The Estonian Employers' Confederation (EEC) said on Wednesday it wants to change an agreement it signed in the spring and lower the rate the minimum wage will rise by in 2024.
In the spring, employers and trade unions agreed that by 2027 the minimum wage would rise to 50 percent of the average wage. A rate of increase was set which states that it will rise next year from 39 percent to 42.5 percent.
A forecast from the Bank of Estonia suggests this would mean an increase of approximately €100 to €827.
Aas, CEO of the EEC, said the agreement was signed under a great deal of political pressure.
"But certain risk scenarios were also written into it, so that if the economy is in a downturn and unemployment is rising, then it is also acceptable to temporarily reduce the minimum wage's rate rise," Aas said.
He said these risks have materialized. The bank is anticipating the economy with contract by 2.2 percent this year.
"If companies are not doing very well, if sales fall, if revenues fall, it is very difficult to raise wages," Aas said. "These costs and revenues should still be in sync."
Following the current target, the minimum wage would rise 14 percent next year. Aas said this could be reduced a little.
"We are probably still talking about a minimum wage increase of 10 percent or more," Aas said. "This is significantly higher than next year's projected inflation, which means that the purchasing power and economic situation of the lowest wage earners should in any case improve."
Jaan-Hendrik Toomel, head of the Estonian Trade Union Confederation, disagreed with Aas.
He said there is no need to go back on the agreement. Toomel said the recession is visible in this year's and last year's indicators.
"But we will start to agree on a minimum wage for the next year, 2024. And the projections for 2024 do not show any further decline, there is already a slight increase," he said.
The Bank of Estonia forecasts 1.4 percent economic growth for next year. Aas highlighted that in spring it was predicted that the economy would have picked up.
"We can hope that all this will happen next year, but we cannot be a hundred percent sure," Aas said. "We have been more optimistic than reality. And we have to be quite cautious about next year, looking also at what is happening in our nearest neighbors."
At the same time, Aas said that employers do not plan to withdraw from the agreement's main aim.
"If we make a slightly smaller increase one year, it will be offset the next year or the year after," Aas promised and emphasized that this is why the growth rate for the next year cannot be very small.
However, the trade unions believe the opposite is true. Toomel thinks it would be right to raise the rate higher than anticipated.
Editor: Mari Peegel, Helen Wright