People are willing to exchange their money for something they value, if they value the latter more than the money they have.
Conversely, people are willing to exchange something they have for money if they value money more than what they have.
Most us trade our time for money, and we make this decision based on how much we value the money we are offered in exchange for our time, certainly if we have the luxury of choosing between commitment and passivity.
In underdeveloped and developing economies in particular, where the supply of labor is much greater than the demand for it, where the price of wages is set by these two forces, with no outside intervention by the state or any other authority, it is highly likely that wages will be unfairly low. This applies to specific sectors in developed economies as well.
Employers tend to keep business costs to a minimum, including employee wages.
The minimum wage is therefore an instrument used by governments around the world as an element of the social protection system. It aims to alleviate poverty and meet the needs of employees and their families.
The introduction of the minimum wage intended to set a threshold, a level below which employees’ wages should not fall. It is the minimum compensation that the employer gives to the employee for the work or service they provide.
Determination of the level of the minimum wage is based on the standard of living, therefore the minimum wage is considered to contribute to poverty alleviation and the establishment of social justice by improving the lives of women and men working at low wages.
the minimum wage was sanctioned by law in 2010, the Labor Law. The Government of Kosovo in 2011 with a government decision set the minimum wage at two levels, depending on the age of the employee – 130 € for persons under 35 years of age and 170 € for persons over 35 years of age.
At this level is the minimum wage in Kosovo even today after 12 years. Raising the minimum wage to € 210 was proposed in 2016 but the Government did not approve it. Then in 2017 it was proposed that the minimum wage be raised to € 250 again the Government did not approve it although the labor law provides that wages be reviewed every year.
When determining the level of the minimum wage, one of the factors that must be taken into account is the cost-of-living.
Harmonized Index of Consumer Prices January 2011 – September 2021 (2015 = 0), annual percentage price changes
The graph shows that there has been inflation, i.e. consumer prices have increased year after year.
From 2011 to 2020, inflation increased by 9.1%. Inflation is known to devalue wages, especially fixed wages. The purchasing power of wages decreases in proportion to rising inflation, whereas the minimum wage to this day is the same as it was in 2011.
Adding the inflation of the end of 2021 and the beginning of 2022 and clearly see that the purchasing power of wages has diminished severely.
In light of these facts, we can conclude that the minimum wage should definitely be increased regardless of whether it will have an effect on state spending or not.
This is in order to increase the welfare of employees many of whom have not had a pay raise for at least the last 10 years.