Tag Archive for Minimum wage

Baltic Region Outlook (BRO) – Estonia

Baltic Region Outlook (BRO) – a weekly economic bulletin in English language.  In this week’s Baltic Region Outlook (BRO)  edition – Estonia

Main news topics:

  • Bad weather in Spain pushes up vegetable prices
  • Lithuania plans to introduce minimum needs basket
  • New alternative fuel vehicle registrations in 2016

BRO: Economic Insights

22 out of 28 EU Member States have national minimum wages. Only 6 countries do not have national minimum wages: Austria, Cyprus, Denmark, Finland, Italy, Sweden.

It appears, as if there were three blocks of countries: with minimum wage up to 500, between 500 and 1000 and over 1000 euro. All three Baltic states are in the first group, with the minimum wage up to 500 euro monthly. The gap between the highest and lowest minimum wage payed is between Luxembourg (1998.59) and Bulgaria (235.2) and the ratio is 8.5:1.

If the price differences are taken into account, and minimum wages are expressed in purchasing power standard (PPS), minimum wages in countries with relatively lower prices become relatively higher, whereas minimum wages in countries with relatively higher prices become relatively lower, as the figure 2 shows.

Once the minimum wage is expressed in PPS, the difference between the highest and lowest paid minimum wage shrinks to ratio of 3.3:1

As for policy-making the minimum wage and median wage ratio is of importance, as the economists suggest not to set the national minimum wage higher than 50\% of median wage. Higher minimum wage could damper the demand for labour and thus decrease the economic growth. Unfortunately, Eurostat provides the median data only for the year 2014.

Note: Eurostat data of minimum wages does represent only the gross monthly minimum wages and the true cost of labour may be different due to different additional taxation (e.g. social contributions, income tax paid by employer etc.)

 

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