(Bloomberg) -- Serbia’s president is promising to put more cash in workers’ wallets, a goal he may struggle to achieve as he pivots away from years of austerity to solidify his ruling party’s position before elections next year.
With wages spiking by double digits across ex-communist Europe, Aleksandar Vucic’s administration is promising to raise the average in Serbia to 500 euros ($550) a month by the end of this year through a mix of legislation and support for the dinar by his allies at the central bank.
While welcomed by voters, who look set to overwhelmingly re-elect Vucic’s Progressive Party in the ballot expected by April, the government announced it will raise public-sector salaries. It will also have to convince private companies that employ 1.56 million workers to help.
“The 500 euro average wage has become a paramount political goal,” said Milojko Arsic, chief economist at the Foundation for the Advancement of Economics. “But even a combination of efforts including a higher minimum wage, a public sector wage increase and further dinar gains may not be enough to get there.”
Serbia isn’t the only country in eastern Europe where a ruling party is promising workers an election-year bonanza. In Poland, the conservative government has pledged to almost double the minimum wage by 2024 if it remains in power after an Oct. 13 vote. Opinion polls indicate it will.
Vucic’s Progressives have a strong lead, with 52% support, according to a survey by the Faktor Plus Pollster from July and August. The opposition Alliance for Serbia was a distant second with 11%. In a move that may bolster that advantage, Premier Ana Brnabic announced public pay rises of as much as 15% from November, as well as more spending on pensions and infrastructure.
“We have surplus revenue and we want to give back part of that to our citizens,” she told journalists Monday.
But the largest former Yugoslav Republic has much further to go to catch up with the richer West. As many as 75% of all Serbian workers make less or close to the nation’s current average of 456 euros, and gross domestic product per capita was just 40% of the European Union’s last year, a fifth less than the bloc’s poorest member, Bulgaria.
Ljubisav Orbovic, who leads the biggest trade union in Serbia, has said that low wages are the reason why as many as 50,000 Serbs emigrate seeking work in richer countries each year.
The problem has been compounded by years of cost cutting under an agreement with the International Monetary Fund to stabilize state finances. And while Vucic has twinned his promise of higher living standards with a vow to lead his country into the EU by the middle of next decade, not all voters are convinced.
His dominant position and policies that his critics say smack of authoritarianism have also sparked protests against his administration and some opposition groups are planning to boycott the vote.
Goran Nikovic, a 37-year-old security guard making the minimum, said he didn’t expect the wage hikes to help his situation. A voter for Vucic five years ago, he said he’s waited for better living standards too long to expect a change now.
“They first raise all prices and then give you somewhat higher wages, and when you go to a shop, you see that prices have gone up by 10% to 20%,” he said. “They’re talking about the 500 euros just because of the elections.”
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