Recently, the EVEA, an association of small businesses, came out with a proposal to abolish the national minimum wage in Estonia or replace it with a regional minimum wage. As the leader of the Estonian Trade Union Confederation, I consider this idea very dangerous. It is precisely in small and medium-sized enterprises that employees are not as well protected against arbitrary action on the part of the employer as they are in large companies.

The minimum wage is not designed to bully businesses. It is necessary to ensure that no one working full-time has to live in poverty.

Workers are left penniless

You would think that in Estonia everything is fine with paying wages. Unfortunately, this is not true. Many workers lose their money and this happens often. One of the most striking trends in 2024 was an increase in labour disputes, with a particularly high number of violations in small and medium-sized enterprises. They either delayed paying wages or failed to pay them at all. The total amount of claims amounted to €18.2 million.

Why am I talking about smaller businesses and the concerns of workers about getting paid? But because even now, when the minimum wage is compulsory, I have seen employment contracts where a full-time worker does not receive the minimum wage on a monthly basis. This is happening here and now - in 2025 in Estonia.

Abolishing the national minimum wage would further increase the risk of workers being pressured into accepting a wage that is not enough to live on. This is particularly the case in companies where workers have not formed a union and cannot collectively defend their rights. And it is also true (as the EVEA itself recognises) that in micro-enterprises with up to ten employees it is difficult for workers to form a union and make themselves heard by their employer.

Raising the minimum wage will help workers cope and the state meet its budget targets

The EVEA came forward with its proposal at a time when the situation is already tense. The Estonian Institute of Economic Research has just reported that there has never been a greater divergence between the satisfaction of the wealthier and the less secure with their economic situation. According to the survey, only those earning more than €2500 a month feel financially secure. People below this level say that after having to pay for essentials such as food and bills, they are unable to save or afford anything.

Let me remind you that the minimum wage has doubled in the last ten years, rising from €390 in 2015 to €886 per month for full-time workers. This is just over 35 percent of the desired wage level for workers.

Minimum wage reduces pay inequality

The number of minimum wage recipients in Estonia has remained stable at around 21,000 workers, and depending on the year, up to 37,000 Estonian workers receive it or close to it. In addition, a number of state benefits, such as parental benefit and unemployment insurance, are linked to the minimum wage. This means that tens of thousands of people in Estonia are directly affected by the minimum wage, in addition to those receiving the minimum wage.

We also know that if wages are too low, people have no motivation to work. Wage poverty means that people work but are still unable to support themselves and their families. It is very difficult for the worker to get out of this situation, and family poverty gets worse.

The number of people unable to manage their daily expenses has risen from 15% to 20% in a year, according to the Institute of Economic Research. They have to rely on savings or take out loans to live. According to the institute's forecast, by the end of the year one in four Estonian families could be in this situation.

A third of small entrepreneurs live in poverty themselves

It is often argued that the minimum wage is a burden on small and medium-sized enterprises and that abolishing it would help employers save costs. But the reality is different. Surveys show that almost 30 per cent of small entrepreneurs live in relative poverty themselves. This means that income security for workers is particularly poor in small businesses. A compulsory minimum wage will boost the confidence of these workers and create some wage stability in the workplace.

In addition, the shadow economy in Estonia is estimated to be around 20%. Unregistered work accounts for a significant share of this. This means that workers lose out on holiday, sickness and unemployment benefits, and the state loses tax revenue. If the national minimum wage is abolished, the risk that the shadow economy will grow further increases. This is detrimental both to workers' rights and to fair competition in business. Dishonest employers will gain an advantage over honest ones who play by the rules.

The regional minimum wage proposed by the EVEA is a shock-scheme.

As for the EVEA's suggestion to replace the national minimum wage with a regional minimum wage, this would not only jeopardise workers' livelihoods but also the regional development of the country. Lower wages outside the catchment areas would encourage an outflow of labour to Tallinn and Tartu, exacerbating regional inequalities. This is particularly problematic in smaller counties and peripheral regions where labour availability is already limited. In terms of regional policy, what the EVEA is proposing is a shock-scheme.

As a trade union leader, I therefore consider EVEA's proposal to abolish the national minimum wage in Estonia or replace it with a regional minimum wage to be socially irresponsible and divisive.

The agreement on the minimum wage is currently the most powerful collective agreement in Estonia, and applies to all workers regardless of whether they belong to a trade union or not. It is agreed by employers and the Estonian Trade Union Confederation as social partners, helping to prevent pay inequality and supporting the recruitment and retention of new workers.

In addition, the increase in the minimum wage will help to reduce the informal economy and unfair competition between businesses. For example, the Ministry of Finance estimates that this year's €66 increase in the minimum wage will generate around €17 million in additional tax revenue for the state. So, in addition to the cost, it is an investment in workers, the population and the sustainability of the state.

Time for government to restore social dialogue with trade unions

Within the EU, there are large differences between Member States in workers' collective bargaining coverage and minimum wage levels. This is partly due to the very different labour market models and income levels in the Member States.

Almost three years ago, therefore, the Adequate Minimum Wage Directive was adopted, which requires Estonia to establish a framework for setting the adequacy of minimum wages, to support collective bargaining on wages and to facilitate workers' access to minimum wage protection. The legislation also stresses the need to strengthen the role of trade unions in standing up for workers' rights and negotiating minimum wages.

Unfortunately, Estonia's labour minister does not consider these requirements of the directive binding and has publicly stated that he does not support collective agreements. This is probably why the ministry has so far neither drawn up an action plan to promote collective bargaining nor created a framework for creating conditions conducive to negotiations. This is probably also the reason for the EVEA's shock scheme proposals, which are in sharp contradiction with the Adequate Minimum Wage Directive.

As the leader of the trade unions, I would like to underline that the national minimum wage agreement agreed between the Estonian Trade Union Confederation and employers is the strongest collective agreement in Estonia, and it applies to every full-time worker in the country. No company can pay workers less than the agreed minimum wage.