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Wage increase by "carrot and stick" method

Author : Oleksandr Okhrymenko

23:21, 27 July 2017
Wage increase by "carrot and stick" method

Author : Oleksandr Okhrymenko

It will be nice if the salary in Ukraine reaches the level of $ 300 (preferably $ 500)

23:21, 27 July 2017

Read the original text at 112.ua.

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The salaries are usually low, especially after the devaluation of hryvnia and a significant increase in prices over the past three years. Quite logically, Ukrainians began to complain that their wages should grow. Moreover, in many respects, the growth of wages ensures the revival of the consumer market in Ukraine.

Related: Hugely increased wages - Ukraine's only way to reduce shadow economy

At first, our government decided to try to raise wages by the “carrot method.” The reduction in Single social contribution (SSC) in 2016 was, in fact, twofold, according to the plan of the reformers, to stimulate the growth of wages in Ukraine. But it did not work. In 2016, the average nominal salary in Ukraine has increased, but not that much - only for 11%. At the same time, the deficit of SSC has increased substantially, as a result of the Pension Fund deficit. The experiment with the "carrot method" failed. Then the "stick method" appeared. This is when it was decided to double the minimum wage in 2017, but in order to prevent employers’ fraud, they strengthened labor control and raised fines. This was really effective. In fact, in five months of 2017, the average nominal wage in Ukraine increased by 37%. At the same time, about 37% of working Ukrainians began to receive a salary of 3-4 thousand UAH, while previously, there were only about 20% of workers that received such sums. The “stick method” worked. Probably, the "carrot method" was too sweet, and therefore the business did not react to it.

Related: Kryvyi Rih miners on strike: Incomes for wage increase instead of offshore funneling

It is clear that any method has its side effects. Since the beginning of the year, about 150 thousand employees were dismissed In Ukraine. Partly, this was due to the fact that the business thus optimized the staff. But this is a small amount, considering that the total number of those officially employed is about 7 million people. The number of salary debts also increased: the total amount reached almost UAH 2.3 billion. But this is only 4% of the total amount of wages that Ukrainians receive. Although we can say that these problems are less significant than the success of salary growth.

But the lawmakers decided to introduce a certain intrigue in the labor reform and in the first reading passed bill No. 6489, which, according to the which, the pressure on the business should be reduced. Indeed, private inspections and heavy fines for illegal employees forced the business to be conscious and formalize people and pay them a decent salary. In turn, business persons began to complain that the inspectors are excessively cruel and thereby interfere with business. Therefore, in theory, the bill number 6489 should be a kind of compromise between business and auditors.

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Bill No. 6489 should reduce the number of fines for violation of labor laws, but not abolish them (it would even increase them). But at the same time the business gets the right to avoid a fine, fix the violation of labor laws independently and pay everything honestly, without penalty. But if the businessman does not understand the liberal attitude towards him, he will have to pay a very large fine. A stimulating solution to the problem, right? In addition, the responsibility of the inspectors is increasing, which will also pay fines for illegal claims to business.

The newest and in many respects unusual scheme for our market: fines are imposed for persons who knowingly provided the labor law enforcement agencies with untruthful information about the violation of their rights.

Related: IMF asks to freeze minimum wages that will lead to Pension Fund deficit

This is in fact a struggle against "rapprochement," or, more precisely, against an unreliable substantiation. But at the same time, employees have the right to complain, and, most importantly, to promptly inform the monitoring bodies about the real facts of violation of labor legislation.

However, this bill has not yet been finally adopted. Let us see how it turns out in the final version. It will be nice if the salary in Ukraine reaches the level of $ 300 (preferably $ 500). The current salary of $ 200 is obviously miserable.

Related: 2013 vs 2016: Amount of goods Ukrainians could buy for one salary - infographics

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