TIRANA, Oct.1- The government has postponed the decision to increase the minimum wage to 16,100 leks. This decision was approved in July of this year but was not implemented because it would harm the companies which had already received orders. Sources from the Finance Ministry explain that the measure will be fully implemented in January 2008 when businesses will have half the obligation on profit tax. Even this postponement has not satisfied fashion industries. They claim that the reduction of the profit tax to half does not compensate for the increase in the minimum wage and the associated social benefits such as contributions to pensions. The representatives of these industries have opposed the law since first introduced, saying that it would bring them an additional monthly cost of 2400 leks per employee.
Fashion industry firms work with materials that are brought from abroad and are half ready, they incur large labor costs because they must employ a lot of workers. An increase in wages hurts these businesses more than others and reduces the comparative advantage of Albania based on cheap labor.
Exports
Industries that work with orders of textiles and leather products, mainly shoes, made up as much as 60 percent of Albanian exports this year. Fashion industries claim that the rising cost of labor is unaffordable since wages, social contributions and taxes increase at the same time. Some experts in the field say that many of these firms run the risk of going bankrupt after the new wages become operational in 2008.
