Employers' Confederation proposes minimum wage increase

Estonian Employers' Confederation (ETTK) managing director Arto Aas.
Estonian Employers' Confederation (ETTK) managing director Arto Aas. Source: ERR

The Employers' Confederation made a proposal on Wednesday to the Confederation of Estonian Trade Unions to increase the minimum wage to 8 percent, Arto Aas, head of the Employers' Confederation, said.

"The Employers' Confederation made a new proposal today. While it was previously at seven percent, as a demonstration of good will, we bumped the growth of minimum wage up to eight percent, which is notably faster than the growth in the average wage and also faster by severalfold than economic and productivity growth," Aas told BNS. 

If the proposal is approved, the minimum wage would increase to €583.2 next year, instead of the €578 on which the Employers' Confederation and the Trade Unions' Confederation agreed in August.

"Sadly, trade unions refused to accept this offer, which is difficult to comprehend from a rational perspective -- if we have already agreed on seven percent, why isn't eight percent good enough anymore? Particularly in a context where all latest economic forecasts have become more meager and the economy is about to face a cooldown," he said, adding that the rejected proposal has prompted for the parties to seek the help of a public conciliator.

Aas said that the trade unions keep stressing their demand that the minimum wage should account for no less than 40 percent of the projected average wage, which would total at least €600; however, the framework agreement between the social partners includes altogether three criteria.

In 2017, employers and unions concluded an agreement to establish the minimum wage in the future based on the principle that the basis of the rise in the minimum pay is two times the rate of increase in productivity in the year for which the rise in the minimum wage is being agreed. The upper limit of the rate of growth is two times the forecasted real economic growth and the minimum at least 40 percent of the forecasted average gross wage based on the Bank of Estonia summer forecast.

The economic forecast need not be taken into account if the average wage growth exceeds the real growth of GDP by twofold or of the economy has been in decline for four consecutive quarters.

"We are in the top part of the negotiation scale that favors trade unions as it is. What remains unclear is how far they are interested in taking this," Aas said.

The possibility that the agreement will not be achieved with the help of the public conciliator and that the government will be tasked with making the decision for the first time over 20 years would be unusual and bad practice, Aas said. The Center Party, senior partner of the government coalition, has supported the principle that the minimum wage should account for at least 40 percent of the average projected gross monthly income in the short perspective and over 60 percent of the median wage in the long run.

"Let's hope it won't go as far as that. Obviously, it's really easy for politicians to distribute money that doesn't belong to them and score points in popularity. Meanwhile the state itself is incapable of raising the salaries of officials, teachers, police officers and rescuers next year," Aas, who was elected to the Riigikogu on the Reform Party's ticket in spring, but gave up his seat, said.

Public conciliator Meelis Virkebau told BNS that he is only acquainted with the developments in the minimum wage talks through the media and neither of the social partners have submitted any applications for launching labor dispute proceedings.

"When [the application] comes, I will acquaint myself with the relevant materials and meet separately with the employers and the trade unions and then hold a join conciliation meeting, by which time proposals for reaching an agreement will also have been prepared," Virkebau said.

He noted that hopefully, the social partners will reach an agreement, be it with his help or on their own. The differences between the two parties' demands are not excessive, he said.

Peep Peterson, leader of Estonian Trade Union Confederation, told BNS that the minimum wage agreement is expected to be reached by the end of November.

Delegations of the Trade Union Confederation and the Employers' Confederation in late August reached an agreement to increase the minimum wage by €38 a month in 2020. According to the negotiated scheme, starting from Jan. 1, the minimum wage will be €578 per month, or €3.44 per hour.

Currently, the minimum rate of monthly salary for working full-time in Estonia is €540, while the minimum rate of hourly salary is €3.21.

The nationwide minimum salary is agreed upon by social partners, that is the Employers' Confederation as the representative of employers in Estonia and the Trade Union Confederation as the representative of employees.

If the social partners are unable to reach an agreement with the help of the public conciliator, next year's minimum wage may for the first time over 20 years be decided by the government.


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Editor: Helen Wright

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