The electoral campaign doubles the salaries

The Executive promised on Saturday to double the minimum wage by year 2008. Economic analysts say this can be achieved only with restructuring the economy and 10 percent economic growth per year

Marian Sarbu, minister in charge with the relationship with the social partners, has a lot of good news in his Santa sack: the minimum wage will double by 2008 as compared with 2004, that is from the current 66 to 68 euros it will grow to 118 euros per month. The growth curve is for the minimum wage to reach 75 euros in 2005, 89 euros in 2006, 108 euros in 2006, to peak with 118 in 2008.

"These wage hikes will be negotiated with the International Monetary Fund and with the European Union. These hikes could go even higher when negotiated between the Executive on the one hand and the trade-unions and industry associations on the other hand, but this will have repercussions on the levels of the average salaries," said Sarbu. He stated that the minimum wage rose almost three times since 2001, as it grew from one million to 2.8 million per month. The minister admitted however that when the inflation was factored in, the raise in real terms stood at only 50 percent.

Where could the money come from?

Daniel Daianu, professor of economics and former minister of finance, said that "the figures put forth by Mr. Sarbu raise a lot of question marks. With no help from other calculator than our brains, one could see that for doubling the wages at the end of a seven-year period one needs a 10 percent growth of the economy every year. So, for doubling the wages over four-year time one needs a growth rate of 18 percent per year," said Daianu.

He thinks this growth rate is huge.

"If we factor in the fact that the Romanian leu will appreciate itself against the euro, due to economic growth, then the 18 percent growth rate could go down to 8 or 9percent. But this is still huge. This would mean for us to have an economy similar to that of China, which sustains yearly growth rates of 10 percent .. But not even in China the doubling of wages cannot occur," said Daianu.

The doubling of wages could be achieved though, he went on to explain, if only some of the salaries will hike or if massive redundancies of personnel will follow in the budgetary sector.

"Let us make up another scenario: in order to not experience problems with the balance of payment we should take into account that not all salaries will double and that medium and high salaries in the private sector will grow slower than those paid in by the state sector. This means that a mechanism for redistributing the revenues should be created, but this is hard to imagine it will be achieved. One way may be the taxation of revenues, which could go high for medium and higher salaries and down for lower wages. Still, I think this is not feasible as an economic program. Of course, there is also the option of hiking the salaries, while making redundant the personnel. If one conducts a bone-deep reform of the administration, where indeed a lot of people could be laid off, one could imagine a hike of salaries that will out-run the growth of the GDP. But this is to be done only with taking in the social costs of unemployment or the economic costs of exporting the work-force," concluded Daianu.

The only certain option stays emigrating

Ionut Balan, economic analyst, thinks that "it is unfortunate that we hear of revenues hikes, and a national currency growing more expensive, but no word is said on the growth of productivity rates, in the absence of which neither wage hikes nor currency appreciation are possible." He said the restructuring the economy it is still wishful thinking and that privatization advanced only in words. "Under these circumstances the only option stays emigrating abroad for getting a job; this shows that we do have a work force able to bridge the gaps, but that we are not able to employ it here at home," added Balan. He thinks that Romania is struggling to administer its poverty, not its growth. "Unfortunately we are not yet showing that we know how to create growth. After we will reach that state, then what minister Sarbu states will become feasible. For the time being though, there are no arguments supporting a sustainable wage hike," concluded Balan.

The pensioners are happy with a10 percent hike of their pensions

Minister Marian Sarbu also promised that pensions will grow with approximately 10 percent during 2005 - 2007. "The balance of pension levels will be achieved in three stages, with a budgetary expense of 7,000 billion lei per year," said Sarbu. Furthermore, for around 700,000 pensioners it is taken into account a doubling of the pensions level. The Executive analyses the option of doubling the pensions for both pensioners who worked in the agriculture, and those who paid their contributions to the state pension system. The former farmers will have their pensions doubled by January 2005, stated Sarbu.