The Union of Free Trade Unions of Slovenia (ZSSS) will be calling on the new centre-left government, which was formed in October 2008, to raise the minimum net wage to at least €500 a month. As it stands, the minimum wage does not ensure a decent standard of living for workers. ZSSS will also be proposing changes to the legislation on the minimum wage or the adoption of a new law. However, the employers argue that the unions’ demands are unacceptable, especially as they come during a time of recession.
Regulation of minimum wage
In Slovenia, the minimum wage is fixed by the Law on the Determination of Minimum Wage (LDMW (47Kb PDF)), adopted on 26 October 2006 (SI0608019I). The LDMW reflects the requirements of the International Labour Organization (ILO) Minimum Wage Fixing Convention No. 131, adopted on 22 June 1970, which was ratified by Slovenia on 29 May 1992. This convention aims to ensure a minimum pay level which enables workers and their families to have a decent standard of living.
The LDMW stipulates that the minimum wage be increased annually on 1 August, in line with forecast rises in consumer prices, which the government adopts as a basis for the preparation of the national budget. The amount of the minimum wage is established on the basis of this forecast and after the Minister of Labour, Family and Social Affairs consults with the social partners.
Calls for higher net minimum wage
On 29 October 2008, the Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS) announced at a press conference that it would be proposing that the minimum net wage be raised to at least €500 a month after the formation of the new government. At present the minimum wage does not ensure a sufficient lowest pay level. Moreover, the union will be proposing a change to the LDMW, or alternatively the adoption of a new law on the minimum wage. While ZSSS is aware of the difficulties raised by the recession, it believes that during such crises, the state should show its social character, based on the principles of the social welfare state.
Reasons for raising the minimum wage
The President of ZSSS, Dušan Semolič, explained that after the annual rise in August 2008, the minimum gross wage reached €589.19, which amounted to about €424.90 in net wages. According to the Statistical Office of the Republic of Slovenia (Statistični urad Republike Slovenije, SURS), the monthly at-risk-of-poverty threshold for a one-person household increased from €466 in 2006 (data for 2005) to €495 in 2007 (data for 2006). However, this threshold has definitely increased since then due to the high inflation levels, especially in the first half of 2008.
Therefore, the minimum net wage is well below the poverty threshold. As a result, workers receiving the minimum wage are not guaranteed a decent, or even a minimum, standard of living for themselves and their families. People in this category most probably belong to the working poor – that is, those who are employed but whose household disposable income is below the poverty threshold, which is 60% of the national median income. Moreover, when these workers retire, they will become even poorer as their pensions will be lower than the minimum wage.
Minimum wage statistics
When the minimum wage was introduced in 1995, it was rising either at a faster or equal pace as the average gross pay, since it was adjusted according to the rise in inflation and partly in line with the rise in productivity or gross domestic product (GDP). The goal was that the minimum wage should gradually reach 58% of the average gross pay in the manufacturing sector. At present, under the LDMW, the minimum wage is no longer adjusted in line with the rise in productivity or GDP.
According to data from the Household Budget Survey of the SURS, 20% of households with the lowest consumption expenditure spent 22.9% of their budget on food and non-alcoholic beverages in 2006, while 20% of households with the highest consumption expenditure spent only 16.6% of their budget on the same (calculations by the Institute of Macroeconomic Analysis and Development (Urad za makroekonomske analize in razvoj, UMAR)). According to ZSSS, in 2007 the prices of food and non-alcoholic beverages increased by 12%, which affected the poorest sections of the population. However, the minimum wage was only adjusted by 9.2%.
Minimum wage drops in relative terms
The minimum wage has therefore been dropping in relative terms. In the period from August 2004 to August 2005, the minimum gross wage reached 43.1% of the average gross pay. In the same period between 2005 and 2006, it dropped to 42.9% of average gross pay. In the period between 2006 and 2007, if fell further to 41.5% and again, between 2007 and 2008, to 39.7%.
More workers on minimum wage
The number of workers receiving the minimum wage is also increasing and is the greatest in the textiles, construction and retail sectors. According to data issued by the Agency of the Republic of Slovenia for Public Legal Records and Related Services (Agencija Republike Slovenije za javnopravne evidence in storitve, AJPES), and as quoted by ZSSS, 2.5% of workers received the minimum wage in 2006 and 3.4% in 2007.
Calculation of pay
In Slovenia, the pay determined by an employment contract is composed of the basic pay, along with the parts of the pay determined by job performance, difficult working conditions, length of service and other extra payments as defined under Article 126 of the Law on Labour Relations (LLR) (SI0206101N). A constituent element of the pay is the remuneration for business performance, if laid down by a collective agreement or employment contract. The problem is that, under the LDMW, the minimum wage is not the minimum basic pay of the lowest paid workers, but includes all of the aforementioned additional payments. When the basic pay of a worker is lower than the minimum wage, they usually receive some extra payments in their wages to reach the level of the statutory minimum wage. Furthermore, regardless of how hard they work, they still only continue to receive the minimum wage.
For these reasons, ZSSS will be calling on the new centre-left government to raise the net minimum wage to €500 a month.
Problem of pay scales
ZSSS is aware that the higher minimum wage will aggravate the problem of pay scales determined by the sectoral collective agreements in the private sector. However, it argues that this should provide an incentive to change the system of pay determination used in these agreements. All of the trade unions have been striving for this change for many years, while the employers have rejected it. The President of the Confederation of Trade Unions of Slovenia Pergam (Konfederacija sindikatov Pergam Slovenije, Pergam), Dušan Rebolj, proposed that the minimum wage should be the lowest possible basic pay of the lowest first ‘tariff class’ in all sectoral collective agreements.
The lowest possible basic pay determined by sectoral collective agreements is meant to be a safeguard for the basic pay determined by individual employment contracts. All collective agreements for the private sector lay down pay categories of jobs – usually nine – on the basis of their requirements, so that differences in pay relate to differences in job requirements. These job requirements are determined on the basis of the level of education required to perform a certain job. The nine categories are known as ‘tariff classes’. The first tariff class – involving simple tasks or work – represents jobs that do not even require a primary education and have the lowest starting pay. The ninth tariff class – comprising exceptionally important and the most demanding work – represents jobs that require doctoral degrees as a rule. The lowest basic pay is determined for each tariff class. The problem is that the statutory minimum wage is higher than the first three or four lowest rates of the lowest basic pay, which, for this reason, are useless as a safeguard for the basic pay.
Reaction of employers
According to the online weekly publication Slovenia News, the Chamber of Commerce and Industry of Slovenia (Gospodarska zbornica Slovenije, GZS) wrote in a press release that the trade unions’ demands were unacceptable, especially as they came in a time of recession. The rise of the minimum net monthly wage to €500 – the equivalent of €705 in gross monthly wages – would mean an increase of 19.6%.
Furthermore, amendments to the existing LDMW would lead to extensive changes to collective agreements and to an increase in labour costs, which are already above the EU average. The increase would, in turn, cause a change to the entire pay system in the private sector.
Commentary
The Prime Minister of the new centre-left government, Borut Pahor, has highlighted that social dialogue will be one of the most important tools of the new government for dealing with the current economic crisis. However, a long and difficult process of tripartite social dialogue can be expected before consensus is reached on the issue of the minimum wage amount.
Štefan Skledar, Institute of Macroeconomic Analysis and Development