In 2015, minimum wage will be increased to 1750 PLN gross - the Council of Ministers decided on Tuesday.
- This decision is very bad news. It will not solve the problems of the unemployed and employers with low wages - says expert of Employers of Poland Łukasz Kozłowski.
It is worth remembering that this increase means that the minimum wage will be higher than suggested by the algorithm included in the Minimum Wage Act. As a result, in the following years minimum wage will have a higher base level. Employers recommended increasing its value to 1731 PLN gross.
Contrary to appearances, a higher minimum wage is not a particularly effective means of improving employees’ situation. If the added value generated by an employee will be lower than the wage, the entrepreneur will be forced to let him go or transfer the costs of the raise to his clients. The best way to increase employers’ income is to simply stimulate economic growth through restricting legal and fiscal burdens – if that is the case, the market mechanism itself will cause an increase in wages.
Minimum wage employees earn so little not because employers pay them so little, but because of very high non-wage labour costs. A person earning 1680 PLN gross receives 1237 PLN net, but the total costs for the employer amount to 2028 PLN. That is how much the employee would earn, if his wage was not dragged down by taxes and social security contributions. Meanwhile, the government freezes the PIT tax rates yet again, which will mostly harm lowest paid employees.
Higher minimum wage will also cause worse business activity conditions for micro-entrepreneurs and the self-employed, as reduced social security contributions paid in the first two years of activity are calculated based on minimum wages As a result, fixed costs for entrepreneurs will continue to grow.
Łukasz Kozłowski, expert of Employers of Poland