Trade unions chief: Minimum wage should be safe, await forecasts ({{contentCtrl.commentsTotal}})

Peep Peterson on Tuesday's "Esimene stuudio". Source: ERR

While the minimum wage in Estonia is not likely to fall in the coming months as a result fo fallout from the coronavirus pandemic, since average wages may fall, this is at least theoretically possible in the coming months, says Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit) head Peep Peterson. A clearer picture will emerge through summer and fall, he added.

Appearing on ETV politics discussion show "Esimene stuudio" Tuesday evening, Peterson said the unions are eagerly awaiting the Bank of Estonia's average salary forecast, which would be likely to impact the minimum wage level.

"We don't expect average salaries to rise much, so the minimum wage is unlikely to rise much next year [either]. /.../ I would not venture to predict that the average pay packet will fall, but if it does, it will be a pretty tense situation for us to digest, and to see how we will come out of it," Peterson said.

The minimum wage – currently €584 per month - has never fallen in Estonia before. 

According to Peterson, a fall is theoretically possible, but he finds it unlikely. 

"This has never happened, and I do not see any reason to predict a decline in the average wage in June," he said.

Interesting applicants for wage support

Peterson noted that interest in the government's wage support package, channeled via the Unemployment Insurance Fund (Töötukassa), which Peterson is also chair of, and declared in response to the coronavirus pandemic, had come from some interesting quarters.

One example was applications from law firms, which he was at a loss to fully explain.

"It is very interesting for me to know what happened (during the crisis) with law firms. There were no negotiations during the crisis situation, no legal agreements, no disputes. My impression is that this is a growth area during crisis situations, so it is definitely very interesting."

The general minimum wage agreement reached by the unions with employers for a two-year period involves a formula linked to the average wage in Estonia. 

This spring's economic crisis means that the average wage will rise very little, if at all, and a decline is not out of the question.

The government's wage subsidy program – intended for firms whose business suffered directly as a result of the pandemic and providing up to 70 percent, or a maximum of €1,000, per employee – was extended to June having initially been set for only a two-month period (i.e. April and May).

Peterson said he thought there would be no further extension beyond June, adding the overall unemployment fund was under a great deal of pressure as a result of the pandemic.

"The wage subsidy program was intended to be temporary. The overall social net was perhaps for six months of assistance. We can offer three plus one [months of support] as of now, but in June, the unemployment fund's ability to provide such a service will run out.

"At the moment, the Unemployment Insurance Fund is no longer putting money into the [wage subsidy] reserve; we have to keep the money in order to pay unemployment insurance benefits."

Wage compensation generally reached the right beneficiaries

As a whole and despite the law firms' interest noted above, for Peterson, the wage compensation offered by the Unemployment Insurance Fund had mostly reached the right place during the crisis, I.e staff payrolls. 

"We've noted that it has been ending up in people's pockets, though not 100 percent. There are also schemes where an employer knows how to obtain funds from it, but at the moment we can see that the scheme has helped keep jobs open that would otherwise have been lost," he said.

Of the €860 million in the Unemployment Insurance Fund's reserve at the beginning of 2020, approximately €330 million is to go on wage subsidies, he said.

The remainder will not be touched for this purpose; it will be left for the performance of basic functions.

Peterson said the worst-case scenario for the unions would be longer term, perhaps after three years from now.

"Fortunately, we have time to take out loans, to change the payment rates. This presupposes that we understand how deep this crisis is. The bigger picture will come to us during the summer, or maybe in the autumn. We have a definite picture for three years, so we can afford to wait for the full picture and then make decisions."

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Editor: Andrew Whyte

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