by the Law of Unified Wages - which uses the gross minimum wage as the base factor for determining wages across the economy) will be raised. The raise of the minimum wage will mean an increase in wages in the public sector. This will force private companies to follow suit, leading to an increase in labor expenses.

What the professional associations say

Professional associations are extremely unhappy that they were not asked to participate in these discussions and they are accusing Government of trying to substitute themselves to the professional associations in the negotiations with the unions.

Constantin Vasilescu, the prime vice-president of the General Union of Industrialists in Romania "UGIR 1903", said: "This is nonsense. The government is trying to speak for the professional associations and is negotiating in our stead with the unions wage increases which will affect the private sector. The private companies have undergone harsh cutbacks as it is, raising wages is out of the question. This measure is unsustainable, because there really aren"t any available resources".

Ovidiu Nicolescu, the president of the Romanian National Council of Small and Medium Private Enterprises (CNIPMMR) warns that any such wage increases need to be accompanied by a study of their social and economic impact: "The government needs to present an impact review which would show us for instance, how many jobs will be created or what benefits this wage increase would have. We do not support the raise of the minimum wage because there aren"t any financial resources to do so, and such a measure would most likely increase the black market labor."

Costel Olteanu, the chairman of the National Union of Privately Owned Professional Associations in Romania (UNPCPR), also warns about the increase in black market labor, especially as the public sector now has to absorb the number of employees laid off from the public sector: "Raising the minimum wage under the current circumstances is unsustainable. In theory the government has the right to issue an emergency ordinance to raise the minimum wage, but it is forcing employers to do so, which we can"t do. The higher the minimum wage gets raised, the more tax evasion and black market labor will increase".

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