Lithuanian Free Market Institute: minimum wage increase will not bring anything good

  • 2012-07-09

VILNIUS - The increase of the minimum monthly wage (MMW) in Lithuania will not resolve the problems of those who receive it and will only burden small-scale business and hinder the newcomers' access to the labor market, said President of the Lithuanian Free Market Institute Zilvinas Silenas.

According to him, Lithuania often overestimates the size of the MMW. Silenas says there are other economic decisions that would be more efficient in improving the well-being of those in need.

"This decision (of the Government to push up the MMW to 850 litas (246 euros) - ELTA) would be viable if some other long-awaited changes were made too, first of all, if the Labor Code was updated. Now we have a growing wage but the Labor Code remains unchanged: old, stiff and preventing business development," he said in an interview with ELTA.

The expert says that no one argues that it is hard to make the ends meet if one receives a minimum wage. However, the aim of the MMW is not about ensuring a minimum means of subsistence. The MMW is rather a state provided minimum price for job that an employer had to pay to an employee, he claims.

"If we imagine the MMW as a sum of money one has to live on, then we should all agree that this amount has to depend on how much money one actually needs rather than how much product one creates. In other words, for example, parents with children should earn more than childless parents or parents to 5 children should get more than parents to one child and so on. This comparison is just to show that we should not delude ourselves into thinking MMW is a minimum means of subsistence. This is not so. This is just a figure the government made up out of nothing," the expert said.

In Silenas’ opinion, the main outcome of the MMW increase will be a harder entry to the labor marker rather than an actual improvement of well-being. Those who are searching for job or seek to re-skill will only find it more difficult.