Minimum wage / Why it does not cross the poverty line – What ELSTAT data show

The latest ELSTAT figures will no doubt come down to reality for the Government and the Prime Minister, who continue to celebrate both the latest increase in the minimum wage and the cumulative increases of the last four years, which have, it is true, increased the minimum wage by almost 27%.

Despite the fact that the increases granted especially in the last two years covered the losses of the workers from the general level of inflation, the data of ELSTAT prove that they passed below the bar of inflation of food and basic food items, which exceeded 30% . In other words, minimum wage earners (about 570,000 workers) continue to be below the poverty line and belong to the poorest 20% of the population who still spend nearly 60% on food and housing. In fact, in 2023, 16% (of the total 20%) of the population lived in conditions of material deprivation, with the percentage being increased compared to 15.5% in 2022.

Gains and losses

However, let’s take a closer look at how much wages have risen over the past four years and how much, respectively, the key economic figures have grown over the same period, to get a full picture of whether and how much the real lives of those on the lowest wages have changed.

* In 2020 and 2021, the New Democracy government did not increase the minimum wage, with the then finance minister G. Staikoura arguing that the increase given by the SYRIZA government in 2019 was too large (11%) and covers the needs of employees for the next three years!

* From 1.1.2022 the minimum wage increased by only 2% and amounted to 663 euros gross, with the result that the net salary rises from 558 to 569 euros.

* With inflation then running at double-digit rates, the government was forced into a corrective increase and from 1.6.2022 the minimum wage increased by 7.5%, with the minimum wage threshold reaching 713 euros gross (612 euros net) .

* In May 2023 the minimum wage increased by 9.4% and reached 780 euros (666.85 euros net), while from April 1, 2024 the minimum wage increased by 6.4% and rose to 830 (705.96 euros net). The minimum wage in the last four years increased by almost 27%, as it went from 650 euros to 830 euros gross.

In the same period, i.e. from 2020, GDP growth cumulatively reached 20.5%, while inflation increased by 16.0%.

However, according to ELSTAT, from the end of 2020 to the end of 2023 the cumulative (nominal) increase in food prices exceeds 30% (30.56%), while, as noted, “the share of the average expenditure on items food and non-alcoholic beverages and housing of the households of the poorest 20% of the population amounts to 58.1% of household expenditure (the corresponding share of the richest 20% of the population amounts to 25.6%).

Below poverty line

The increase in the minimum wage from April 1st to 707 euros creates an annual income of 9,889 euros for 1/5 of the workers in the private sector. However, according to ELSTAT, the poverty threshold amounts to 6,030 euros per year for a one-person household and 12,663 euros for households with two adults and two dependent children under the age of 14 – and is set at 60% of the median total equivalent available of household income, which was estimated at 10,050 euros.

Finally, we should note that with the new increase of 50 euros gross per month, the net earnings correspond to 707 euros and the monthly increase, with the deduction of contributions and tax, limits the increase to between 32 and 37 euros. It is typical that the annual tax increases from 55 to 188 euros for employees without previous service or with a previous service of more than 9 years, while, correspondingly, the contributions increase from 7 to 9 euros per month and up to 126 euros per year. And of course (and) the latest increase does not contribute to the increase of wages in the highest minimum wage scales, due to the minimum sectoral contracts that are in force, with the result that wages are kept “frozen” for the majority of workers and this despite return of the three years from the beginning of the year.