Analytics, Financial Services, Lithuania, Markets and Companies, Wages

Algirdas Butkevicius.

"Everyone knows that it is almost impossible to survive for slightly more than 600 litas – and this is how much people working for minimum wages receive – especially, taken into account that everything is getting more and more expensive. Therefore, raising the minimal wage up to one thousand litas would benefit both, employees and employers, more specifically, businessmen. Because people, who earn more, will be able to afford more goods and services, thus, consumption would increase, and this is what our businessmen need. The number of companies focusing on domestic markets would increase," Butkevicius said.

According to the leader of the Seimas opposition, contributions to the budgets, especially municipal budgets, would increase slightly. Moreover, the politician is convinced that people would be motivated to work and not to receive social benefits, the need for compensations and social benefits would decrease, writes LETA/ELTA.

The increase of the minimum wage would not solve poverty and social problems. Instead of raising the minimum wage, negative income tax should be imposed on residents, said on the other hand financial analyst Gitanas Nauseda, adviser to the president of the SEB bank.

"Here I am rather skeptical due to a very simple reason. Usually, the minimum monthly wage, compared with the average wage, is based, as economists say, on the criterion of optimum rather than maximization. Of course, in some sort of a hypothetical situation, we can imagine that a 100% of the minimum wage accounts for the average wage, and then we all would be paid the average wage, and there would be no differentiation between the wages," said Nauseda at a discussion held at the ELTA news agency on Thursday.

"My observations and analysis show that in many Western European countries, of course, there are exceptions, this optimum ranges about 40%, this means that the wage comprises almost 40% of net wage. When it exceeds this level, there are fewer possibilities for differentiating wages according to human performance, training, etc. Recently, the average wage in Lithuania has not gone up. Thus, at this point, there are no assumptions for increasing the minimum wage," he economist said.

The economist proposed increasing the tax-exempt income for the sake of the residents with low income. Such was also the proposal of the International Monetary Fund experts.