Association of Regional Centres: planned leap of minimum wages is too rapid

Chairman of the Board of the Association of Regional Development Centres (ARDC) Vents Armands Krauklis believes that increase of minimum wages to 430 euro planned by the Ministry of Finance is excessively rapid and can cause an effect converse to the planned decrease of public inequality.
“The tax reform planned by the Ministry of Finance and Government that is aimed at decrease of labour tax burden and decrease of public inequality in general must be valued positively. However, as Association of Regional Development Centres has already previously stated, authors of the reform insufficiently reckon its negative consequences for municipal budgets. Such a rapid growth of minimum wages as is planned by the Ministry of Finance can cause an effect converse to the planned objectives of the tax reform. I. e., many municipalities and companies working in their territories can be forced to dismiss their employees due to excessive growth of financial burden. We must either take hidden budget deficit or dismiss employees,” believes V. Krauklis.

ARDC has previously ordered a research of independent experts – economists of the Department of Engineering Economy and Management of Rīga Technical University (RTU), in order to analyze effect of the tax reform on the budget of one specific, average by Latvian scale, Province – Dobele Province. Research of RTU economists showed that growth of minimum wages from 380 euro to 430 euro will cause growth of unemployment rate in Dobele Province from 7.3% to 9.2%. Up to 234 persons may lose their jobs in total, including 51 persons in municipal structures.

“The research clearly shows that very serious further discussions on the form of introduction of the tax reform guidelines are necessary. There is no doubt that the existing reform model threatens by significant decrease in municipal budget revenues. This will lead to worse or more expensive educational, transport, health care, social care services and other services within the competence of municipalities. Population will probably get a few euros from the planned reform today, but in the long-term they will still lose it due to drop in the quality of life in their municipalities. Therefore, ARDC will closely watch implementation of the tax reform and specific draft normative acts resulting from it, and will be actively involved in discussions with both Ministry of Finance and Government and the Parliament committees,” previously admitted the Chairman of the ARDC Board V. Krauklis.

More information,

Rolands Pētersons, rolands.petersons75@gmail.com

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