Fewer low income earners, but there is a caveat

Most wages rose at the end of last year and the number of those earning less than the minimum wage declined. However, the wage increases for roughly half were less than the rise in prices, which is why in reality they earned less.

The average income of individuals, who work all month, which social security payments are calculated from, rose 8,6% last quarter, from 767 euro in late 2016 to 833 euro at the end of last year, Sodra calculates.

According to its data, the incomes of those earning the least rose more often, despite the increase in minimum monthly wage no longer having an influence.

Wages rose more often for those, whose wages were particularly small a year ago, not exceeding the minimum monthly wage. For half of them, income rose by 10% over the year and roughly a third had income increases of no less than 100 euro over the year according to Sodra data.

“You can find most of such employees in the major cities, largest retailers, largest hospitals, places of temporary employment.

Their wages often rose after the individual changed office or place of employment. It is clear that with tensions in the job market rising, employees’ capacity to negotiate for better wages is also increasing,” Sodra chief advisor Julita Varanauskienė states.

However considering annual inflation, some half of these individuals have been faced with an actual decline in income because their nominal wages after tax did not exceed price increases.

The number of those earning minimum or lower monthly wages contracted from 23.6% in early 2017 to 16.3% at the end of the year.

The adviser mused that soon a decline of insured individuals will arrive and it will be most felt in 2026-2027 when retirement age will reach 65 years and the duration of required work experience – 35 years. Due to this it is worth considering, what measures to take so that Sodra income would not decline.

“I believe it is a suitable time to consider how to form suitable conditions for older individuals to work, how to draw in labour from third countries and how to reduce dependency on social payments. Private pension accumulation is necessary so that our incomes would not decline drastically on entering pension,” the expert noted.

Employers registered in the major cities raised wages more than those in more remote areas. Incomes rose the most in the cities of Neringa, Vilnius, Klaipėda and Kaunas. The lowest increases were observed in the municipalities of Vilkaviškis, Skuodas, Kalvarija and Pagėgiai.

When viewing representatives of different professions, the portion of those earning the minimum monthly wage among leaders declined from 23% to 19%, among specialists, engineers and technicians – from 12% to 9%, retail and service sector employees – from 26 to 18%, qualified employees – 17% to 11% and unqualified employees – from 38% to 33%.

In January 2018, 184 thousand employees earned wages of 400 euro before tax. In January 2017, when the minimum monthly wage was 380 euro, the number was 254 thousand.

According to Statistics Lithuania, this January consumer prices were 4% larger than a year ago.

The new Labour Code, which came into power last July, specifies that the minimum monthly wage is the lowest allowed wage for unqualified work. Unqualified work is specified as being that which demands no special qualification or professional skills.

Furthermore, based on the code, places of employment must specify wage payment systems, which among other things must establish wage payment indexing (raising or declining) regulations.