SDE only party against employers' proposed minimum wage rate changes

Coins in a purse (photo is illustrative).
Coins in a purse (photo is illustrative). Source: Karin Koppel

The Social Democrats (SDE) are the only coalition party against the Estonian Employers' Confederation (EEC) proposed plan to change the rate increase of the minimum wage next year. Reform and Eesti 200 said they will not force companies to act.

The EEC plans to go back on an agreement it signed in the spring that said the minimum wage will rise by slightly over €100 in 2024.

But yesterday Arto Aas, head of the EEC, said as the economy is in recession this target should be lowered.

SDE leader and Minister of the Interior Lauri Läänemets said the agreement was partly to eliminate the tax hump.

"They made this agreement with the government when the coalition government was formed," Läänemets said. "The Riigikogu has made decisions according to the word of the employers. Those decisions could have been in part non-existent or different."

Aas said an agreement to raise the minimum wage to 50 percent of the average salary by 2027 will not change. If the rate is changed next year, it can rise by a little more in the coming years.

Social Democratic Party (SDE) chair Lauri Läänemets. Source: Priit Mürk/ERR

But Läänemets does not agree.

"In the last 30 years of the Republic of Estonia, there have been two such wage agreements, and twice the employers have backed out. And in the end, the goals have not been achieved," he said.

The minister said in the spring SDE put forward two proposals: either the government decides on the increase of the minimum wage by itself or it can be agreed together with employers and trade unions.

Läänemets said the government still has the option to raise the rate itself. "I'd like to hope that won't happen," he said.

Estonia 200, Reform Party: Government not going to set a minimum wage

Eesti 200 board member and Minister of Foreign Affairs Margus

also recalled the coalition talks in the spring.

"The Social Democrats wanted to throw out the principle that employers and employees agree on minimum wages and the government plays the role of mediator," said Tsahkna. "And I continue to be very clear that the government is not going to tell businesses or workers what the minimum wage agreement should be."

Margus Tsahkna. Source: Siim Lõvi /ERR

Reform board member and Minister of Defense Hanno Pevkur said the wage agreement must be set by employers and employees.

"It's not really the government's business to participate in the debate, [or] that we have some kind of wish [to do so]," Pevkur said. "Because from a purely economic point of view, you can't go about regulating the labor market in such a way that the government prescribes what the minimum wage is."

Tsahkna also highlighted the poor state of the economy. 

"The state has also led by example and we have frozen public sector pay rises. The private sector is no different," he said.

Läänemets acknowledged the situation is difficult in certain sectors, but said big profits are still made in other areas.

"The sectors that are doing badly are not paying the minimum wage today. In those sectors where the minimum wage is paid, we cannot talk about such a big recession," Läänemets said.

If the minimum wage does not rise according to the target set in the spring, Läänemets thinks that the government's decision to raise taxes should be revised. 

Hanno Pevkur. Source: Priit Mürk/ERR

"I can't imagine what these new solutions might be. Whether it's to make a higher tax on corporations. Or a higher income tax than might otherwise be the case." he said. "I don't know if this is reasonable."

Sikkut: There is no agreement to raise minimum wage by force

SDE member and Minister of Health Riina Sikkut said negotiations between employers and trade unions will only start next week. She said politicians should wait and see what path the discussions take.

"There is a clear political expectation that next year the minimum wage will reach 42.5 percent of the average wage," Sikkut said, adding that she believes the parties involved could stick to this agreement. "I think that if we cannot keep up this pace, it is justified to discuss again at the government level that maybe the government should introduce a minimum wage."

However, the minister also said SDE has a different policy position to Reform and Eesti 200.

Riina Sikkut. Source: Ken Mürk/ERR

"We do not have an agreement that if the SDE partners do not agree on this, then the government will set the wage," said Sikkut.

Central Party board member Jaak Aab said employers and trade unions should be allowed to agree on the minimum wage. 

"It is also understandable that the economy is worse than it looked in the spring," Aab said. "And forcing through a faster wage rise than employers and unions can agree could mean unemployment."


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Editor: Merili Nael, Helen Wright

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