#Official Commentary of Marina Zheynova on consequences of minimum wage increase in Ukraine
I wrote about the Ukrainian budget for 2017 earlier. I have to repeat one sentence. ʺIn fact, the Ukrainian draft budget for 2017 is based on that the financial burden will be put, as usual, on ordinary citizens with a reduction of social obligations to them. Regional hospital and schools maintenance costs, which should be payed by local budgets in the context of decentralization, will be passed on citizens and it is all apart from a pressure on business, an excise taxes increase, a unified social tax revision.ʺ
What do we see? We see another ‘sensational’ minimum wage increase to 3200 hryvnas in Ukraine. “I will make every employer to evaluate an employee’s work properly. It is okay, if a business owner earns a bit less money and his employee receives much more,” Groysman said.
The government will check how populism of the Ukrainian Cabinet of Ministers is carried out in regions. Even a special contact center, where ‘offended citizens’ can complain about their employers, will be created.
And here is a simple example, which explains why I referred to my own quotation about the Ukrainian state budget for 2017 in the beginning of this commentary. Let us take the education sector. Funding of the education system had been reduced, the minimum wage has been increased, and a wage scale is not revised. And what do you get? A part-time job, a part-time working week, a transition to 0.5 or 0.75 wage rate, etc. As the saying goes, what goes around, comes around… Even a Ukrainian media have started to write about it.
And one thing leads to another. Utility subsidies are tied to the minimum wage. Consequently, the subsidy amount will be much less. Apparently, everything is done for ‘well-being’ of the citizens in Ukraine. Analyzing the topic of subsidies and revealing machinations of Ukrainian government earlier, I could not safely say what the point was. And now, everything is becoming apparent after the minimum wage increase.
All these changes are a result of an adoption of such bills as “Law on amendments to certain legislative acts of Ukraine No. 5130” and “Law on Amendments to the Tax Code of Ukraine Regarding the Balancing of Budget Revenues in 2017No. 5132” by the Verkhovna Rada. Also, these changes have affected government-subsidized students, pensioners and entrepreneurs. The Pension Fund will not use an ‘average wage’ as one of the components of calculation formula for the calculation of pensions, but a ‘manually’ established one by the Cabinet of Ministers. Notice that indexation of pensions is linked to this indicator. Draw your own conclusions.
Salaries of able-bodies persons are tied to a living wage instead of the minimum wage, that is salaries have been lowered. A minimum premium has been automatically increased with the minimum wage increase, therefore, physical entities – entrepreneurs and employers will have to pay almost two times more.
At the same time, powers of the authorities in employment and wages have been extended. Local governments are authorized to inspect enterprises now. Also, employers’ responsibilities have been tightened by increasing penalties. Anyway, nothing is out of the ordinary in Ukraine. Revenues of ordinary citizens have remained the same as they were before. Against the backdrop of the minimum wage increase, the main thing is that queues in employment centers do not increase in connection with mass staff reduction.
Marina Zheynova, the DPR People’s Council deputy