Inflation Concern in Lithuania’s Minimum Wage Hike
- New Europe Investor
- January 07, 2016
Economists in Lithuania are concerned that hikes in the minimum wage will lead to higher service prices in the country.
At the beginning of the year, Lithuania increased the minimum wage from €325 a month to €350 a month.
The government is due to increase it again in July to €380, representing a €55 increase or 14.5% over six a month period.
Nerijus Maciulis, an economist at Swedbank said that the effect of increasing the minimum wage will send ripples up the wage scale. He explained, that those earning more than the minimum wage will expect pay increases, as unskilled workers receive salaries more in line with their own.
The rise in salaries has a negative effect for employers in two ways. One on paying the employee more, but social insurance contributions that are already extremely high in Lithuania, increase also.