In its latest report about Macedonia, the International Monetary Fund warned of risks and unwanted effects after the Macedonian government decided to increase the minimal wage in order to improve the living standard of workers with lower wages.

„The net minimum wage has been raised by 44 percent cumulatively since 2017 while productivity growth has been low. The minimum wage is estimated to reach 53 percent of the average wage in 2020, which is high by regional standards. These increases may not be effective in reducing overall poverty and may have adverse effects on formal employment and competitiveness“, is state din the report.

The report stresses that even though the increase of minimal wage can decrease poverty among workers with lower wages, it will not influence the overall in the country.

“A minimum wage increase is not a well-targeted measure. In 2018, the risk-of-poverty rate was 22 percent for the population overall, whereas for employed persons it was about 9 percent.“, state the IMF

They also state that the generous minimal wages can instigate informal economy.

“If minimum wages are too high compared to labor productivity, they could disincentivize employers to create formal jobs” informs the report