Minimum wage increase and effect on informality

2024-12-14 09:00:38, Ekonomi CNA

From April 1, 2023, the minimum wage increased from ALL 34 thousand to ALL 40 thousand, or by 17.6%. After the increase in the minimum wage, from June the maximum wage also increased by 17.6%, from ALL 149,954 to ALL 176,416.

In the second quarter of 2024, according to INSTAT data, of the total number of employees who pay social insurance, 25.3% of them have salaries up to the minimum level of 40,000 ALL.

Compared to the second quarter of 2023, the total number of employees who are paid up to ALL 40,000 decreased by 5.3%. While in the first 3 months of 2024, the share of employees up to the minimum wage was 25.8%.

This category recorded an increase in the second 3-month of 2023 by 7.6% compared to the previous year. This happened due to the change in the limits of the minimum salary, which was increased in April 2023 to the level of 40,000 ALL, from 34,000 ALL before.

The weight of employees with a salary of 40-50 thousand ALL in the total number of employees in the second 3 months of 2024 reached 20%. Compared to the same period of the previous year, the weight for this category of employees increased by 1.8%.

The category of employees with a salary in the range of 50-60 thousand ALL has increased by 0.5%.

An increase was noted in the high salaries over 120 thousand ALL. Persons with high salary levels occupied 10.4% of the total employed with an increase of almost 1.6% compared to the same period of 2023.

Minimum wage increase and effect on informality

The chairman of the ProExport Albania Association, Edvin Prençe, analyzes that the increase in the minimum wage in the clothing and footwear manufacturing sector had double effects on employment.

"On the one hand, the increase in the minimum wage has led to a possible reduction in the number of employees, as some companies are forced to reduce employment due to the increase in labor costs.

On the other hand, some companies try to increase labor productivity and invest more in automation and technology to offset the additional costs," he asserts.

The textile and footwear sector has always been one of the most sensitive sectors to changes in labor costs, exchange rates, as this sector has a labor-intensive nature with a low profit margin.

According to Mr. In fact, the increase in the cost of employee wages, including the minimum wage, has a significant impact on this sector.

He says companies are adapting in several ways to cope with these cost increases, such as automating and modernizing manufacturing plants, focusing on increasing quality and diversifying products.

Some companies are reorganizing their work structure to minimize wage costs.

“This has included optimizing the number of employees, making reductions in positions that are less needed or improving the use of staff in processes that require more work.

In some cases, there are even job cuts to keep costs at affordable levels," he says.

The textile and footwear export sector continues to be in difficulty due to the fall of the euro and ordering contracts from European countries. The sector's difficulties have led to the closure of a number of factories and the reduction of jobs.

Edvin Prençe said that from November 2023 to November 2024, there are more than 10,000 closed jobs and about 50 businesses that have closed their activity in the sector.

There were job cuts in the fashion sector during 2023 as well, where the most affected areas were in Krujë, Fushë-Krujë, Laçi, Lezhë and Shkodër./ Monitor.al