Unions: Minimum wage level affects half of Estonia's wage earners

Euros. Source: Alexandr Podvalny/Pixabay

This June, 3 percent of Estonia's workforce, or nearly 18,000 people, earned the national minimum wage — but the wages of a full half of the country's workers are affected by the minimum wage level as well, according to the Estonian Trade Union Confederation (EAKL).

EAKL communications director Jaan-Hendrik Toomel told ERR that last year they had investigated exactly who is impacted by the minimum wage and how.

"The minimum wage has a pretty direct impact on wage levels up to the median wage," Toomel said. "In other words, we're saying €1,300-1,400 [monthly] wage earners are equally affected. When wages increase at the bottom end, the next ones must be increased as well."

Regarding the question of potentially increasing Estonia's minimum monthly wage, which is up for discussion during ongoing coalition talks, Toomel said that the median wage splits the labor market down the middle, and the size of the minimum wage impacts the entire lower half.

"In other words, broadly speaking, half of Estonia's workforce, actually," he said. "That has a huge impact."

According to the Toomel, the minimum wage is going to increase regardless — to €700 or beyond. "If you look at what other wages are doing and then add to that high inflation and the labor shortage, then the minimum wage is still most likely going to go up," he said.

Last week, the Reform Party, the Social Democratic Party (SDE) and Isamaa, whose coalition talks are ongoing, reached an agreement to increase the basic exemption, i.e. tax-free income limit, to €654, i.e. the size of the current national minimum wage.

Toomel is sure that the minimum wage will not remain below that point next year. "Our proposal was €700," he added, "But €654 is definitely better than the €500 from five years ago."

Some sewers not even earning minimum

According to Mait Saarts, board chairman at Estonian clothing manufacturer Hansmark, the minimum wage should definitely be higher rather than lower.

"Right now it's an agreement between employers and employees, but actually the Estonian government should be imposing this," Saarts told ERR. "This is why this Second Estonia emerges. If you employ someone and can't pay them a dignified wage, then no such job is needed in Estonia. That person will just go elsewhere in the sector. These jobs can't be maintained by force."

Saarts said that sewing work is underpaid due to competition from China and India.

"It is very difficult to find sewers, as this is piecework," he said. "In some companies it's also the case that at their piece rates and working normal hours, one doesn't even earn the minimum wage. And some of these people give up. If this industry segment can't be sustainable, then it will simply disappear. Harsh as it is."

It would be reasonable for a sewer to earn €800-900 a month, he added.

"It's often the case that 20 percent earn the minimum wage, but the rest, maybe better sewers, who are fast, and who do more difficult operations, earn, say, €1,000 [a month] and more," the board chairman said. "That may be a little sewing workshop that has remained in some small village; there aren't any other employers, and then this place can't pay a higher wage. They're existing purely on reserves."

Andrus Särev, CEO of clothing manufacturer Ally, told ERR that raising the minimum wage always has some kind of impact. "If you start raising [it] from the bottom end, the top end rises as well," he said.

Hotels hoping to legalize work bites

Estonian Hotel and Restaurant Association (EHRL) board chairman Ain Käpp told ERR that hotels are currently faced with a difficult situation, having to repay uncomfortable loans and deferred payments from the past two years.

"I'm positive that in most places we're already paying people significantly more than the minimum wage," he said.

"But there are distinctions here as well," he continued. "For example, we are the first employer for a lot of young people, which in very many places pays the minimum wage initially, until they've gained some kind of skills. We ourselves have said that the period in which someone is learning the job should be somewhere around nine months. If they already have the skills, then there's no problem going beyond the minimum wage."

Another concern is whether, going forward, companies will be able to manage to attract young people to the labor market on top of school. According to Käpp, one hindrance right now is the inflexibility of Estonia's Employment Contracts Act.

"We've also provided several proposals regarding how to legalize so-called 'work bites' aimed specifically at young folks," he said.

According to Tallink Hotels board member Ave Svarts, it's impossible to recruit anyone at minimum wage from the current labor market, as wages in the hotel sector have grown.

"The lowest wage at our hotels is also higher than the minimum wage — amid the current labor shortage, it wouldn't even be conceivable any other way," she told ERR.

Svarts likewise said that increasing the minimum wage impacts more workers than just those earning the minimum.

"It also fuels [the growth of] other lower wages as well," she said.


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Editor: Aili Vahtla

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