The ILO SRO-Budapest Bulletin > Newsletter 2-95

Albania's First Steps towards Tripartism

The conference was an important achievement. The first survey carried out among all industrial enterprises in Albania made before the conference by ILO-CEET and INSTAT revealed some alarming trends. Average wages were still very low, below all estimates of the subsistence minimum, and condemn a significant proportion of Albanians to extreme poverty, increasing the risk of social conflict.

As the main causes of low efficiency, management, especially in state enterprises, cited low wages, along with difficulties in selling output. The increasing gap between public and private wages is a second major source of worker discontent. Nearly 50% of state enterprises cited low wages as the main cause of their losing newly trained workers. Also, the official minimum wage fell in real terms between 1992 and 1994 to less than 55% of the estimated subsistence minimum, and fixed compensations for price increases did not match inflation. As a result, the official minimum wage lost its role as an anchor for social cohesion and as a protection for low-paid workers.

According to most observers, these trends were caused partly by the restrictive stabilisation programme implemented in 1992 which involved price liberalisation and a tight incomes policy aimed at limiting inflation. Various means were used to curb wage growth: direct limits on average wages, wage tariffs, and irregular minimum wage adjustments.

This led both to social unrest - particularly in the budgetary sector - and a series of economic distortions, notably a fall in consumption, a disconnection between wages and productivity, and delays in restructuring. The tax also encouraged a shift to non-wage forms of remuneration, so encouraging the informal economy.

Intensive discussions were held on alternative wage policies. There was general consensus on the urgent need to raise the lowest wages and to link them more closely to microeconomic performance in order to increase living standards, motivation and productivity. Most state and several private enterprises fix their lowest wages not much above the minimum wage, rendering it particularly important as an economic and social instrument.

Recent decisions to increase the minimum wage may progressively help to solve such wage problems as low pay, wage gaps between public and private sectors, and insufficient motivation and productivity. One objective in the short and medium term should be to fix the minimum wage at the subsistence minimum level or above. Representatives of the Ministry of Labour insisted on the urgent need to establish an official method for calculating and regularly updating the subsistence minimum. The recently adopted Labour Code also stipulates that an official subsistence minimum should be published.

Results from the ILO-INSTAT survey also showed that the new profit-sharing legislation has brought some flexibility in wage fixing. Participants agreed that this course should be pursued further in order to link wages more closely, not only to profits but to productivity and other measures of the quality of work.

Nevertheless, new payment systems cannot survive without progressive relaxation of the prevailing restrictive incomes policy. The economic and social problems to which this policy has so far led have clearly been underestimated both by the Government and international organisations.2 Moreover, it seems impossible to reduce public and private sector wage differentials without the abolition of public sector wage regulation. The participation of trade unions and employers¡ representatives in the wage bargaining process is crucial.

In this regard, intense discussions were held on different ways to promote Social Dialogue in Albania. The presentations of Lajos Héthy, Political State Secretary at the Hungarian Ministry of Labour and László Popper, Director of its Wage Department, helped participants better to understand the conditions needed for developing tripartite wage bargaining in Albania.

During the conference, the UNDP representative office in Tirana announced its decision to fund a second phase of the project in 1996. This will help the Albanian authorities continue to reform wage policy and promote more negotiated wage policies with the intention of creating a tripartite wage committee next year. The latter step entrenches the ongoing wage bargaining process. This is certainly the most concrete result of the project so far. The second phase will be directly based on strong co-operation between Hungarian and Albanian wage experts from the respective Ministries of Labour, employer and trade union organisations and statistical offices.

On the occasion of the ILO-EU symposium on wages held in Budapest (see cover story), a co-operation agreement was signed at the Parliament between the Minister of Labour of Albania, Engjel Dakli, and the new Hungarian Minister of Labour, Péter Kis on wages and other industrial relations issues.

The Prime Minister of Albania, Mr Meksi, closed the conference with a speech which insisted on the urgent need to reform wage policy, and announced his decision to shift the responsibility for it from the Ministry of Labour to his cabinet, so relocating the entire wage department. Although this decision underlines the political will to solve wage problems as soon as possible, participants also agreed that the most promising form of wage policy in terms of efficiency and equity cannot be promoted at the microeconomic level without the involvement of the social partners in wage-fixing at the branch, regional and enterprise levels.