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How much money average Ukrainian employee earned in 2020?

Author : Oleksiy Kushch

Source : 112 Ukraine

The average monthly nominal (excluding the inflation factor) salary of one full-time employee in companies with more than ten staff in December 2020 amounted to 510 USD all over the country
21:13, 4 February 2021

Open source

Ukraine’s State Statistics Agency decided not to wait for the end of the era of poverty (slogan, proclaimed by president Zelensky, - ed.) and canceled it by a strong-willed decision, publishing data on the average salary for December 2020. At the first acquaintance with these figures, a stable feeling arose that either some pre-election talking points had been printed, or that one of the employees of the State Statistics Service had freaked out a lot, having lost the rest of his patience.

So, according to our statistics, the aveerage monthly nominal (excluding the inflation factor) salary of one full-time employee in companies with more than ten staff in December 2020 amounted to 510 USD all over the country, and UAH 780 USD in Kyiv. As the State Statistics Service accurately noted, the average monthly wage in December was 2.8 times higher than the minimum wage of 180 USD. The growth of labor income in December 2020 compared to the same month of the previous year was 15.6%.

Related: Average salaries in Ukraine to reach $600 in 2022, - PM Shmygal

The inflation-adjusted real wage index in December 2020 increased by 17.2% compared to the previous month and by 10.1% compared to December 2019.

Naturally, the December payroll is always significantly different from the usual month – primarily due to the payment of bonuses and other annual payments (who, of course, have them).

We’ll provide you with the real version of the above numbers.

The published data practically do not correspond to the feelings of the majority of Ukrainians. They are told about, for example, 365 USD per month in the Chernihiv region, and local residents are well aware that 90% of the region's workers work for much less money. But let's move on from the statement to the explanation of this "unreal reality."

The first reason: the counting technique. Average salary is the ratio of the wage bill in companies with more than ten full-time employees to the average number of employees. So, in the denominator of this formula, the payroll is used, accrued both for staff members and for part-time employees (and such in some companies is 10-20%). And the denominator is only the number of permanent workers without part-time workers. This calculation technique automatically "lifts" the average salary by 10-20%.

The second reason: the representativeness of the sample on the basis of which the calculation is made. There are about 18 million people of the economically active population in Ukraine, including more than 13 million payers of ERUs. And now the number – in the studio: the number of full-time workers in companies with ten full-time positions and above is only 7.44 million people. It is on the basis of these 7 million that the average salary is calculated. About 11 million of the economically active population, including 6 million ERU payers, fall from the radars of the State Statistics Service. The state statistics indicator covers only 41% of the workforce.

In fact, a significant part of the service sector is singled out from the calculation, which currently employs more than 50% of employees. The indicator of the average salary is largely formed by the data of state-owned companies, the public sector, foreign companies, and financial and industrial groups. This is confirmed by industry analysis. In agriculture, the level of labor income is only 76.5% of the average. In trade - 90%. In the hotel and restaurant business - 48.2%. In construction - 81.6%. In education - 82%. But in the field of information and telecommunications - 159.4%, in finance - 161.1%, in the system of public administration - 159.7%. If we take the industry, then in the processing industries (which are the basis of industrial production, acting as a kind of intersectoral "lift") wages are fixed at the level of 90% of the average. In the food industry - 82.4%, in the textile industry (according to theory, this is one of the highest levels of added value) - 59.7%. But in the pharmaceutical industry - 177.4%, in the energy sector - 162.1%.

Related: Salary of doctors in Ukraine should be at level of $700-800, - Healthcare Minister

In fact, the more the industrial core is destroyed, the more "prominent" is the specific influence of several flagship industries that are still afloat: pharmacy, IT, finance, energy, and the mining industry. If in the past the share of these highly profitable industries was diluted by the "large population" of the basic sectors (processing, food, textile), now, as they die off, the "common pot" grows shallow, exposing the remaining "pieces of meat" at the bottom. To this we can add a "bloated" budgetary sector with "bonuses" and a banking system that earns mega-income "on the crisis", that is, on government debts and National Bank certificates of deposit. Plus, the mining industry, where the price of iron ore on world markets has more than tripled in recent years. And the energy industry, due to the inflated prices for electricity, in fact, earning money on those who still show sluggish signs of life.

In addition, we are developing an "African model" of wages.

This is what German economist Bruno Knall wrote about in his works about the vicious circle of poverty: a degrading economy is not able to provide adequate investment in the education and training system. hence the decline in productivity and skills and an acute shortage of qualified personnel, which in turn helps to reduce the complexity of the economy and reduce the real costs of education. But a number of industries still continue to create demand for qualified personnel. That is, the remaining pros begin to pay more. It's just that the number of vacancies for such specialists is small. This explains the phenomenon that a person with a good technical education can be paid a thousand dollars in Ukraine. There are just not so many such vacancies. And there are even fewer people who know how to do something. This is the African model: in some countries of the Black Continent, a technologist and engineer from Europe will be paid 5-10 times higher than at home.

Related: National Bank of Ukraine expects raise of average salary by 15 percent in 2021

The problem of accounting for the size of labor income could be removed by the median wage, which is calculated in many countries, including the Russian Federation, and which shows not the “average temperature in the hospital,” but the level of labor income around which most of the hired workers are concentrated. It is usually 30-40% below average. In Ukraine, according to my estimates, it could be about 210-250 USD per month. The fact that this indicator practically does not differ from the minimum wage level only indicates that our indicator of the minimum wage has turned from an instrument of social protection of an employee into mechanisms of the tax burden on SMEs and fiscal control over the employer.

In this regard, Nobel laureate and representative of the Stockholm School of Economics Gunnar Myrdal is right, who believed that the main problem of a developing economy is not the creation of new jobs, but overcoming labor poverty, when low labor incomes demotivate employees and reduce their development prospects, in particular in the context of productivity growth. As a result, deep social frustration. Labor poverty is one of the problems of the Ukrainian economy. It is not a problem to find a job for 180-210 USD, the problem is to survive on this money. The model of the relationship with the employer, when you live from paycheck to advance payment, is called labor slavery in the scientific literature.

Related: Ukrainian govt announces 30% increase in doctors' wages for 2021

Real well-being must be assessed by the level of replacement, that is, the ratio of the average pension to the average salary. And here the growth to 750 USD in Kyiv only speaks of the blatant poverty of pensioners, for whom, with an average pension of 107 USD, the replacement rate was just over 14%, although five years ago it reached 40%. In Ukraine, this figure is now 21%. This again speaks of the level of poverty in which about 70% of our pensioners find themselves, and this is about 10 million people.

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