Wage increase based on decent work, performance, and meritocracy

Wage is by far the most complex topic to be managed by businesses and the government. It can be considered a source of disappointment for all these years. But what we want to discuss today based on the opinions of our partners is that the salary should also be considered as a source of joy and incentive for continuity.
The situation of the wage dialogue today is only a discussion dominated by economic terms and is still far from the dialogue for a wage that embraces dignified work.

In economic terms, the average salary at the end of the first half of 2023 compared to 2020 has increased by 33%. Yes, the minimum wage has also increased for the same comparative period. Deciding on a higher salary will also result in a higher cost of living, which can reduce the benefit of the increased salary (as education / transport / housing can be much more expensive than your salary increase).

Although wage is particularly important (otherwise more people would choose unpaid work), it is not the only thing that makes a difference in our working lives.

However, knowing the arguments surrounding the discussion of what a good wage is can improve job prospects and of course can help employees, but also employers to make long-term decisions based on the concept of how to reach a good salary.

The basis of the whole discussion about the topic of a good salary is like the discussion about the living wage, which represents beyond the legal requirements also the level of education, skills based on experience and the differences between the type of activities together with their location in the labor market. work.

The dividing line between the conception of a decent wage and the feeling that employers have about it is influenced by how the value of work is conceived for a private or public activity.

Private sector employers see salary as a cost (sometimes up to 70% of their cost base), which affects the effort to maximize profits or remain profitable with the aim of remaining in the market.

Meanwhile, public sector employers still try to reward employees for their skills and performance, despite claims voters may have about timely and quality services from the public sector.

In a discussion based on the market and its functional rules according to demand and supply, we should have such a situation, where the more demand there was for an employee with the skills required by the market, the better the employee would be paid. Meanwhile, the supply of the labor market is shrinking, since what the government cannot implement as a policy, the market and the economy have succeeded in dictating by force. The cost of living increased to levels even beyond the official statistics is affecting the decision of employees for higher salaries, without asking much about keeping a job for a long time. This request is not always related to the compensation or bonuses given by public sector employers, or even in some private sector companies, but also to the working conditions, the relations between the parties, as well as the way work is conceived in these times in which we live.

In addition to the market rules, the state also intervenes through the decisions it takes regarding the fixing of a minimum wage, the change of taxes to the value of work, as well as other regulatory measures to create or not create conditions for a market without informality and with equal opportunities for all.

Even if the above were guaranteed and functional, market Supply and Demand would still play a critical role in directing employment and the payment of labor value based on skills and market demand.

In a market that does not have enough work according to the requirements, with working conditions that are still far from the criteria of the law, also influenced by abusive policies for graduates without training and therefore considered as overqualified workers for a simple job, as and the presence of high informality has conveyed precisely a spirit of low wages, as it has removed the mechanism of competition and meritocracy.

Skills only matter if the market demands them. Compensation does not reflect the employee’s skills, but rather the intersection between what the job requires and what the employee has to offer. So, if the Albanian market does not need products and services of the technology of the time, this means that the skills of an employee cannot be sold and there is a need to emigrate near the market where these skills are sold and manage to reward the intellectual value or the direct value of the employee’s work.

On the other hand, starting from the deformations that have been occurring for many years in the Albanian economy related to not giving equal chances to participate in the redistribution of budget funds, it has resulted in some businesses earning less than their direct competitors. This disparity is influenced by market supply and demand, but is more influenced by political patronage, lack of vision to diversify the economy and increase its competitiveness for the expansion of the small market towards export.

This burdensome environment with deformed contours has directly influenced the lack of development of skills according to market requirements, stimulating more business growth through proximity to corrupt politicians and using business to carry out criminal activities or in direct service of theirs.

The problems of developing the labor market according to the model of decent work based on skills and merits should have been the reason for the existence of many policies and institutions that should implement them. But the policies had to be closely related to meritocracy. The policy being implemented is seen to be dominated by a freeze on promotion and a steady increase in wages based on skills and experience.

This approach has become a normal practice in the public and private sector.

Although Albanian companies control what others pay and try to do the same, it happens that in these conditions as above they find little space to increase the salary fund when they have no incentive or long-term incentive policy to help in the direction of sharing of labor costs.

In fact, performance is important and should be linked to pay. The best performing employees should always get raises or better bonuses, but they may not get the best compensation overall, as some may be “luckier” than them.

Although it seems that the public sector, as well as the private sector, are trying to fix the salary discrepancies that have been going on for a longer time, we must mention the practices of many countries that if it happens that suddenly the market heats up and salaries increase for a set of skills, then the first to suffer are other expenses that will be left aside or overlooked, not benefiting in fact from a qualitative development in function of increased productivity.

It usually happens that neither the administration nor even private companies believe that they can fulfill their objectives and in the meantime, since the salary is the biggest expense for many of these segments, it remains only when the salary is considered as an instrument for managers benefiting from it can be used as a pseudo-reform that results in piecemeal increases in the salary system without deeply analyzing the dynamics and effects. All the above should be part of the dialogue for the new Social Contract, which does not seem to be realized by this current generation of politicians.

A salary should be the result of our long-term efforts to learn and grow and not something to pursue in the short term.