Higher minimum wage will lead to higher prices

DELFI / Šarūnas Mažeika

“Clearly, the increase [of the minimum wage] ripples along the entire pay scale, even in companies that do not employ anyone for the minimum wage,” said Nerijus Mačiulis, an economist at Swedbank.

“Those making slightly above-minimum wage or average wage will ask for a raise, so their salaries differ from those of unskilled workers. This adds to pressure on prices.”

In July, the Lithuanian government is raising the minimum wage €30 more, to €380.

Janina, a street sweeper from Panevėžys, points to all the areas she has to take care of for minimum pay. In January, her monthly salary will grow €25, to €350, after the government raised the minimum wage. After tax, she will get almost €20 extra.

The rise in the minimum wage also means higher taxes for employers. Before this January, Janina’s employer paid about €100 for her social insurance and now the tax will be some €10 higher.

“We have decided to review our service rates, since they have been the same since 2013. Meanwhile the minimum wage has grown over these last three years, as have the price of equipment and clothing needed to do the job,” said Virginija Čiurlienė, director of UAB Panevėžio Būstas, a municipal service company.

Residents of Panevėžys, a north Lithuanian city, will see their municipal service bills rise this year as a result.

Economists say that rising minimum wage inevitably entails pressure on service providers to raise their rates.

“This applies to catering, hairdressers – prices for these services will inevitably go up, they already have. Prices in cafés and restaurants, if you compare them in litas before and in euro now, are the same [the exchange rate was LTL 3.45 for €1],” says Danukas Arlauskas, the president of the Employer Confederation. “It is a signal that employers must invest in their employees and ask for more.”

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