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Minimum wage increase shut down garment factories in January

2026-02-18 07:27:00, Ekonomi CNA

The continuous increase in the minimum wage in Albania is becoming one of the biggest challenges for the garment industry, a sector that for decades has been among the main employers in the country and an important engine of exports.

In January, many small and medium-sized factories closed after not being able to afford the high costs of the minimum wage, which increased from 40,000 lek in 2025 to 50,000 lek in 2026, said Florian Zekja from the ProEksport Association.

This closure has also been reflected in the decline in textile and footwear exports in the first month of this year. This sector sold 8 billion lek in January 2026, a decrease of 5.8% compared to the same period a year ago.

Mr. Zekja said that the tailoring industry operates with low profit margins and contracts mainly with European markets, where prices are determined by global competition. Therefore, any increase in labor costs is immediately reflected in the financial structure of companies. Unlike other sectors that can transfer costs to the final consumer, tailoring often does not have this luxury, as it works with orders and prices predetermined by foreign partners, causing many companies to cease activity, he said.

The minimum wage in January was 25% higher than in 2024 and 66% higher than in 2021, aiming to increase incomes and improve living standards. However, for manufacturing plants, this increase is translating into strong pressure on costs and competitiveness.

The increase in the minimum wage does not only affect the basic wage. It is accompanied by an increase in social contributions, insurance and other costs related to the workforce. For a factory with hundreds of employees, the impact is multiplied, making any decision to increase wages a direct burden on the financial balance sheet.

This situation is also being reinforced by other external factors. Demand from abroad has fallen, logistics costs have increased significantly in recent years, while competition from countries in the region and Asia remains strong. Asian countries offer lower labor costs, making them more attractive to international buyers. In this context, any increase in costs in Albania weakens the competitive position of domestic factories.

Textile and footwear exports continue to be the largest exporting group in the country with 30% of the total.

Sector operators warn that the rapid increase in the minimum wage, without supportive policies for the industry, is further encouraging factory closures and shifting production to cheaper countries. Italian companies Cofra and Cotonela, which had production bases in our country, have withdrawn and reduced capacities, while others are considering moving part of their production abroad.

The main risk is job losses. The garment industry employs tens of thousands of people, especially women and workers in small towns, where employment alternatives are limited. Closing these lines would have significant social and economic consequences for local communities./ Monitor