© AFP/Europress

The first step was taken by the Federation of Trade Unions of Macedonia in November 2021. The Federation made the proposal to increase the minimum wage to 18,000 denars (MKD) and to set this wage at least at 60% of the average wage. At that time, the minimum wage was slightly above 15,000 MKD, which corresponded to 52 % of the average wage.

After thorough discussions in the Economic and Social Council of North Macedonia, Parliament adopted the revised minimum wage law in February 2022. The law sets the new minimum wage at 18,000 MKD currently corresponding to 62 % of the average wage. Compared with the EU, the level of the new minimum wage is relatively high. In most EU countries the minimum wage ranges between 45% and 60% of the average wage. The new legislation also requires an annual adjustment of the minimum wage based on the developments of the average net wage and the consumer price index. The new law does not allow the minimum wage to fall under 57% of the average wage. Finally, the new legal framework offers temporary wage subsidies to employers until the end of 2022 to give them time to adjust.

It is expected that the recent reform of the minimum wage will have a positive impact on improving the standard of living of workers and reducing inequality in North Macedonia. 94,000 workers (17% of the workforce) will directly benefit from the reform as they are currently earning less than the minimum wage. Policy makers hope that the new minimum wage will also serve as a reference for workers in the informal sector.

It is not the first time that the Government of North Macedonia goes for a bold change of the minimum wage. In 2017, the Government pursued a comprehensive minimum wage reform with a 19 % increase. The government also introduced the same minimum wage for all sectors and abolished exemptions previously allowing lower minimum wages for industries heavily relying on low skilled workers like the textile sector.

Back then, the government asked ILO to do an assessment of the reform quantifying the effects of the increased minimum wage on income equality and employment. The study provided solid evidence that the minimum wage adjustment was successful in reducing wage inequality. Results showed a large increase at the lower end of the wage distribution, while the middle and upper part of the wage distribution remained intact. Other measures of inequality showed a similar direction. The poorest 10 per cent of wage earners saw an almost 40% increase in their share of all wages received. The study did not find any evidence that the new minimum wage had a negative impact on employment or higher degrees of informality.

Legal minimum wages are a frequently used social policy intervention in the EU and beyond. Four out of five EU member countries set the minimum remuneration that any employer is required to pay to workers. Minimum wages now exist in 90 percent of the 187 ILO member states. Despite being a widely used social policy intervention, minimum wages are still controversial. Supporters say it increases the standard of living of workers and reduces inequality. Opponents of the minimum wage say that it increases unemployment, particularly among the unskilled workers, and can increase undeclared work. Empirical evidence overall says that minimum wages have been successful in improving wages of the lowest paid with very small or no negative effects on employment if introduced at cautious levels and incremental steps.