The Voice of Entrepreneurs Association published a detailed analysis that reveals the true face of the minimum wage increase for the current year.

Although in political circles every increase in the minimum wage is celebrated as a major step forward for workers' rights and improving citizens' standard of living, the actual calculation shows a completely different picture. It is well known that politicians regularly use the growth of the gross amount as the main argument for their concern for the most vulnerable layers of society in election campaigns and public appearances, but rarely does anyone mention who takes the biggest piece of the pie.

According to the mentioned analysis, behind the resounding promises of higher earnings lies a mechanism by which the state apparatus quietly and exceptionally efficiently fills its own budget, leaving employers with enormous financial burdens.

Exposing the mathematical deception

The figures from official payroll calculations for a single person in Zagreb explain this situation best and most simply to everyone who is not involved in accounting, states the Voice of Entrepreneurs Association. When the state announces that the gross minimum wage is rising by 80 euros, that is, from 970 to 1,050 euros, the worker will never see that amount in their current account because gross is not money paid directly into their hands. Due to the system of contributions and taxes, the actual increase in net income amounts to a modest 44 euros. At the same time, the total cost that the employer must allocate for that same worker rises from 1,130 euros to as much as 1,223 euros. Simply put, for the worker to feel a raise of 44 euros in their wallet, the employer must provide the state and the worker with an additional total cost of 93 euros compared to the previous calculation.

What is most surprising in the whole story is the data on exactly how much tax burdens are increasing on such small and sensitive incomes. Income tax on the minimum wage jumps from the previous 47 euros to more than 61 euros, which represents an incredible increase of 30 percent in just one year. This imbalance creates a dangerous economic circle in which labor costs drastically become more expensive for price-sensitive sectors such as hospitality, trade, tourism, and service activities. In order to cover this sudden blow to business operations, entrepreneurs are forced to raise the prices of their products and services, which directly fuels further inflation. At the end of that spiral, the already modest worker raise of 44 euros loses all purchasing power at supermarket checkouts.

The deputy president of the Voice of Entrepreneurs Association, Bruno Samardžić, clearly stated that entrepreneurs are not against higher wages, but against ever-higher taxes and levies on labor that literally suffocate the real sector. The core of the problem lies in the fact that the personal allowance, that is, the non-taxable part of the salary which currently amounts to 600 euros, does not even remotely keep pace with the speed at which the minimum wage is rising. In practice, this means that the state is systematically and deliberately increasing its share in every paid worker salary. Instead of relieving labor and enabling citizens to live with dignity by exempting the lowest incomes from heavy taxation, the government continues to treat entrepreneurs as an inexhaustible source for financing its own enormous apparatus.

In conclusion, it can be stated that the current policy of regulating the minimum wage is a prime example of political marketing that successfully masks growing tax pressure. It is known that Croatia has for years struggled with slow bureaucracy and problems with drawing money from European funds, and some of those funds often even have to be returned. Instead of cutting its own costs and implementing the necessary public administration reforms, the state has chosen the path of least resistance and decided to compensate for losses by digging deeper into the pockets of workers and employers. The increase in the minimum wage has thus in reality turned into the most elegant way to, under the guise of social justice and care for the poor, tax most heavily precisely those with the lowest incomes, ensuring the state a real and unobstructed extra profit.