TIRANA, May 4 – In an expected move ahead of the upcoming general elections, the ruling Socialist Party-led government has increased the minimum wage by 2,000 lek (€14.7) to 24,000 lek (€176), slightly increasing costs for businesses relying on cheap labor costs and social security contributions for self-employed people, but yet continuing to apply one of the region’s lowest minimum wage.
The 9 percent hike adopted this week ahead of the scheduled June 18 general elections comes after a 3-year freeze in the minimum wage and follows an increase in wages for some 164,000 public sector employees accounting for 18 percent of total employees. The public administration also had their wages increased following a 3-year freeze.
The garment and footwear industry employing about 100,000 people, had strongly opposed the move, claiming the country’s top exporting industry relying on cheap labor costs would lose its competitiveness.
Luan Bregasi, the head of the Business Albania association, earlier said the 24,000 lek (€176) minimum wage was accepted by all industries, except for the garment and footwear industry.
“All industries accept a 2,000 lek (€15) increase in the minimum wage. Our proposal for garment and footwear producers is a 1,000 lek (€7.3) increase for this year and adjusting the hike to inflation rate in the coming years,” Bregasi said earlier this year.
The hike in the minimum wage also slightly increases business costs and payments by self-employed people by raising social security and health insurance contributions which will now be calculated starting at a minimum wage of 24,000 lek (€176).
The maximum wage social security and health insurance contributions are calculated on has also increased by 9 percent to 105,850 lek (€778).
The government decision expected to become effective starting next month sets 174 working hours a month for the minimum wage.
With the informality rate in the country estimated at about 30 percent of the GDP, private sector workers are commonly declared with tax authorities as receiving minimum wages to avoid paying taxes and get the rest in ‘envelope wages.’
Social security contributions currently stand at 24.5 percent, of which 15 percent is paid by employers and 9.5 percent by employees. Meanwhile, health insurance contributions are at 3.4 percent, shared by 1.7 percent between employers and employees.
Earlier this year, the government increased the minimum wage for some 6,900 public sector workers by 36 percent to 30,000 lek (€220).
Albania’s current minimum wage of 22,000 lek (€161) is lower compared to all regional EU aspirant countries, including Kosovo which applies a €130 minimum wage for people aged up to 35 and €170 for elder employees.
Minimum wages in the other Western Balkans EU aspirants range from €206 in Bosnia and Herzegovina to €213 in Macedonia, €235 in Serbia and €288 in Montenegro.
While Albania offers the cheapest labor skills in the region, the tax burden is one of Western Balkan’s highest, being a barrier to attract foreign direct investment in sectors other than oil and mining despite the country’s favorable geographic position and Mediterranean climate.
