Minimum wage rises across the CEE. Populism, economic growth or structural changes?

Recently minimum salaries of CEE countries have been growing faster than economic growth statistics would indicate.

Minimum wages in selected CEE countries 2014-2017(Euro/month) 2014 2015 2016 2017* Minimum wage rise since 2014
Bulgaria 174 EUR(340BGN) 183 EUR(360BGN) 194 EUR(380BGN) 214 EUR(420BGN) 23%
Czech Republic 314(CZK 8,500) 340(CZK 9,200) 360(CZK 9,900) 407(CZK 11000) 29%(11% last year)
Estonia 355 390 430 470 32%(9%)
Hungary 324(101,500 HUF) 335(105,000 HUF) 354(111,000 HUF) 407(127,650 Huf) 25%(15%)
Latvia 320 360 370 380 19%
Lithuania 300 325 350 350* 16%
Poland 380 (1,680  PLN ) 395 (1,750 PLN ) 418 (1,850 PLN) 450(2000 PLN ) 19%(8%last year)
Romania 188(850RON) 216(975RON) 276(1250RON) 298-320* (1350-1450 RON) 70%
Slovakia 352 380 405 435 23%(7.5%)
Ukraine 43(1218 UAH) 43(1218 UAH) 57(1600uah) 114(3200 uah) 265%(100%)

There seems to be many unrelated reasons for the raises. The biggest reason seems to be the demographic situation of the region coupled with the outflow of workers to wealthier EU countries. Most countries started experiencing labor shortages among falling unemployment and apparently the official unemployment figures aren’t completely reliable.

In case of most countries the year 2017 will see the most significant increases of minimum wage in recent years. One of the reasons for the increase is probably populist change in 2015-2016 in western politics that has so far seen electoral surprises in USA and UK but also electoral change in Poland (November 2015) along Bulgarian and Moldovan elections all of which seem to oppose the version of politic and economy based on western middle class values. One of the very interesting examples is Romania, where minimum wage changes seemingly went hand in hand with the corruption scandals that the government had to face and increased 70% over the 4 years including 2017 but another reasons could be also that through these years the economic growth was among the highest in Europe.  The biggest surprise came as Ukraine raised the nominal minimum wage by 100% in November 2016. The wage level deteriorated because of the political situation in the country and the devaluation of the currency. The government in a surprising move raised the wage but the reasons seem to be populism among the raising discontent and falling governmental legitimacy. It would be a reason for further study but the real minimum wage in Ukraine compared with the pre-crisis  level is gonna be lower even after the 100% nominal increase this year.

In Hungary the minimum wage is supposed to increase by 15% in 2017, and by 25% for skilled workers. This is supposed to be continued in 2018 8% and 12% respectively.In  October 2016 Czech Prime Minister Bohuslav Sobotka said on his Twitter account that the minimum wage should rise even further in the future after the sharpest increase(by 11% in 2016). In Poland the government went beyond the trade unions expectation raising the minimum salary by 8%  which is a third more than the trade unions were expecting

Furthermore, more countries started introducing hourly minimum wage which is supposed to protect wage laborers and simply make circumvention of minimum wage laws, thus all Visegrad countries have hourly minimum wages by now that have been introduced in recent years.

Jan

Jan is the main contributor. Likes writing, politics and some things that nobody else would ever find interesting.

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