Ukraine to raise 2019 minimum wage to UAH 4,200 a month

Ukraine’s government will raise the minimum wage to
about UAH 4,200 a month (USD 149) in 2019, Ukrainian President Poroshenko
announced during his visit to Vinnytsia on Sept. 8, the Interfax-Ukraine agency
reported. The decision will be adopted in the 2019 budget, he said, reminding
the public that the minimum wage was raised to UAH 3,200 in 2017 from UAH
1,600. Starting Jan. 1 2018, the minimum wage was UAH 3,723. “We are doing it
not [because of] elections, we are doing it not to be the country of low-cost
labor,” Poroshenko said. “We have other competitive advantages.
Ukrainians have the right to receive decent salaries.”

Meanwhile, the current growth in average wages –
supported by boosted productivity – will reduce the current labor migration, he
said, particularly if average wages reach UAH 12,000-15,000. Recall, the
current average wage in Ukraine is about UAH 9,170
per month.

Evgeniya Akhtyrko: It was only
a matter of time for the president to announce a 2019 minimum wage hike during
the election campaign. Importantly, the government managed to avoid the
populist move of a wage hike in 2H18, while this issue was repeatedly hammered
on by competing political forces.

The minimum wage hike usually boosts the growth of
nominal wages in the economy, as employers need to adjust other salaries in
order to maintain appropriate proportions between salaries and workers’
qualifications. At the same time, the  growth of wages will create
additional inflationary pressure and will serve as an argument for the central
bank to maintain tight monetary policy. It also will put an additional burden on the budget, as the salaries
in the government sector will need to be adjusted accordingly.