Business News

Think-Tank Says Higher Minimum Wage to Cost 5,000 Jobs

Ljubljana, 02 April (STA) - The recent 22.9% increase in the minimum wage could cost over 5,000 jobs in the short term and over 17,000 in the medium term, projects the Institute for Macroeconomic Analysis and Development (IMAD), the government's economic think-tank.

"There will be a stepwise adjustment. Most likely, the minimum wage hike will lead to additional layoffs in a relatively short time," IMAD director Bostjan Vasle said Friday at a presentation of the spring economic forecast.

Over the medium term a lot will depend on how companies react. If they fail to take action in production, the increase in unemployment could be even higher in two to three years, he said.

But Vasle also pointed out that the 17,000 figure is a worst-case scenario. "In this period firms will probably adapt and find other solutions instead of laying off workers."

An analysis by IMAD on the effects of the new minimum wage also suggests that higher minimum wage will increase pressure on pay increases overall.

The minimum wage rose 22.9% to EUR 734.15 gross in accordance with legislation that took effect in February. However, companies in trouble can opt for a gradual increase over two years.

Slovenia's unemployment rate stood at 10.6% in January, but IMAD believes the situation will get worse. It projects that the registered jobless rate will rise to 11.1%.

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