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5 Reasons Romania Needs To Move Away From a Minimum Salary Economy

No matter how much I try, I can't stay away from Politics and Economics. The basics have remained unchanged since time immemorial; amass personal wealth and trade it for influence, or vice-versa. We're still living that same old rat race, and to some extent humanity always will be. I'm not going to say that there's a utopian solution that will change things, but I do think that there are certain man-made mechanisms that level the playing field, even if only slightly.

One such mechanism, alien to Romanian employees and employers alike, is remuneration in the form of an hourly wage.  I've looked through the Romanian Labour Code and as far as I was able to find, there is nothing stopping employers from offering salaries based on an hourly wage. What does make things complicated is that, in Romania, the minimum wage is defined in terms of a monthly salary. Whereas the minimum wage in Ontario is $10.25/hr, the Romanian 'minimum salary according to the economy' is 800 lei (RON) per month or about $250 CAD. This translates into a paltry 5 lei/hr (or $1.55/hr CAD).

Here's a major difference as far as the interpretation of the minimum wage in each respective country; the Romanian version sets in terms of a monthly salary, while the Canadian (and US) versions correspond to the minimum hourly wage. In Romania this means that the employer is legally bound to paying the monthly salary regardless of hours worked. This means employees could easily be exploited when they are asked to work overtime, but it also means that the employer is losing money when paying an employee for days they may not be needed at work. Here are a couple of examples:

A bar owner asks his employees to work 8 hours a day. This doesn't include the one hour of lock-up at the end of the night. In the course of the month, the employer is getting about 20 hours of free labour. On the flip-side, if the same bar never has customers after 10 pm, and the employees are sticking to the contract and staying until 11 pm or midnight, the bar owner is paying out unnecessary overhead costs in keeping the bar open and paying employees to sit and do nothing.

I've heard horror stories on both sides about this. Employees who are contracted to work until closing time (usually 1am) but the last client rule takes precedence and this means they get stuck until 3 am - on the same salary. Or just as bad, a dead store/restaurant/bar getting babysat by two employees who are guaranteed their wages whether or not there are customers or work to be done. A restaurant owner here in Cluj told me how easy it is to be held hostage by a summer worker who gets bored by the job, leaves after a week and doesn't come back to sign the contract termination notice. This means that the employee remains on the books and the restaurant owner is required to pay the monthly tax to the government for that employee's salary until the termination is signed.

The big problem I have with this minimum monthly salary thing is that it leaves no room for flexibility. If I'm a summer student who wants to save up for a car, I'm going to look to work 60+ hour weeks. This means I'm looking at two, maybe even three jobs. I don't need the guarantee of a salary, but I need to know that I can get hours from my employer. If I tell my employer I'm willing to spend 12 hours a day at work the employer might be happy not to hire another person to cover two shifts. Likewise, if I just need a bit of disposable income and I'm happy to work only ten hours a week, the option is there.

The issue here isn't only about the amount of money paid out, but also that it's framed around a discussion of exploitation, not one of opportunity. I understand that the guarantee is necessary in a small economy like Romania's where opportunities to make money in somebody else's enterprise are few and far between, but I find it to be a very short-sighted policy.

There are at least five good reasons Romania should switch from the monthly salary system to one based on hourly wages in the retail or manufacturing sectors.

1. There is no law limiting business owners from paying wages above what the minimum hourly wage. This increases competition among business owners to attract new employees.

2. There is nothing stopping job seekers from searching for employers who pay a decent hourly wage. While there would be businesses paying out the minimum, the competitive ones would not.

3. The small business owner has more incentive in starting up if there's a guarantee that overhead can be limited in the form of part-time staff paid by the hour. An hourly wage instead of a salary for employees offers that guarantee.

4. The employee gets a better bang for the hour and more flexibility with their schedules, especially if overtime is involved.

5. There would be no reason for employers to by-pass the law by paying salaries in part 'on paper' and in part under the table to avoid paying out employment taxes.

The last point especially is a hot topic here. Because the government requires a very steep monthly tribute for each employee registered with the company, many employers offer the 'minimum salary according to the economy' and the rest is paid out in cash, as per a friendly agreement. You can imagine what kind of doors that leaves open for exploitation. In fact, that's exactly what salaries do to people; They lose their rights to overtime, holiday pay, time and a half, or any other conveniences afforded when exchanging hours for money. You work as long as it takes to get your job done and this doesn't exclude 16 hour days.

As far as I can tell, what's happening here involves the interpretation of the law rather than its limitations. There are articles clearly stating that remuneration can be offered in the form of hourly, weekly, or monthly wages. But because there is an expected 'minimum salary per economy' each time an employment contract is discussed, talking about hourly wages becomes a moot point.


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