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Increasing the minimum wage – benefits and side effects

Повышение минимальной зарплаты - преимущества и побочные эффекты

In conditions of economic stagnation in Europe the increase of the minimum wage in Latvia is considered as an element of reducing the shadow economy, but at the same time has negative consequences, so as at the most measure some services and goods will become more expensive, which could negatively affect the competitiveness of local businesses, writes with a reference to Dienas Bizness agency LETA.Although the minimum wage is increased by only 40 euros (5.7%) – from 700 to 740 euros in a month, which cannot be considered an impressive increase, experts suggest that it would be adequate, if the recession in Europe and Latvia
would not continue to increase. Rising spending in conditions, when the market is stagnant, could hurt competitiveness. He noted that this is the situation with the increase in the minimum wage in Latvia, because potential voters will appreciate this short-term decision of politicians with their
vote in the election, but where it will bring producers and providers of services, which really fill the state budget, politicians are practically not interested. As the tax expert Ainis Dabols, the increase from 2025 year to 740 euros means, that the pockets of low-wage workers will have more money, but this will increase the
costs of many employers and force their prices for goods and services. The government will receive additional revenues from mandatory social insurance contributions and taxes on consumption. “Minimum wages are usually paid in sectors where hands are used as the main resource of consumptionSome are paying the lowest wages to increase their competitiveness by optimizing their costs. But such a business is not sustainable, ” says the general
directoroftheLatvianAssociationofAgriculturalCooperativesRolandsFeldmanis.

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