Wages - more money, more problems

The PSD did what everybody wants. It raised wages. We all want happy Romanians. If we could, we would raise employees' wages every day, in fact, we would do so hourly. There is no moral limit on that. The limitations on that are economic. The state uses its privileged situation to collect taxes from us, to pay higher salaries, and even more, to impose the hike of the minimum wage. Meanwhile, we, the private businesspeople, are forced to lay off some more of our employees, to ensure the others' wages. That's when we're not actually shutting down the company. Thus, the happiness isn't general. The PSD is doing what it wants, we are doing what we can.

On January 23rd, 2019, at the electronic General Registry of Employees format, according to the records submitted by the employers, there were 1,173,906 state employees and 4,279,555 in the private sector, according to the Ministry of Labor.

Starting with January 1st, 2019, the minimum gross wage guaranteed, without bonuses and other extras, has been set at 2080 lei a month, for a normal average work schedule of 167.333 hours a month, representing 12.43 lei/hour, according to data sent by the Ministry.

The representatives of the Ministry of Labor told us: "For personnel employed on positions which stipulate higher education, with work experience of at least one year in the field of higher education, the base gross guaranteed salary, without bonuses and other additions, will be raised from 2,080 lei to 2,350 lei a month, for a normal work schedule of 167.333 hours a month on average, representing 14.044 lei/hour".

According to the quoted source, for the construction sector, the minimum guaranteed national gross wage without other bonuses and extras is 3,000 lei a month, for a normal average schedule of 167.333 hours a month, or 17.928 lei/hour.

Data shows that there are 48,717 employees with a minimum wage of 2,080 lei, and 948,809 employees in the private sector.

Also, the public system has 2450 employees registered with a minimum wage of 3000 lei, and 98834 in the private sector.

Most entrepreneurs feel that the constant hike of the minimum wage and particularly the wage increases in the public sector are having negative effects on the activity conducted by companies and on their budgets, as well as represent unfair competition between the state and the private sector.

• Clara Rotescu, entrepreneur: "The wage hike should have been done gradually and in tandem with policies for supporting Romanian manufacturers"

For Romanian employers, raising wages is not a simple thing to do at all, at a time when there are increasingly fewer producers that are 100% Romanian owned and in the context where for almost everything we make imports are needed (since 1990, in the textile industry alone 1500 factories have been closed), said Clara Rotescu, entrepreneur.

She said that at this time, the wage hikes represent a way too great burden to carry and will lead to the shutdown of many businesses and the increasingly quick absorption of the cheap workforce by multinationals or by the European market.

Clara Rotescu said: "Raising wages was a necessity. It was complicated enough to live on 900 lei a month. For Romanian employees it has been a lifeline. For the multinationals it hasn't meant anything. In France, a janitor gets about 2500 Euros, including bonuses, which is a salary that in Romania only someone with higher education and extremely high skills will get. So the 500 Euros minimum wage is yet another gift for the multinationals from the Romanian government".

The wage hike should have been done gradually and in tandem with policies for supporting Romanian manufacturers, said Clara Rotescu, who added: "Show me one single measure of support for a small entrepreneur!"

Furthermore, she also told us that we do not currently have a clear law on volunteer work, no measures to support SMEs, measures which would support small companies to at least dream of becoming big.

"It is simple to view things from one point of view and think that Romanian employers are bastards that don't want their employees to lead a better life. But Romanian employers are becoming slaves to their employees, and less able to compete by the day: high prices of materials compounded by huge customs taxes, expensive labor, in a market that is completely imbalanced and in which Romanian products have been ostracized for decades. The first years of freedom came with slogans where the «Fa» soap was better than any stinging nettle shampoo. On the other hand, we have an employee that works 20 days a month, 10 months a year: for one month he has a legal holiday and they have another 17 public holidays when they get days off.... which is once again reflected in the price of the product".

Even though they have a number of rights and increasingly fewer obligations, Romanian employees are harder to find and have the ability to migrate without yet having a formed professional conscience, as they do in countries educated in that regard, Clara Rotescu further said.

• Mihaela Proicea, Bio Ortoclinic: "Doctors no longer want to work in the private sector, the state pays higher wages"

Doctors no longer want to work in the private sector, as the wages paid in the state owned medical system are far higher, according to Mrs. Mihaela Proicea, general manager at Bio Ortoclinic. "Ten years ago things were a lot easier. Romanian degrees are the only ones that get recognized right away, and that makes plenty of medical personnel to emigrate. Even worse is that doctors no longer want to work in the private sector, as the state pays very high salaries. (...) We're living in constant fear that our doctors are waiting for a state job to become available so they can move. It's a vicious circle. People don't want us to raise prices, which would be the only solution for offering competitive wages".

• Cristian Pârvan, PIAROM: "The raising of wages in the budget sector is a populist and unjustified measure"

The "galloping" rise of the minimum wage is one of the government measures that are detrimental to the business sector, says Cristian Pârvan, the president of the Romanian Professional Association of Domestic Investors (PIAROM). He recently told us that the wage increase is a populist, unjustified measure, which deals yet another blow to the business sector: "We do not discuss the hikes - are they necessary or not -, because no one can say that a wage increase is not beneficial for people, but it is made in a populist manner, without any justification, without any criteria, without any obligations in the public sector, and people have to constantly go and get some certificate, go to court and so on. And so, the public institutions aren't working any better despite the wage increases". In the opinion of Mr. Pârvan, Romania isn't making public investments because all the money is spent on wages. The president of the PIAROM claims that such a decision will affect the business sector, after it has already suffered following last year's government measures which raised wages in the public sector 24%, and only 11% in the private sector, causing a flow of departures from the private sector to the public sector.

• Cristina Chiriac, CONAF: "The competition is no longer between entrepreneurs, but between them and the state"

Cristina Chiriac, the founder of the National Confederation for Female Entrepreneurship (CONAF), told us the following in an interview: "It is hard for me to admit, but the biggest problem in the entrepreneurial sector is the unfair competition of the state. For some time now, the competition has no longer been between entrepreneurs, but between them and the state. This has birthed a very dangerous precedent - the migration of qualified personnel from the private sector to various state institutions. The workforce is already insufficient and unqualified enough, suddenly became very costly, which has led to the increased costs of production and implicitly to the increase in the daily living costs. We are not aware of the effects of these decisions, because most people think in the short term, but the effects will definitely become visible in the next three years. A drop in the birth rate together with other demographic, social and even cultural aspects, doesn't exactly generate a bright entrepreneurial future. But I do hope that the representatives of the business sector will understand that we are all facing the same problems and that they will cooperate towards supporting a solid economic agenda, to build an entrepreneurial Romania".

In the opinion of Cristina Chiriac, steps can be taken to improve and fix the legislative issues, through proposals submitted to the business sector. "Our projects have been sent to the Ministry for the Business Sector, Trade and Entrepreneurship. For now, we are in the stage of coagulation of the working committees and I hope everything will go well, so that we can at least have a legislative initiative by autumn this year".

• Mihai Ionescu, ANEIR: "Employees from all the exporting sectors should also get tax breaks"

Exporters don't have anything against the raise of the minimum wage, because they are aware that if people aren't paid they will leave and that shouldn't happen, because there are plenty of orders in that sector, says Mihai Ionescu, the president of the Romanian National Association of Exporters and Importers (ANEIR). He told us: "What exporters are asking for is that, if the breach of tax breaks for employees in several economic sectors has been created, such as IT and construction, then other sectors which export should benefit from such facilities as well - such as textiles".

• Ştefan Vuza, Chimcomplex: "It is a good thing that Romania is leaving behind the obsolete model of paying people low wages"

Ştefan Vuza, the shareholder of Chimcomplex, also agrees to the hike of the minimum wage, even if other entrepreneurs don't agree. "It is a good thing that Romania is leaving behind the obsolete model of paying people low wages and instead going for the model adopted by Hungary and Poland many years ago where wages are concerned. We need to pay higher wages, and the unprofitable sections can just be shut down and replaced with other ideas. For instance, we've shut down both textile units, but people find jobs quickly. We can't keep paying people poorly. Even though we are hurting in the short term, we will have growth in the long term, if we adapt.

We are in the midst of a workforce shortage, so only someone who doesn't want to work isn't going to find a job. Nowadays, anyone you fire can find a job, but people also need to retrain themselves. With all the problems that entrepreneurs will experience in the short term, the salary trend needs to be upwards. For instance, in chemistry we are ranked third among the companies that pay the best wages, to keep our specialists from leaving".

Ştefan Vuza pointed out that in Poland, specialists who had left seven years ago for France, Germany and other countries are coming back, even though wages on the polish market are half those of the countries in question, but utilities and rent are also a lot lower. In his opinion, the same phenomenon will happen in Romania in 4-5 years, but only if we pay our workforce better.