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Friday, October 28, 2016

Putin raised the minimum wage: the standard of living may decline

From 1 July the minimum wage (SMIC) increased by 20.9% and will amount to 7.5 thousand rubles. The relevant law was signed by President Vladimir Putin. According to him, the increase will affect about 1 million workers. Of these, 87% are employed in state and municipal institutions, and 13% in the private sector. However, such a measure can be called a sweet pill to swallow. According to experts, the wallets of the Russians not to grow. The increase of the minimal wage “devour” the growing inflation.

photo: Natalia Gubernatorova

Pavel Sigal, first Vice-President of OPORA RUSSIA:

– Raising the minimum wage will not affect the well-being of citizens in a positive way, but rather the opposite. Economists know that in General the mere presence of a statutory wage creates unemployment: because those who agree to receive less than the minimum wage, I can officially get to work, even if an employer has a desire to employ them. The minimum wage increased by 20%, with annual inflation around 15-20%, i.e. the income of state employees will actually remain the same, they are simply raised to the level of inflation. While the minimum wage still higher, now it is approximately equal to 9.5 thousand rubles a month per person.

Nikita Isaev, the Director of the Institute of contemporary economy:

– Increase the minimum wage by 21% to 7,500 rubles – it is rather soothing inoculation than a real economic measure. One of the authors of the law Olga batalina said that it is “a serious measure of income protection, which will reduce the income differentials in society. Calculations of lawmakers a few unconvincing, which cannot be said about their beautiful interpretations and explanations, which is quite possible to buy. Well, first, where we first see the income disparity? Of course between the top managers of state companies and staff. What added 1296 rubles will reduce the difference between the ordinary wages of state employees and multi-million dollar income of the head is just ridiculous. And the difference between the incomes of public sector employees, the welfare of which should theoretically affect this measure, and so minimal – all get little. Presumably, this measure will affect income of 1 million Russians, that is, only 0,68% of the population will get a raise. But given the fact that just last year, the purchasing power fell by 20%, the proposed measure in the country is negligible. Besides raising the minimum wage has a reverse side – the state not only gives more, but in the end, and collects more in personal income tax. For anybody not a secret that many entrepreneurs formally specify the salary of employees is equal to 1 the minimum wage for the sake of reducing taxation. Now, however, contributions to the budget from such employees will increase by the same 21%. In fact, for populist messages hidden additional financial burden on people and entrepreneurs, which will be more explicitly supported.

Rising prices and a falling ruble. Chronicle of events

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