Newly enforced minimum wage renders workforce costlier

Hourly labor costs increased 21.84% in Q2 2008 compared to the similar period of 2007, reveals data supplied by the National Statistics Institute (INS). Compared to the first three months of the year, the quarterly index of the hourly labor cost advanced 9.14%.
Both main components of the hourly labor costs – direct outlays (wages) and indirect outlays (non-wage costs) – increased, with the second witnessing the most notable advance.
The steepest annual rise in the quarterly indices of hourly labor costs (Q2 2008 as to Q2 2007) was registered in health care and social assistance (46.26%), education (38.23%), electricity and heat energy, gas and water supply (32.22%). The advance was lowest for financial intermediation (6.72%), followed by the hotel and restaurant industry (15.19%). Direct labor costs advanced year-on-year 21.71% and indirect expenses (taxes and dues) advanced 22.26% from mid-2007 to mid-2008.

A quarterly comparison (Q2 2008 compared to Q1 2008) reveals the most significant increases were in the extractive industry (32.68%), electricity and heat energy, gas and water supply (25.50%), transportation, storage and communications (16.77%), financial intermediation (14.27%), health care and social assistance (13.13%). Conversely, the indices decreased for public administration (- 0.80%) and education (-0.76%). In this interval, direct labor outlays advanced 8.94%, indirect outlays went up 9.76%.
Growth in labor costs in Q2 2008 was mainly the effect of negotiations on the national minimum wage and seasonal activities, writes Business Standard. "I believe that discussions, negotiations on the minimum wage resulted in supplementary outlays. Such negotiations agitate employees, they start pressing for higher wages. (…) I consider that this – and to a far lesser extent seasonal activities – was the main element in the rise of workforce outlays," Florin Pogonaru, president of the Romanian Businesspeople Association (AOAR) told the cited paper.
INS has recently given to publicity data referring to the wage rise. Thus, in June, the net average pay has been 1,273 lei (almost 350 euros), up by almost 25% from June 2007. Compared to May the net average wage increased 2% (25 lei). In May the net average pay has been 1,248 lei (341 euros), by 34 lei less (almost 10 euros) compared to the previous month.
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