The legal minimum wage level has over the years been used as the most direct policy instrument of governments to influence wage levels at the bottom of the distribution mechanism.<\/p>\n
But even though minimum wages are considered as a policy action to (a) ensure a fair wage and counterbalance the negative effects of market power (b) pay for work done; (c) coping with the increase in the cost of living, as well as (d) the increase in the income of social contributions, influencing the increase in tax compliance, on the other hand, the minimum wage has entered as a culture in the process of being created for the respect of labor rights and labor contracts in respect of decent work.<\/p>\n
This attention is part of a growing consensus among policymakers and workers that minimum wage increases have had a positive effect on low incomes but have also limited negative effects on employment.<\/p>\n
Moreover, in the conditions of a labor market in Albania where the power of businesses to set wages unilaterally is very widespread, it constitutes a push that is used by the government as one of the efficient ways of imposing decent work and wages higher has strengthened and the argument in the interest of the government’s policy for increasing the minimum wage three times within the time frame 2022 – 2023 [1]<\/a>.<\/p>\n Given the frenzy of inflation not seen since the early 1990s disproportionately hitting the most vulnerable, low-income households, minimum wage increase may become an even more valuable tool to protect the living standards of low wage earners, aiming to simultaneously keep inflation and public finances under control.<\/p>\n However, beyond the government’s decisions to increase the minimum wage, other means and resources must be mobilized to protect the income of families in need, from negotiations with and between social partners for benefits at work, to improving the labor market, as well as social transfers, but of a temporary nature.<\/p>\n Even if these elements are met, workers still cannot absorb the costs of inflation alone. But companies can’t either.<\/p>\n The latter have problems and unhealthy management of their costs.<\/p>\n Cost management would enable more effective use of available resources in the form of labor, materials, and machinery.<\/p>\n Keeping these elements of business costs within predictable limits would help prepare development and expansion plans and execute them successfully.<\/p>\n However, the Albanian market has a weak economic dynamism, which can be seen in the low average lifespan of businesses. Few businesses manage to survive in the market and go through the period of a strengthened and consolidated business.<\/p>\n Many businesses do not achieve a reasonable profit not only because they do not apply the basic concepts of cost and defined prices, but because of the problems that the Albanian market carries, as a small market, with high evasion, informal money in excess and lack of competition honest.<\/p>\n The situation is more serious in the service business because each service performed has a different cost. It is difficult to calculate costs for services and quote a price that is competitive and profitable. Without realizing what they are doing, some business owners set their selling price below their total cost.<\/p>\n This may result in a loss. Occasionally, small, and medium-sized business owners who do not have full knowledge of the cost try to compensate by setting extremely soaring prices. The result is that the business is not competitive in price and does not attract enough customers to continue.<\/p>\n Mostly they benefit by managing their evasion, non-implementation of the regulatory framework for trading and service conditions, non-implementation of contractual conditions and maintaining a quality and standard of products and services below the acceptable market level.<\/p>\n Meanwhile, the aggressive policy of the Albanian government, which in the period 2022-2023 increases the minimum wage by 25%, has given an incentive to another wave of inflation and distortions in the market.<\/p>\n In the current situation of implementing the government’s decision to increase the minimum wage, the business can increase the selling price of its services or make a necessary reduction in its fixed and other variable costs to absorb the increase in wage costs and benefits.<\/p>\n An increase in the minimum wage adds to the overall costs of operating a business, which can result in a higher price being passed on to consumers. Over time, this could translate into a higher cost of living and more minimum wage increases. So, an increase in business operating costs produces even further rising inflation.<\/p>\n However, in fact, even though it seems necessary that the minimum wage should be increased, since it is the lowest in the region, it needs to be increased by fulfilling the criteria through which it can be considered as a request and decision-making based on them.<\/p>\n The minimum wage limit is determined by factors such as the poverty line, prevailing wage rates determined by the Labor Force Survey, and socio-economic indicators (eg inflation, employment figures, Gross Regional Domestic Product, among others), which ensures better protection of workers. In other words, according to the International Labor Organization (ILO) [2]<\/a> “Minimum wage is defined as “the minimum amount of remuneration that an employer is required to pay employees for work performed during a certain period, which cannot be reduced by collective agreement or individual contract”.<\/p>\n But has the government considered these?<\/p>\n Has he conducted an in-depth study regarding this decision-making?<\/p>\n These questions need to be addressed knowing that out of more than one hundred countries, including 22 EU member states, which implement a policy based on the national minimum wage\u00a0[3]<\/a>, Albania is also one of the European countries (non-EU member), which has an official minimum wage [4]<\/a>.<\/p>\n This perspective is introduced in this analysis, as just two decades ago, the common view was that minimum wages did more harm than good.<\/p>\n The prevailing view among economists was that minimum wages interfered with the normal functioning of the labor market and led workers to the tendency to claim a minimum payment value even without making the corresponding contribution through their work, which in some cases of crisis could even affect a decline in employment.<\/p>\n Now, when the minimum wage is an instrument of politics, which is being used often, the debate about the method and formula of calculation should be more extended with actors of society and economy. On the other hand, it is necessary that the argumentation of the decision for the increase is declared to be based on some calculations, which can be carried out by government institutions, or outside it, but which have an analysis of the feasibility of the policy of reforming the system of salaries in Albania.<\/p>\n Among the many methods of setting minimum wages, many countries now rely on a senior expert body to advise governments on the appropriate rate of change.<\/p>\n Minimum wage setting regimes that include a body of experts independent of governments can help build support between employer and employee groups.<\/p>\n Dialogue with local experts is a must, as the increase in the minimum wage has a direct impact on changes in the average wage.<\/p>\n Although the minimum wage, which changes in reality, aims at low wages and postponement of poverty, the decision to change its threshold should have transparency as far as it is related to the use of a formula for determining the minimum wage, but also for the analysis cost and benefit for employees, for businesses and for the state budget.<\/p>\n A decision in conditions of surprise, or a rather short time and without consultation, in addition to creating a non-cooperative climate leaves little flexibility to respond to changing conditions of the labor market.<\/p>\n When the minimum wage is set by the government rather than by a formula or with the advice of a third party, there is a risk of it being set on political rather than economic grounds.<\/p>\n Comparable evidence on the effectiveness of different approaches is almost impossible to obtain, and many influences other than the minimum wage are at play.<\/p>\n According to the ILO, the minimum wage can be fixed in many ways, including giving the force of law to the provisions of collective agreements.[5]<\/a><\/p>\n <\/a><\/p>\n Collective agreements can be a tool to fix minimum wages. However, there are only a few countries that rely exclusively on collective agreements to set the minimum wage.<\/p>\n <\/a><\/p>\n These are countries where collective agreements cover over 90 percent of employees. In most countries, the coverage of collective agreements is insufficient to ensure the protection of minimum standards for most workers. Therefore, in many countries, governments have adopted minimum wages in addition to those set by collective agreements.<\/p>\n <\/a><\/p>\n Although our country is not in the conditions of a widespread culture of collective agreements, in the legal minimum wage, the government must make every effort to ensure full consultation and, as far as possible, direct participation, based on equality, of social partners in the creation and operation of minimum wage systems.<\/p>\n <\/a><\/p>\n To be effective, such consultations should be carried out in the context of open social dialogue and held before decisions are taken by public authorities.<\/p>\n <\/a><\/p>\n The minimum wage determined by the government also carries responsibility for the standard of living, as it must ensure not only life insurance, but also the preservation of the efficiency of employees through salary income [6]<\/a>.<\/p>\n In this discussion, it is the vital minimum that determines the level to which the minimum wage should represent other expenses that include a standard of living based beyond the effectiveness that the work brings to the activity\/workplace of the employees.<\/p>\n In the post-pandemic period, as well as in the situation of significant inflation in the cost of living, there has been a greater “appetite” both among the public and among politicians for increasingly higher minimum wages in various European countries.<\/p>\n But, because each country has specifics and policies adopted and implemented at various levels than the other, then minimum wages should be reviewed regularly to ensure that they maintain their usefulness as a policy instrument.<\/p>\n High uncertainty and slowing economic growth suggest caution in raising minimum wages to adjust, at least partially, the existing level of the minimum wage to a level that protects those workers who are most exposed to price increases.<\/p>\n However, it is important to carefully consider both the economic and social effects of minimum wage adjustments and to consult with social partners and other stakeholders, as trade-offs can be reinforced by uncertainty, a tight labor market and inflation. .<\/p>\n In such a context, the promotion of minimum wage adjustments needs transparent and predictable decisions for both business and workers is essential.<\/p>\n To be most effective, it is essential that minimum wage policy is coordinated with tax and benefit policies to ensure that increases in the value of the minimum wage translate into higher wages, limiting increases in labor costs for employers.<\/p>\n This is even more important now!<\/p>\n <\/p>\n [1]<\/a> The third increase of minimum wage to the level of 40 thousand ALL per month has not happened, but it has been declared that it will be decided within a few weeks of the beginning of 2023 https:\/\/www.youtube.com\/watch?v=lz-2KM7G2yE<\/a><\/p>\n [2]<\/a> https:\/\/www.ilo.org\/wcmsp5\/groups\/public\/—ed_norm\/—relconf\/documents\/meetingdocument\/wcms_235287.pdf<\/a><\/p>\n [3]<\/a> https:\/\/ec.europa.eu\/eurostat\/statistics-explained\/index.php\/Minimum_wage_statistics<\/a><\/p>\n [4]<\/a> https:\/\/ec.europa.eu\/eurostat\/statistics-explained\/index.php?title=Minimum_wage_statistics<\/a><\/p>\n [5]<\/a> https:\/\/www.ilo.org\/global\/topics\/wages\/minimum-wages\/setting-machinery\/lang–en\/index.htm<\/a><\/p>\n