Romania’s central bank governor says wage increases should be decided by market forces, not politicians

Wage increases in Romania should be decided by market forces, not by politicians, and be in line with productivity, central bank governor Mugur Isarescu said on Thursday.

“In Romania, we are facing a series of challenges, which are certainly not only here, but also at the level of the European Union. One of the dramatic consequences would be that wages are being increased by politicians, not by market forces,” Isarescu said, cited by Agerpres.

“In a natural order, wages should grow with productivity and thus become competitive,” he added.

His speech comes in a moment when the government plans to increase the minimum gross wage in Romania by 9.5 percent from November 1, up to RON 2,080 (EUR 446), and implement higher minimum wage for university degree and seniority, according to the Labour Minister Olguta Vasilescu.

However, Romanian prime minister Viorica Dancila said on this week that she opposes the project to increase the gross minimum wage from RON 1,900 up to RON 2,080 from November 1, but she agrees to apply the measure from December or January 2019.

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BR has announced this week that the Romanian government is planning to introduce a higher minimum wage for university graduates and employees with at least 15 years of seniority starting from November 1, 2018, amid fierce opposition of employers and unions.

The project has already been drafted and proposes to increase the minimum gross wage in Romania by 9.5 percent. from RON 1,900 (EUR 408) to RON 2,080 (EUR 446) from November 1.

But the same project also proposes a new rule – to establish a separate minimum gross wage for university graduates and for employees with 15 years of seniority of RON 2,350 (EUR 504).

Employers in Romania oppose these measures.

AOAR, one of the largest employers’ associations in the country, has already denounced on Monday the government plan to increase minimum wage from November 1 by 9.5 percent up to RON 2,080 as being an arbitrary and populist measure.

AOAR points to the economic slowdown in 2018. “Under such conditions, the announcement of the advance of the increase in the minimum wage to November 1, 2018, from January 1, 2019, is a populist, arbitrary measure adversely affecting the private sector, especially the manufacturing industry,” AOAR said in a press release.

Some unions’ leaders also criticize the plan.