Romanian Inflation Returns Wages to January 2022 Levels

As of January 2023, Romanian nominal wages rose by 15% on year-over-year growth to RON 4,265. It took a while for the nominal wages to rise to match the increasing inflation rates. During this same month, it was noted that inflation rose by a 15.1% year-over-year growth whereas now they match the wage rates from that of January 2022.

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Wage Increase Projected for the Beginning of 2023

Average monthly wages for Romanian were projected to increase to RON 3,000 back at the beginning of 2023. The average monthly wage in the middle of December 2022 was RON 2,550.

The average wage increase is thanks to the recent rise in the Romanian minimum wage. Those working at this rate started taking home about RON 1,863 each month as of January 1 of 2023.

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After much collaboration with Romanian labor unions and local employee associations, the government chose to increase the national minimum wage. This will assist the 2.2 million individuals receiving this rate of pay in their work positions. Hence, the minimum wage will go from RON 15.24 for every hour as an 18% increase to RON 18 per hour.

What This National Wage Increase Means for Small Businesses

While the rise in the Romanian minimum wage benefits the millions of individuals receiving the rate of pay, this will place very small businesses at a disadvantage. With more than 410,000 small businesses in Romania that employ at least nine people or less, raising the national minimum wage means that they will have to compensate in one or more ways.

Either they will have to downsize the number of employees on their team, or they will have to get creative and think of avenues to increase their monthly sales to maintain their current team size. Hence, with 88% of the nation’s small businesses employing nine people or less, it will instill a heavy burden on business owners to think critically about how their entities will thrive amid this national wage increase.

Consumer Prices Are Also Rising

While the wages and inflation rates matched together in January 2023, it started teetering off balance a month later when consumer prices increased by 0.95%. This rise in consumer prices was not expected by Romanian financial experts.

Thankfully, Inflation Rates Will Be Steady

Financial experts are projecting that inflation will rise by an overall 7% by December compared to the originally projected value of 11.2%. Because more businesses are being born in Romania and the recent national minimum wage increase, this means there is a rise in overall consumer spending. Hence, the prices of goods and services and raw materials utilized during production to bring them to fruition are rising to compensate for the demand.

It’s a Normal Trend In Any Economy

Wage increases and inflation hikes are normal in any nation. For Romania, the minimum wage increase can interfere with the success of local small businesses. However, larger enterprises can benefit from the wage increase as the prices of their goods and services rise to compensate for it.

When do you think Romania will have another increase in its minimum wage? Do you think inflation will remain stable or teeter off balance with wages again? Weigh in with your comments below.