Analytics, Financial Services, Latvia, Legislation, Markets and Companies, Wages

The ministry said that low labor costs are still an advantage for the competitive capacity in Latvia, which is why increasing the minimum wage could leave a negative impact on companies' competitiveness. "It will increase business owners' labor costs and the desire to evade taxes, reducing employees' completed work hours," the Economy Ministry said.

At the same time, there are several factors why the minimum wage should be increased. "First of all, increasing the minimum wage will directly increase the purchasing capacity of low-income earners, which would have a positive effect on domestic demand that has been the cornerstone of the economic growth for the past couple of years. Secondly, it will bring the salaries closer to the European Union's average level, which is one of the instruments in reducing the emigration rate. Thirdly, an increase in salaries could be a serious stimulus for competitiveness not associated with low labor costs, as well as facilitate innovation and investments in new technologies in order to reduce costs and increase productivity," the ministry believes.

Thus, the Economy Ministry believes that it will be possible to increase the minimum wage in Latvia from EUR 360 to EUR 375 as of January 1, 2016, as proposed by the Welfare Ministry.

At the same time, the Economy Ministry concludes that, according to the government's declaration, the minimum wage exempt from personal income tax also needs to be increased, as it would limit the total increase in labor costs and help maintain companies' competitiveness.