Slovenia’s minimum wage is one of the highest among the EU Member States. Despite average wages remaining stagnant, in Slovenia the minimum wage increased to 50% of the average wage in 2012. Following a review by the European Commission stating that the minimum wage needed to be reviewed to help reverse losses arising from cost competitiveness, the government promised to make changes in 2013, in dialogue with social partners. However, the government later said it would not make changes for the time being.
Background
Slovenia’s minimum wage is one of the highest among EU Member States. While average wages remained stagnant, the minimum wage increased to 50% of the average wage in 2012. The In-depth review for Slovenia (665 KB PDF) published by the European Commission in April 2013 stated that the minimum wage should be reviewed to help reverse cost-competitiveness losses.
The previous significant loss was in March 2010, when the minimum wage increased from €597 to €734 per month (SI1209011I, SI1209011I), an ill-timed rise given Slovenia's rising unemployment. At the time, the number of recipients of the minimum wage more than doubled.
The 2010 increase also coincided with a period of economic slowdown and interrupted the ongoing deceleration in wage growth. The increase was exceptionally high, not only compared with developments in the minimum wage over the previous decade, but also in the context of average yearly increases in inflation and labour productivity over the same period.
The minimum wage was pushed well above the lowest basic wages negotiated in some sectoral collective agreements (SI1302031I), even for tasks requiring secondary education. At the beginning of 2011, 2012 and 2013, the minimum wage was adjusted in line with the previous year's inflation rate, resulting in a further increase of 6.7%, to €784 in 2013 (SI1301031I).
In 2011, Slovenia's minimum wage workers were among the most expensive in the EU compared with average wage workers, measured both in gross terms and by labour costs. The high level of the country's minimum wage is thought to have had a significant negative impact on employment and delayed employment recovery.
Poverty and unemployment
Although the minimum wage is below the relative poverty threshold, the risk of poverty among the employed is low. The net income of minimum wage workers is not sufficient to reach the relative poverty threshold (60% of median equivalised disposable household income).
However, the net income of minimum wage workers in Slovenia is among the highest in the EU when compared with average-wage workers. The rate of those at risk of poverty is low in Slovenia compared with in other EU countries, including among workers who only have primary level education who tend to be low-paid. Given that the main cause of poverty is unemployment, increases in unemployment as a result of inappropriately high minimum wages may in fact lead to a rise in overall poverty.
Slovenia's Institute of Macroeconomic Analysis and Development (UMAR) says that, against the backdrop of one of the steepest decreases in economic activity in the EU, Slovenia recorded the highest increase in the minimum wage. In some other countries the minimum wage has either stagnated or at least not increased in real terms.
Meanwhile Slovenia's minimum wage has been rising throughout the crisis because of the statutory yearly increase in the minimum wage, and this has been compounded by the 22.9% surge in 2010 at the peak of the economic crisis. In the period 2008–2012 the minimum wage increased by almost 30% in real terms, creating huge pressure on the cost effectiveness of the economy and leading to job losses.
The growth in the minimum wage outpaced overall wage growth for the fourth year in a row in 2012. At €783.66 gross, Slovenia has the seventh-highest minimum wage among the 19 EU Member States that have a statutory minimum wage, behind wealthier countries such as the UK, France, Ireland and the Netherlands.
With average wages remaining stagnant, the minimum wage increased to 50% of the average wage in 2012, a share that is set to grow further, as it rose again by 2.7% in 2013 (SI1301031I) as a result of indexation to inflation. Only Malta (50.4%) and Greece (50.1%) have similar ratios, whereas in other countries minimum wages range between 33% and 47% of the average wage.
Government action
In the National Reform Programme 2013–2014 (899 KB PDF), the government promised that it would, in dialogue with the social partners, prepare changes to the minimum wage system to make it more equitable, while at the same time making the economy more competitive.
Hovewer, on 15 October 2013, the Labour Minister Anja Kopač Mrak said that for the time being the government would not make changes to the minimum wage. His announcement was reported in a note on the website of the national broadcaster Radio and Television of Slovenia (in Slovenian).
The government believes that the cost of labour (and the level of the minimum wage) is not the main problem, but rather energy prices and excise taxes. The problem is also that the net minimum wage is lower than the poverty level (€606) and the definition of minimum wage, which would include supplements for shift work, night work and productivity bonuses.
Social partners’ reactions
Igor Antauer, Secretary General of the Association of Employers of Slovenia (ZDS), said that if the minimum wage increased further, companies would go bankrupt and new business and jobs would not be easily created.
Dušan Semolič, President of the Union of Free Trade Unions of Slovenia (ZSSS), said that the ZSSS is aware of the problem being caused by minimum wage indexation and is prepared to negotiate on this issue.
The problem, from the unions’ point of view, is the unfair definition of the minimum wage which is deemed to cover all bonuses and supplements and so prevents night workers who receive the minimum wage from receiving the night work supplement. For a long time, the ZSSS has been urging a change in the definition of the minimum wage to counter this.
Commentary
The statement of the Labour Minister Anja Kopač Mrak (and also that of the Prime Minister, Alenka Bratušek) must be seen in the light of the drop in inflation in Slovenia from 2.7% in 2012 to 0.7% in 2013. It is quite probable that Slovenia will face deflation soon and there will be little to justify the indexation of the minimum wage. Further details of the deflationary trend are available in a recent Eurostat press release (450 KB PDF).
Štefan Skledar, UMAR