Salary of ordinary Ukrainian: It's not about zeroes (proven by Venezuela case)

Author : Antonina Slavytska

Source : 112 Ukraine

Let's talk about the purchasing power of the Ukrainian population and compare the price level in Ukraine, Belarus, Hungary, and Poland
10:01, 29 January 2020

Open source

Previously, civil servants in Ukraine fought for higher salaries, but now there is an opposite trend. MP Oleksiy Honcharenko, the member of Poroshenko’s European Solidarity faction, states that the salary of Ukrainian MP should be 380 USD, which is in two living wages. Honcharenko wrote a corresponding bill and reported it on Facebook. It is clear that Goncharenko's idea will not be supported by Rada and the victorious relations like "we defeated those greedy officials" will not work. Populism does not overcome gluttony, other methods are needed here. But the only thing Honcharenko is right about is that civil servants' incomes should be tied to the minimum wages.

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The Opposition Platform - For Life faction also submitted a bill to parliament that would limit officials' profits. It differs from Goncharenko’s one; it does not offer solutions that will definitely be liked by society, and which, nevertheless, will be doomed to failure. We assume that the maximum allowable amount of payments to persons authorized to perform the functions of the state or local government - if these functions are financed from the state budget - should not exceed ten minimum salaries, that is, 1900 USD. If you want to get more money, you should work on raising the minimum wage - for the benefit of all Ukrainians. I think this is quite fair.

I would like to raise the problem of high and low salaries in different categories of the population. After all, the payroll sums themselves do not speak of living standards. Venezuela suffers from hyperinflation, since January 2020, the minimum wage has been raised to 250,000 bolivars, which at the official rate is 3,600 USD. And we should take the purchasing power of the population. The prices for food products in Ukraine have reached the level of European ones - and this is with the obvious backlog of our salaries.

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I have found interesting numbers from experts of the Economic Discussion Club that compared the price level in Ukraine, Belarus, Hungary, and Poland. It turned out that Ukraine is ahead of its neighbors on a number of indicators. In particular, we have more expensive bread – 83 US cents per kilogram against 67 US cents in Poland; as well as flour (44 cents per kilogram versus 40 in Hungary); chicken (2,26 USD per kg against 2,02 USD in three other countries); oil (1,34 USD in Ukraine versus 1,33 USD in Poland and 1,1 USD in Belarus); rice (0,77 USD in Ukraine versus 0,84 USD in Poland); carrots (0,45 USD in Ukraine versus 0,28 USD in Poland); butter (7,46 USD in Ukraine versus 7,14 USD in Belarus); pork (4,93 UAH per kg in Ukraine versus 3,96 UAH in Poland); milk (0,90 UAH in Ukraine versus 0,71 USD in Hungary, 0,67 USD in Belarus and 0,65 USD in Poland).

However, this is data from last year. Already in 2020, chicken, which is more expensive than other groups of goods, still grew in price and reached 2,37 USD per kilogram. Why is this product expensive? Ukraine is among the TOP-3 exporters of chicken in Europe. The answer is simple: for the import of meat the Ukrainian producer receives a good VAT refund (20%), so it is quite obvious that it is more profitable to trade with neighboring countries than to sell products to the domestic buyers at low prices.

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The state has self-eliminated with the support of small and medium-sized farmers, and small agricultural enterprises often do not have the ability to provide themselves with adequate infrastructure. Simply put, they have nowhere to store milk, so billets buy it for nothing so that they can then spend money on refrigeration and fast transportation of a product that spoils too quickly. In other words, the cost of logistics affects the price of milk.

Whereas, dairy products in the  EU countries and even in Belarus are mostly bought from large farms. And the quality of milk itself is higher than ours because Ukraine lacks the cows of good dairy breeds. And unless the state reconsiders its policy and directs investments for the development of dairy farms and processing plants, things will not move.

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Belarusian potatoes are cheaper because they are collected centrally in large fields, which could be called state farms. No, I do not urge to go back to the USSR and create collective farms, but I suggest taking note of another experience of Belarus – coverage of the country with a network of modern vegetable storage facilities, which allow storing the crop in proper condition for quite a long time. In Ukraine, up to 30% of the harvests are simply rotting before the next spring.

And it is even difficult for me to predict how much the situation will deteriorate if the Verkhovna Rada nevertheless enables the free sale of land. Now this question is put to pause, and other super-important topics have simply fallen out of sight. For example, the same VAT reimbursement, which in Ukraine in a number of nominations is approaching 20%, while in Poland, for example, it is 5%. Therefore, if we subtract the difference of 15%, we will approach the Polish prices. The state must do everything in its power to stimulate the manufacturer to reduce the cost of goods. But it doesn't.

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If the average salary in Ukraine in 2019 was 305 EUR, in Belarus it reached 415 EUR, in Hungary - 1152 EUR, and in Poland - 1216 EUR. In EU countries, wages generally exceed the Ukrainian wage by 4-9 times - at roughly the same rates for socially significant groups of goods.

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