Next year it is expected that the minimum wage will increase to 8 thousand hryvnia. However, this will not lead to a real increase in the incomes of Ukrainians.
The minimum will increase, the average will tighten
According to Budget 2024, the minimum wage will increase twice next year. From January 1, the minimum wage will increase from the current 6,700 to 7,100 UAH, and from April 1 – to 8,000 hryvnia.
The average salary will catch up with the minimum. According to State Statistics Service data, the average salary in Ukraine in the first half of 2023 reached UAH 16,306 (gross). It is expected that by the end of 2023 it will increase to UAH 18,527, and in 2024 – to UAH 21,809.
However, the average salary in Ukraine continues to remain “the average temperature in a hospital.” If we analyze a recent NBU survey , today Ukrainians are actually divided into rich and poor, so few people receive this average salary. As the famous joke goes, some eat meat, others eat cabbage, but on average everyone eats cabbage rolls.
According to a survey by the regulator, if in 2021 12.2% of Ukrainians saved on food, then in 2023 the share of the poorest increased to 26.2%. At the same time, the share of those who can afford any purchase increased 3.5 times – from 0.5% to 1.7%.
Also, the number of Ukrainians who can afford food, clothing, shoes, and household appliances has almost tripled. Economists, by the way, do not see anything paradoxical in such simultaneous growth of both rich and poor and explain: the mechanism for distributing national income has become even more unfair. Before our eyes, society is being reformatted and severely polarized. But the number of those whom we usually call the middle class tends to a minimum.
No shifts
Experts note that several factors work in the interests of increasing the minimum wage.
Firstly, prices are constantly rising, and the real cost of living has long been below the level of the minimum wage.
Secondly, increasing the minimum wage automatically means an increase in the flow of money into the budget from companies paying workers the minimum wage.
Thirdly, according to forecasts, economic recovery will begin in 2024, as a result of which both prices and wages will rise. And in order to synchronize this growth, the minimum wage needs to be gradually raised.
And finally, an increase in the minimum wage formally demonstrates the government’s concern for fellow citizens.
At the same time, despite the fact that the increase in the minimum wage in Ukraine is often presented as one of the steps to overcome poverty, unfortunately, this step does not help. For years, we have only heard about how Ukrainian salaries and pensions are growing, but this does not result in any more money in our wallets. The thing is that in hryvnia equivalent salaries are indeed increasing by leaps and bounds, but in dollar terms they are practically standing still.
For example, according to State Statistics Service data, the average monthly salary in 2013 was 3,282 UAH, or 410 dollars at the rate of 8 hryvnia for “green”. The average monthly salary in the first half of 2023, as mentioned above, is 16,306 UAH, which at the current exchange rate of 36.04 UAH per dollar is 452 dollars. As you can see, the growth in currency equivalent over 10 years is not so significant, although in hryvnia the average salary increased 5 times over this period.
Economists explain: it is necessary to raise social standards in the country, but in proportion to the country’s economic growth. In our country, according to various forecasts, the economy in 2024 will grow by 3.5-3.6% (this is not to mention the fall of 29.1% in 2022), and they plan to raise the minimum wage by almost 20%.
“Mechanical growth of the minimum wage is a path to nowhere,” noted Alexander Okhrimenko, president of the Ukrainian Analytical Center, KP.UA. – Without real economic growth and labor productivity, an increase in the minimum wage simply leads to a whitening of wages, an increase in budget revenues from the white part of income and to another rise in prices. That is, the purchasing power of wages will eventually even decrease.
Labor poverty plus lack of prospects
But if increasing the minimum wage not only does not help, but also aggravates the poverty situation, what option remains? Leaving the minimum wage at the same level and not raising it for years does not look like a good solution either.
Aleksey Kushch, an analyst at the Analytical Center Ob'ednana Ukraina, has been insisting for years: Ukraine needs to start by overcoming labor poverty. In our country, neither before the war nor during the war, there was and is no problem finding work for the minimum wage. The problem is to survive on this salary.
While in developed countries a person can fall into poverty after losing his job, in our country he is poor even when working. Most working Ukrainians barely make it from an advance payment to a salary, and saving is not even a question.
According to the expert, Ukraine needs to implement a new economic policy, serious reforms to strengthen the social responsibility of business, and also find a new consensus between society, business and the state in the field of redistribution of added value in the economy. We are talking about changing the structure of redistribution of internal income in favor of workers, and not the owners of financial industrial groups.
– In addition, it is necessary to increase the level of added value in domestic products, because commodity-producing countries cannot pay high wages. And also not to increase, but to reduce the tax burden on the wage fund,” the expert noted in a comment to KP.UA. – “Widespread” general poverty will disappear only after labor poverty can be overcome.
Recently, there has been a permanent discussion in society that the Ukrainian refugees who live in Europe today simply will not return to such salaries . However, economists say, the increase in the minimum and even average wages will be very small for this to be considered a significant economic factor in favor of returning. In order to make life in Ukraine economically attractive, long-term factors of stability are needed. That is, people need to see prospects, and first of all this concerns the pension and healthcare systems. A person must understand where and at what cost he will be treated, how and in how many years he will be able to earn a decent pension. But instead, we regularly listen to statements from officials that in 20 years there will be no pensions, or calls to take Ukrainians out of their comfort zone and break everything social.
Last week, bill No. 10267 , which proposes to establish a differential approach to military taxation under martial law. In particular, it is proposed to tie the rate of military duty for taxpayers of state and municipal forms of ownership to the monthly taxable income in the minimum wage (MW):
- 1.5% – with a monthly income of up to 3 minimum wages (today – up to 20.1 thousand UAH)
- 3% – with a monthly income of 3 to 5 minimum wages (20.1-33.5 thousand UAH)
- 5% – with a monthly income of 5 to 7 minimum wages (33.5-46.9 thousand UAH)
- 7% – with a monthly income of 7 to 10 minimum wages (46.9-67 thousand UAH)
- 10% – with a monthly income of 10 to 15 minimum wages (67-100.5 thousand UAH)
- 15% – with a monthly income of 15 to 20 minimum wages (100.5-134 thousand UAH)
- 20% – with monthly income from 20 to 30 minimum wage (134-201 thousand UAH)
- 25% – with a monthly income of 30 to 40 minimum wages (201-268 thousand UAH)
- 30% – with a monthly income from 40 to 50 minimum wage (268-335 thousand UAH)
- 40% – with a monthly income from 50 to 70 minimum wage (335-469 thousand UAH)
- 50% – with a monthly income of 70 minimum wages (over 469 thousand UAH).
“Under martial law, the demand for justice is especially great,” says the explanatory note to the document. – And one of the important components of the perception of justice is earnings in the public (municipal) sector.
The social tension associated with the fact that even under martial law in Ukraine there are categories of people who receive high wages in the public sector that are disproportionate to the earnings of the vast majority of citizens (and the pension provision of the vast majority of pensioners) is noticeable to the naked eye.
Since the bill, which proposed to limit the maximum salaries in the public sector to 10 minimum wages, did not find support in parliament, this project proposes to establish a differential approach to military taxation under martial law. Officials who receive immorally high salaries in the public (municipal) sector should at least pay a higher military tax.”
