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In Albania, there is an open debate about the government's initiative to reform the country's wage system. Since April 1st, the minimum wage has been raised to 40,000 lek or about 18% higher. This increase, along with the announced wage hikes, aims to, according to officials, increase competitiveness in the economy and curb human resource outflows from the country. Despite Prime Minister Edi Rama's statements that the country has the means to implement such a reform, experts think differently, saying that the productivity of the Albanian economy cannot justify it. Those who are knowledgeable about the economy support the policy of raising wages, but only when it is based on labor market analysis and the country's economic development.
In the case of the minimum wage increase, some think that there were no studies or consultations with the National Labor Council, employers and employees, and no respect for the International Labor Organization Convention.
"This makes me think that institutions are not functioning, that the National Labor Council is only on paper, and does not perform its fundamental duty of negotiating, especially the minimum wage. The other part is that there is no study, no material, and no evidence to see what has happened and what the reason for the minimum wage increase is," said Bardhi Sejdarasi, an economics journalist, to Voice of America.
The minimum wage in the country has changed six times in ten years, twice just last year. Experts say that frequent changes go against the norms established in EU countries, according to which this wage can change once every 1-2 years.
An increase in the minimum wage means a new financial burden for businesses for social security and health insurance payments for employees. Such frequent and unstudied movements, according to experts in the field of economics, put businesses in difficult positions to adapt, in a crisis where inflation is over 7%.
"We need to understand that businesses employ thousands of people, and we need to be careful. Businesses should not be seen as cows to be milked every time we need to fill budget gaps or other schemes such as pension schemes, but they should be seen as long-term partners," said Artan Gjergji, an economics expert, to Voice of America.
Experts believe that imposing a wage increase based on political rather than economic grounds results in costs being passed on to consumers. They urge authorities to increase employment, reduce informality, combat corruption and misuse of public funds in order to stabilize the economy on secure grounds.
"Informality promotes corruption, abuse and speculation. The government has not fought against these phenomena, meaning it has not fought informality, informal money that has already affected the exchange rate, and this is something that needs to be mentioned. This money is affecting exports and remittances. This is the part that is not studied. Above all, there is a lack of sincerity in understanding what the real problems are," said Eduart Gjokutaj, an analyst at the Albanian Economic and Fiscal Center, ALTAX, in an interview with Voice of America.
Furthermore, experts believe that increasing the minimum wage by 18% goes against the Central Bank's tight monetary policy, which has increased the base interest rate as a tool to influence inflation reduction in the country. During crises, they argue, governments dampen inflation by indexing wages and pensions, and add that such unstudied initiatives have no impact on curbing emigration.
"We are simply seeing a public, political discourse about the immediate need to raise wages so that people do not leave us. The balances of immigration, inflows, outflows, migration flows have other issues, other factors that are influenced and not influenced by such a minimal increase as the minimum wage," continued Artan Gjergji, an economics expert.
According to INSTAT, minimum wage workers account for 21% of all workers in the country. The increase in the minimum wage, even for the state itself, is estimated to have an effect of 15 million euros on the social and health insurance fund as contributions. It is expected to impact the pension scheme, which has not met the condition for the number of contributors to be higher than that of beneficiaries in the past three decades, but it is not the solution to the problem. Experts explain that wages in the private sector increase as a result of supply and demand, as has recently happened.
"In 2022, the private sector has increased wages by at least 18%. They did it themselves and not by government decision. They did it because the level of human resources that companies needed and the need to acquire qualified resources forced them to raise wages, and it continues to force them to raise wages because if you look at the large flow of employee movements within and outside the country, it is certainly necessary to raise wages," continued Bardhi Sejdarasi, an economics journalist.
The average salary in the private sector for 2022, according to INSTAT, was 58,000 lek compared to 70,000 lek in the public sector. The gap has been 32% for several years, but in 2022 it decreased to 20%, which means that the private sector has reacted, according to researchers, to the labor shortage by increasing salaries. Since 2019, salaries in this sector have increased by 22%, compared to 11% in the public sector, which is also, according to them, a positive sign.
Voice of America contacted the Ministry of Finance and Economy for an assessment regarding the experts' arguments but did not receive a response. However, beyond economic analyses, analysts have raised concerns that the increase in the minimum wage as well as the government's announcements regarding the increase in average wages are being made before the local elections on May 14, and that these could influence voters. The electoral code prohibits the government from undertaking such initiatives only before parliamentary elections.
"The electoral code does not stop the government, because surprisingly it has placed restrictions only on political elections, but ethically and morally, this is not acceptable. These salary increases, including those announced by the government in the public sector recently, are understood to have a direct impact on voters' preferences," argued Eduart Gjokutaj, an analyst at the Albanian Economic and Fiscal Center, ALTAX.
Authorities have dismissed criticism that the increase in the minimum wage and the promise to increase the average wage to 900 euros are being made with the aim of influencing voters in the local elections on May 14, but experts do not see any economic logic in them. They believe that an unstudied increase in wages, at a time when inflation is around 7% and forecasts for 2023 speak of slow economic growth of 2.6%, could have serious consequences.