In Ukraine, in 2024, the minimum wage may be increased from UAH 6,700 to UAH 7,651, according to the calculations of the Ministry of Economy. This will cover the price increase in 2023, but it will not compensate for the loss of real income for 2022. Raising the minimum wage will also lead to an increase in the average wage. The experts are sure: the planned increase is not enough: this will not stop the growth of poverty and will not affect the well-being of Ukrainians.
In addition, Ukraine will soon have to completely change the approach to determining the level of wages. If you do not achieve its sharp growth, you will not be able to compete with European employers. About how much Ukrainians will earn and how to view the approach, read the material GLOBAL HAPPENINGS.
How will the minimum wage be raised and will it help?
“Ukrainians in 2024 will lose 50% of income, and they are compensated only 14%“, – commented on the proposal of the Ministry of Economy, former Minister of Social Policy Andrei Reva. According to his calculations, the total level of price growth for three years (2022, 2023 and 2024) will be about 50%. And in order for the minimum wage to compensate for such inflation, it should increase next year by the same 50%, but the government actually turns a blind eye to last year’s price increase, indexation will be carried out only by 14% (the projected level of price growth for 2023).
The minimum wage in 2024 will be UAH 7651, reported in the Federation of Trade Unions based on the results of discussions at the Ministry of Economy. Such an increase will not make it possible to compensate for the rise in prices and stop the increase in the level of poverty, candidate of economic sciences Lyudmila Cherenko is sure. “Of course, a 14% increase in the minimum wage will not reduce or mitigate the growth of poverty. But I do not think that there is an opportunity to raise it more significantly,” the scientist explains in a commentary to GLOBAL HAPPENINGS.
Already, the actual cost of living for an adult is 7782 UAH. per month. That is, all those who receive less cannot pay for a basic set of products, goods and services and are below the poverty line. Both the current and the new minimum wage will not solve the problem of poverty among workers. The minimum wage will be fixed at a level below the poverty line.
There are questions about the very methodology for determining the minimum wage. The good news is that the decision was discussed with the trade unions, the bad news is that the Ministry of Social Affairs was completely excluded from the discussion. The proposal was developed by the Ministry of Economy, and the calculations were sent to the Ministry of Finance. Reva is surprised: How is the most important social indicator determined without the participation of the Ministry of Social Policy?
A few years ago, the issue of employment was transferred from the competence of the Ministry of Social Affairs to the sphere of competence of the Ministry of Economy. On the one hand, the labor market is derived from the economic situation, and on the other hand, the function of the minimum wage is primarily to protect working Ukrainians. Previously, the Ministry of Social Affairs and the Ministry of Finance, regardless of personalities, were constantly in competition. The Ministry of Social Affairs wanted to distribute more money and increase social guarantees, while the Ministry of Finance wanted to save money and prevent budget imbalances. Now the economic bloc does without the participation of the Ministry of Social Affairs.
Ukraine needs to abandon cheap labor and change the model
Ukraine should gradually move towards significantly raising salaries, Cherenka says. Prior to this, our competitive advantage was cheap labor. As a result, Ukrainian highly qualified engineers earned several times less than their colleagues in the nearest EU countries. This situation must be abandoned.
“If we decide to switch to a new economic model, which will not be based on low wages, and this is exactly how it should be if we go to the EU, we must take the first steps,” the scientist says. With an increase in the minimum wage, average wages will also gradually increase. The minimum wage is the only direct mechanism for the state to influence wages.
After the end of a full-scale war with the Russian Federation, the state must calculate the risks, the possible economic effect, find funds for state employees and significantly (several times) increase the minimum wage. The process of raising Cherenka compared with walking on the edge of a knife. On the one hand, a sharp recalculation can harm small businesses and provoke an uncontrolled rise in inflation, on the other hand, achieve the return of a significant part of the refugees to Ukraine without raising wages and retain the able-bodied population from migration after the war will be difficult.
Reva believes that already now it is necessary to significantly increase the minimum wage, at least to the level of UAH 10,000. The ex-minister is sure that this will increase the purchasing power, the Ukrainians will spend the money received on goods and services produced domestically, which will make it possible to compensate for the costs. Cherenko recalls that in 2017, when the minimum wage was doubled from UAH 1,600 to UAH 3,200 per month, the result was positive. This made it possible to increase revenues to the state and local budgets, the Pension Fund and reduce the level of poverty.
“It turns out that the minimum wage was actually frozen for two years, while the maximum wage was not limited. Look at the salaries of members of supervisory boards, managers of state enterprises. Reva.
For comparison, the minimum wage in Poland is 30.5 thousand UAH (in terms of zlotys). There is a risk that after the end of the war, some men will go abroad in search of high-paying jobs. The only way to prevent such a situation is to create decent working conditions within the country.
Source: Obozrevatel
I am a journalist who writes about economics and business. I have worked in the news industry for over 5 years, most recently as an author at Global Happenings. My work has focused on covering the economy news, and I have written extensively on topics such as unemployment rates, housing prices, and the financial crisis. I am also an avid reader and have been known to write about books that interest me.
