Rada hikes minimum wage to UAH 5,000

Ukraine’s parliament voted to raise the minimum
monthly wage from the current UAH 4,723 to UAH 5,000 (about USD 183) starting
on Sept. 1 at a special session on Aug. 25. The bill was supported by 295 out
of 423 MPs.

The explanatory note to the bill states that the
additional budget expenditures related to the increase of minimum wage (the
respective wage increase in government and budget sectors) will amount to about
UAH 4 bln. They will be mostly financed by the resources “saved” by the reduced
budget outlays on state debt servicing.

Evgeniya Akhtyrko: As we wrote earlier, this hike
of the minimum wage will not do much to improve the well-being of the
population, and we view it as a purely populistic move by the Zelenskiy
administration in an attempt to improve its falling popularity prior to the
local elections scheduled for late October.

Meanwhile, it will be even more interesting to see
the outcome of the initiative to implement two more minimum wage hikes in 2021,
to UAH 6,000 and UAH 6,500. This idea is being heavily criticized by a broad
circle of economists and analysts in the country as it will cause a high
additional burden on the budget and employers. The initiative is even opposed
within Zelenskiy’s People Servant parliamentary faction. In particular, faction
member and head of the parliament’s committee on finance, tax and custom
policy, Danylo Hetmantsev, noted that the increase of the minimum wage to UAH
5,500 and UAH 6,000 is an issue which should be discussed when the 2021 budget
is on the Rada floor.