Iancu Guda: The repeated increase of minimum salary generates negative effects on short term

The repeated increase of minimum salary generates negative effects on short term, which will persist against the improbable positive effects on the long-term, according to an analysis of Iancu Guda, president of Financial-Banking Analysts Association from Romania (AAFBR) and lecturer at Romanian Banking Institute (IBR).  

„The minimum wage was hicked 12 times in eight years, the new governing plan indicating three increases until 2020, when it will reach RON 2,400, compared with the current level of RON 1,450. Thus, the share in the minimum salary on average level increased by 27 percent in 2008 and can exceed 60 percent until 2020. This dynamics will confirm that the consecutive increases of the minimum salary on economy will be realized in an increased rhythm, which wasn’t supported by the evolution of production registered at the level of the business environment. In this context, I’m expecting negative effects in the short term, caused by the non-sustainable increase of the minimum salary: the discouragement of entrepreneurship, the increase of the differences between big and small firms, the increase in the unemployment for youth,” said Guda.

According to him, the reality of the last years points to the lack of the structural basis that supports the spread of some possible effects on the medium-long term, as well as the increase in the consumption that leads to the sustainable increase of the internal production, based on the solid financial management.