In order for the average salary to rise to 1400 euros by the end of 2027, the total increase would have to be about 59 percent
President of Serbia Aleksandar Vučić he stated that the plan is to increase both pensions and minimum wages by the end of the year, and that, if his ideas are accepted, the average plata in Serbia in December 2026 will amount to 1.147 euros, while by the end of 2027 it could reach 1.400.
However, experts believe that such an increase is not realistic, and that the government should not stimulate employers to pay their employees minimum wages, writes Dunja Marić for The new economy.
"Now the minimum wage is 457 euros, I want to raise it to 500 and 550 euros," said Vučić, adding that currently around 95.000 people receive the minimum wage.
In order to relieve the burden on employers, he announced the possibility of increasing the non-taxable part of wages or reducing taxes and contributions on salaries.
The salary would have to increase by 59 percent
The average salary in February, which is the latest data, was exactly 103.519 dinars, which is 883 euros.
For the average wage to rise to 1.147 euros by the end of 2026, it would require a 30 percent increase over the next 18 months. To reach 1.400 euros by the end of 2027 - the increase would have to be another 22 percent in one year.
In total, the increase from now until the end of 2027 would have to amount to about 59 percent.
Considering GDP, economic growth, inflation and other economic indicators, an increase of 59 percent is large and not realistic, according to economist Danilo Šuković.
"The crucial question is not how many euros the salary will be then, but what the standard will be compared to today's. That is a more important factor. It is possible that the salary will be higher, but that living conditions will be worse, as happened in previous years when the salary in euros increases, pensions in euros as well, but not the standard of living. This is due to the freak policy of the exchange rate, because it is fixed, as if stable. How can it be fixed and stable if we do not have a strong export economy? And the export industry is everything weaker precisely because the exchange rate is disincentive, so if you sell a product for 100 euros today, and the next, and even those there, and your costs have increased - that's how you go into loss. That exchange rate policy has brought the Serbian economy to the brink of collapse," Šuković explains.
On the other hand, the minimum is currently around 53.500 dinars, or 457 euros. To reach 500, the minimum wage would have to increase by about 9,4 percent, and by an additional 10 percent to reach 550 euros. This means that the minimum wage would have to increase by about 20,3 percent in total in order to reach the amount that the president talked about.
The state should reduce taxes and contributions by a third
Speaking about the increase of the minimum wage, Vučić said that "it's a tough fight with Sinisa Mali on that issue."
"In the private sector, you must not put too much burden on the employer, so the state will take the burden of increasing the minimum wage on itself, by increasing the non-taxable part of the salary or by reducing taxes and contributions," said Vučić.
Taxes and contributions for many employers are currently high. When it comes to the minimum wage, for the aforementioned 53.500 dinars, the employer pays a total of slightly more than 70.000, which is the amount that includes taxes and contributions. When it comes to the average salary, it is in the gross amount of 142.908 dinars, while the net amount, which falls on the account of the worker, is almost 40.000 less - 103.519 dinars.
More precisely, a tax of 10 percent is paid first. Furthermore, contributions for pension and disability insurance are paid, namely 14 percent at the expense of the employee and 10 percent at the expense of the employer. Then, contributions for health insurance amount to 5,15 percent at the expense of the employee and the same amount at the expense of the employer. Finally, unemployment contributions are 0,75 percent at the expense of the employee.
The non-taxable part of the salary this year amounts to 28.423 dinars, which means that taxes and contributions are calculated on the rest of the salary.
In order for the increase of the minimum to 550 euros to happen without additional burden for employers, the non-taxable part would have to increase, but according to Dragoljub Rajić from the Business Support Network, these are "the most ordinary calculations".
"The problem is that there is a constant counter-policy in Serbia. The minimum wage should not be a measure we are discussing at all, the minimum wage should not become a standard. It is a temporary measure in all of Europe, for one year, when the company is in some financial problems, so the state gives it a year to pay the workers that salary without taxes and contributions. In almost all European countries, the minimum wage is completely exempt from taxes and contributions. In our country, politicians who know nothing about the economy and do not know how things are regulated in other countries they grasp for that minimum as if it were some kind of great service," says Rajić for Nova Ekonomija.
The amount of the minimum wage and other issues concerning it should be dealt with by employers' associations and trade unions, adds our interlocutor, not the president. When it comes to this topic, he is incompetent.
"One more thing, if the state and its representatives stimulate people to give workers the minimum wage, they turn them into social cases. It can be 100 euros higher, but it is a temporary measure. We need to create conditions in which we will increase wages and strengthen the economy so that as few companies as possible give the minimum wage, and here we have a completely opposite policy and constantly talk about some increase in the minimum wage," says Rajić.
And if the state really wants to do something, the interlocutor of New Economy believes, then it should reduce taxes and contributions by a third.
"This would reduce the gray economy, relieve the burden on employers, who could then pay higher net wages," says Rajić.
According to him, the reform of the tax system would create room for employers to increase their wages, which could reduce the departure of people abroad.
"One hundred euro increase is not enough, when prices and inflation are taken into account," concludes Rajić.
Pensions lag behind salaries
Speaking about pensions, President Vučić said that their growth did not follow the growth of salaries.
"Pensioners will be very satisfied because they will receive a significant increase in their pensions before the end of the year. We owe it to them because the increase in pensions did not follow the increase in wages," said Vučić.
Pensions are currently significantly lower than salaries. More precisely, the average pension in Serbia is about 50.600 dinars. So, less than 50 percent of the average salary. Associations of pensioners, by the way, have been asking for the pension to be at least 60 percent of the salary for years. In fact, the average salary and pension were in this relationship when the Serbian Progressive Party came to power in 2012.
Meanwhile, the average wage rose by 150 percent in nominal terms, while pensions increased by about 100 percent (due to the large rise in prices during the period, the increase in people's standards was much less than that). The increase in pensions could be higher, but at the end of 2014, the government reduced the amount received by the oldest citizens. More precisely, pensions up to 25.000 dinars were not reduced, and those up to 40.000 were reduced by reducing the difference up to 25.000 by 22 percent. Finally, pensions greater than 44.000 were reduced by reducing the difference up to 40.000 by 25 percent. Fiscal consolidation lasted until the beginning of 2018.
In the first month alone, according to an earlier calculation by Istinomer, the state took 17,2 million euros based on reductions to pensioners. When you take into account the reduction of pensions and the money that pensioners did not receive based on the adjustment of pensions twice a year, the total amount of 74,58 billion dinars, or 612,4 million euros, is what the fiscal consolidation cost pensioners.
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