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Thursday, January 31, 2019

Minimum Wage vs. Minimum Income

PM Tsipras' intention to increase the monthly minimum wage to 650 Euro has triggered debate. I think the debate is about the wrong issue.

As someone who is often blamed by readers for being a neo-liberal, I propose the following: anyone who champions a market economy as the best system for generating wealth must recognize that there will always be people who don't succeed, for one reason or another, in such a market economy. Perhaps temporarily, perhaps permanently. Given that, it is mandatory for a society of the First World to make sure that there is a sufficient safety net for those who cannot succeed, temporarily or permanently. No one in a First World country should fear potentially being totally left out in the cold. I emphasize the term First World country because such countries definitely have the resources to provide for a safety net. Obviously, a safety net should be in place everywhere but where there are no resources, there cannot be benefits.

Examples of such a safety net would be Hartz IV in Germany or Sozialhilfe in Austria. These systems must not be confused with the concept of Basic Income. The latter proposes unconditional basic income for everyone. Hartz IV or Sozialhilfe, on the other hand, assure that those who require protection are protected but not the others.

Society, through the democratic process, needs to determine the extent of the safety net, i. e. the minimum amount of income those who do not succeed in a market economy should receive to maintain a satisfactory existence. Sozialhilfe, I believe, sets that amount at 850 Euro per month, Hartz IV, I believe, is lower than that.

And now to the connection between the safety net and a minimum wage. If Sozialhilfe stands at 850 Euro, it is clear that market forces will automatically set the working wages above that level. There has to be an incentive for working in order to avoid incentives for not working.

As I said, whether or not a minimum wage of 650 Euro is adequate for Greece is a matter for the democratic process to determine. However, to have a minimum wage in any amount for people who work without having, at the same time, a safety net for people who cannot work is not defensible.

1 comment:

  1. https://www.naftemporiki.gr/finance/story/1434777/se-gennaia-auksisi-misthon-proxorise-i-eydap

    in english

    "Increase in their earnings was secured by the employees of EYDAP through the Supplementary Labor Agreement signed between the company's management and the Federation of Employees (OME EYDAP).

    According to EYDAP OME, this Supplementary Convention 2018 - 2021 achieves the following:

    ATA is integrated into basic wages, meeting a decade of employees demand.
    The minimum wage from 1.1.2019 to 970.05 euros from 651.24 euros and the wage bill for ET2 increased to 31.86 (955.8) euros from 21.32 (639.6) euro and for ET1 to 32.78 (983.3) euro from 22.07 (662.1) euro as it was until today.
    By integrating, basic wages are rising and overall employee earnings over three years are improving. Based on information, as an official announcement by the EYDAP administration did not exist, at least until late yesterday yesterday, within three years, the wages of approximately 2,251 employees of the company will gradually return to the pre-memorandum level.
    The one-off payment to everyone will be increased.
    All vested rights are retained, and according to the Federation, the explicit abolition of wage costs gives room for further trade union claims and recovery of financial losses.
    The Supplementary Collective Labor Agreement (which runs from 1-1-2019 until 30-4-2021) was not signed by the President of the Federation George Sinori, who disagreed with its content, but by the Vice-President, Mr. Mary Liapis. According to the trade union belonging to the chairman of EEDAP, Law 4024/2011 under which the salary cuts were made in EYDAP does not apply as of 1/1/2019 and therefore wages should be returned immediately to the pre- memorandum level.

    It is noted that EYDAP is a profitable business, and after the payment of public debts in 2013 (through cash and offsetting) in view of a memorandum of its sale, it now has zero borrowing. In 2011 its short-term debt liabilities amounted to € 201.6 million.
    Based on its official data in 2011, EYDAP's total fees and expenses were EUR 165.2 million, while in 2017 EUR 128.2 million.

    According to its latest published results for the first half of 2018, turnover was 153.4 million compared to 151.7 million in the corresponding half of 2017, net profits of 17.9 million from 11, EUR 8 million, while its cash available was EUR 322 million.

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