New social payments for Ukrainians. What 'guaranteed minimum income' could be introduced?

Author : Anna Peshkova

Source : 112 Ukraine

The first article of the Basic Law reads: Ukraine is a social state. Despite the fact that the “Ze-team” came to power under the slogans of liberalism, the country's socially popular idea of ​​guaranteed minimum income could operate. This is discussed in the memorandum of Ukraine with the IMF on economic and financial policies, reports Economic Truth
21:57, 9 June 2020

Open source

True, it is planned that only needy Ukrainians will receive a guaranteed minimum income. But, since according to the UN, 60% of the country's population lives below the poverty line, theoretically, almost every second citizen can count on a new type of assistance.

The prerequisites for the introduction of such a single aid existed long ago, regardless of the memorandum with the IMF. The new register of social assistance recipients is already being tested. In theory, pensioners and the unemployed will receive more than today. But experts say: everything can turn out differently, and innovation will only hit the pockets of citizens more painfully.

Guaranteed income in Ukraine

Economists Milton Friedman and Friedrich von Hayek considered guaranteed, or basic minimum income, the best way to overcome poverty. The idea involved the state accruing to each resident of the country a certain amount, independent of his employment. It was a way to protect ordinary citizens from global economic shocks, as well as a “preparation for the future” if, due to the development of technologies, the need for human labor will disappear.

The first to test this concept back in the 1960s was American President Richard Nixon. In recalculation for today, Americans were paid about 10 thousand dollars a month as part of the experiment. Some subjects in their free time began to engage in education and creativity. On average, 17% of women and 7% of men quit their jobs, and the number of divorces increased. This is probably why the Republicans were against full implementation.

The idea was unprofitable not only for them. In 2016, Swiss residents voted in a referendum against the proposal to pay $ 2,418 a month to each adult. They feared that no one would want to do low-paid, manual labor, except for migrants, who would become countless in the country. In addition, the fact that everyone would have the money would spur inflation.

Since January 2017, such an experiment also started in Finland. The state pays its citizens monthly 560 euros. And just a few days ago, Spain passed a law on minimum basic income. At least 461.5 euros per month (about 13.5 thousand hryvnias) will be paid to every fourth citizen.

To some extent, our unemployment benefit can be considered guaranteed basic income. With the difference that in case of employment of a Ukrainian, his payment will be canceled.

In fact, Zelensky, as a presidential candidate, promised his voters some form of unconditional basic income. It was an economic passport of a Ukrainian. It was assumed that the money from the sale of natural goods (mineral resources, land) by the state would be put into the bank accounts of citizens. But Ukraine is not Saudi Arabia or Iran, which have large deposits of oil.

Nobody is going to pay Ukrainians just like that. Such income is suitable only for successful countries. In Ukraine, there is no money for the initiative. Economists unanimously reiterate: what European countries put into this concept is significantly different from what is meant in the Ukrainian case

“When we talk about the minimum guaranteed income, it is assumed that this is the base value that all citizens of the country will receive, regardless of their social status. As a rule, this minimum income is also not taxed. Such a payment is a guarantee of a high consumer level of citizens of the country. This can be afforded to countries with a high state budget surplus and income significantly exceeding the expenses that they have within their obligations. Of course, this is not about Ukraine. We want all the social payments that often do not correspond, reduce to one register and combine," emphasizes economic expert Oleg Pendzin.

The fact that a single payment is being prepared only for those in need already means that there can be no talk of guaranteed minimum income. It would be more correct to speak of a guaranteed minimum social payment.

Why do you need a new benefit

The fact of providing numerous benefits is often unfair. Financial analyst and expert at the Growford Institute, Oleksiy Kushch, is convinced that the principle of accrual of benefits must be radically changed.

“I consider it a mistake to use the target principle in social subsidies, not the focus group principle. We have many beneficiaries who receive payments according to clearly defined criteria. And in the West, the main criterion is social insecurity. It’s not enough just to belong to beneficiaries. We need to prove that you really need these payments, and you are below the poverty level. We have many owners of Hero of Ukraine orders who enjoy benefits, although they are actually rich. At the same time, those who really need benefits, they don’t have them," says the financial analyst.

The mechanism of accrual of individual payments is also doubtful because they became a method of "political monetization", "buying up" the votes of people before the election. After the voters cast their votes, some payments are often canceled. Many accused Petro Poroshenko of his practice with his indexation of pensions. Already in 2020, the indexation had to be postponed, but the newly elected president temporarily accrued an additional thousand hryvnias for certain categories of pensioners.

Now in the country there is no clear understanding of how many people need help. The new system of combined benefits will be transparent.

So far, there is no detail on the list of payments that will be included in the "minimum income". Kushch suggests that some benefits could still be left in their current form and not implemented in the general registry: for example, treatment, free trips. But preferential travel could be made targeted and included in this income, or, more precisely, the basic benefit.

In this case, people could choose: take a ride in public transport or sit at home and save money. In addition, this would minimize corruption risks. Municipal transport is interested in maintaining the current preferential system, when the subsidy is paid to carriers at the end of the year in one payment. Since even with the presence of an electronic ticket it is impossible to clearly calculate how many people actually used the services of transport, it is not clear how it is spent. You can "draw" any numbers.

And, perhaps, the main reason for social innovations is saving. There are many people in need in the country, but there are not enough payments for everyone. The authorities want first of all to help the most vulnerable, and then to those who need less support. In principle, such is the policy of not the first Ukrainian government. The amount of subsidies is reduced annually due to the introduction of various restrictions on the provision of assistance.

Related: Kyiv ranked 106th in Mercer 2020 Cost of Living Ranking

If a person receives assistance in 17 programs, they will limit it so that he will not get more than, for example, the average salary. The only question is what such a limit can be. In fact, the government acts on the principle that in order to have enough butter, you need to reduce the area of ​​bread.

Indeed, a reduction in social assistance payments is necessary for the treasury, since financing for the unemployment benefits is no longer enough. In general, in 2020, about 300 billion hryvnias will be spent on helping poor Ukrainians under a variety of programs.

However, for Ukrainians, the main thing is that a new approach to the calculation of social payments, at least, does not reduce their income. Economic expert Oleg Pendzin is sure that the news is bad for citizens. Moreover, often with verification, payments are also lost for those who really deserve them.

“You need to understand that the purpose of such innovations is not to make life of socially vulnerable people better, but to optimize payments from the state budget. But we have a synonym for optimization - reducing the burden on the budget. The true goal is clear - to systematize benefits by introducing a new social payment, and radically revise the criteria receiving a payment. During the review process, these criteria are often tightened, and recipients of various payments as a result have less money", says Pendzin.

At the end of December, the president signed the Verification Act, under which the electronic platform will take information on the recipient of social payments from various databases, as well as gain access to bank accounts and data from the State Border Service on border crossing. So the first step to implementing the likely IMF requirement has already been taken. The Fund itself has long advocated a reduction in social assistance to the population and an increase in tariffs for housing and communal services.

However, Oleksiy Kushch believes that this program cannot be implemented during the post-quarantine crisis. He does not agree that at the first stage with its help it will be possible to reduce budget expenditures.

“This reduces costs in the long run, but deprives the budget of “manual maneuver.” Subsidies are allocated at the end of the year, when there is no chance to pay the salaries. And if it is a direct payment, then you need to pay every month so that a pensioner, for example, together with his payment he received money for travel in public transport. This money can no longer be stopped," the expert emphasizes.

New registry from the Cabinet

Many of the Cabinet’s plans have not yet come true. It is not known whether the initiative will really come to fruition. But the fact that the Ministry of Social Policy began to develop a single base of Ukrainians who receive social assistance from the budget was announced back in 2017. They would like to include information on recipients of subsidies, birth assistance, unemployed, displaced persons, Chernobyl victims, people with disabilities, orphans. Then it was directly stated that this was done to save state funds.

Then they returned to the topic in 2019. Then they talked about the "unified information-analytical system for managing social support of the population" and the Unified State Register of the social sphere.

According to the decree of the Cabinet of Ministers of Ukraine No. 676, adopted a year ago, the Ministry of Social Policy should fill the new E-Social database with information by the end of September and launch it already from October 1, 2020. That is, citizens will be able to submit applications for social payments faster. But the deadlines for the implementation of the Unified Register of the social sphere have not yet been called.

Without a social assistance registry, which will collect all the information about the income and expenses of Ukrainians, the new system will not be able to operate. The economist Taras Kozak is convinced that the need for this reserve is long overdue.

"Ukraine needs a state strategy to help citizens, including the creation of a single register. The authorities are already moving in this direction. In addition, they want to make the same Pension Fund part of the Ministry of Social Policy, reduce the number of officials. They plan to merge citizen appeal offices with administrative assistance centers to they didn’t have to go to several rooms. Although the project on unified social assistance has not yet been prepared, it’s good if it is launched. Then in the future we will have savings in costs, maintenance of various bodies, reduction of registries, reduction of payment errors," he emphasizes .

One of the first such an idea was introduced by Belgium in the nineties. In Brazil, a similar register was specially created for a separate program, but in the end it was also used for family allowances, school subsidies, medical transfers and food payments, as well as to help low-income families. Now in this database there is information about more than a third of Brazilian families. Indonesia’s unified database even integrates as many as 5 programs: subsidies, food payments, payments to households affected by rising oil prices and more.

True, only 75% of those in need were able to enter data into the system in the country. And the transfer of data between the central database and other registries is manual, which greatly delays the process. President Zelensky talks a lot about digitalization. He even looked for the "technical director of the country for digitalization." However, will this mood be enough to effectively launch such a system in Ukraine?

Systematization of information from various departments is a sore spot in the Ukrainian workflow. Ex-Minister of the Cabinet of Ministers Dmytro Dubilet spoke in January about the creation of the Unified Register of Ukrainians in 1-2 years, but so far no progress has been made. The country has great difficulties even with the census and the creation of a geocadastre. The security issue also remains open. In 2017, the Constitutional Court blocked a similar project, since through such a register, officials received unlimited access to personal information.

And not so long ago there was a leak of personal data of millions of Ukrainians, which were distributed in one of the anonymous Telegram channels. Experts suspect that its cause could be the Diya application, which was popularized by the government. There is a risk that falsified documents may fall into the new database.

Living wage instead of pension

Pendzin suggests that the "top" for a single payment will be the cost of living. From the first of July it will be 2 118 hryvnias (79 USD).

Such an amount, of course, will not save Ukrainians from poverty. Excluding travel in transport and payment for that part of the utility services that the subsidy will not cover, less than 1,000 hryvnias (37 USD) will be left per month for food, clothing and medicine. The Ukrainian subsistence minimum takes into account only 23 food products, and not up to 200, as in the Eastern European model.

And there are questions to the legality of calculating the Ukrainian living wage. At the end of last year, the Moscow District Administrative Court called on the authorities to conduct a high-quality examination of products and services that are included in the consumer basket, since prices have not been monitored for it for several years.

If the economist’s assumption is correct, only those who receive the smallest payments will be lucky: pensioners with a minimum pension and some unemployed. Social benefits will be beneficial for those who have officially worked less than 6 months in a year, who were fired for absenteeism, for those who are just looking for the first job in their life, for migrants who can’t document their employment. But it is difficult to judge this until clear figures have been provided by the government.

Of course, it would be relevant to tie guaranteed income at least not to the minimum, as announced in the Cabinet, but to average pensions. For example, as of April 1, the average pension in Ukraine is still below the required limits, but at least more realistic.

Related: Ukrainian labor migrants stuck at border with Poland

However, it is not entirely clear why the link to the minimum pension sounds at all, if the pension is not social assistance at all. Counting the state a single social contribution from their salaries, Ukrainians save up for their old age. So they cannot be limited in their rights to a deserved well-deserved rest. And in most countries, pension is not included in the format of unified social assistance.

If we talk about really justified amounts, then there is an indicator of the actual cost of living. According to recent government estimates, it is 4,300 hryvnia (159 USD). Various international organizations also talk about the survival threshold in Ukraine of 4 000 hryvnias (148 USD). And the Federation of Trade Unions believes that the amount necessary for life should start at least from 5 500 hryvnias (204 USD).

It is very interesting that ex-Minister of Economics Tymofiy Milovanov wrote on the need for introducing a “minimum basic income” for the period of quarantine. He offered to pay half of the average salary to pensioners and those who lost their jobs or businesses. That is, we are talking about those very 5 000 hryvnias (204 USD).

But economic expert Taras Kozak is sure that a separate figure on the type of living wage will not limit payments: a special formula should be developed.

"You can’t limit payments to such a small amount. There is also a disability payment, a subsidy if, for example, a woman brings up children without a husband. It can be a large amount. A high-quality formula must be developed and discussed at public hearings," he says.

The initiative itself is positive, but it is highly likely that its true goal is to reduce social benefits. Therefore, we still have to wait for the text of the memorandum with the IMF, and then - the presentation of the innovation with all its consequences.

Related: Dollar's price in Ukraine increased

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