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Economy 2020-05-15T05:45:00+03:00
Ukrainian news
NBU: Raising Minimum Wage To UAH 4,200 Coupled With Raised Pensions To Inflate Inflation By 1.6 Percentage Poi

NBU: Raising Minimum Wage To UAH 4,200 Coupled With Raised Pensions To Inflate Inflation By 1.6 Percentage Points

NBU, pension, minimum wage, inflation

The National Bank of Ukraine predicts that raising a minimum wage to UAH 4,200 in the combination with the increased pension will lead to the inflation growth by 1.6 percentage point.

The Ukrainian News Agency learnt this from NBU Deputy Chair Dmytro Solohub.

"According to our assessment, the update of pension will add approximately 0.8 percentage point to the inflation index in 2018. We did not have time to feel the effect of the raised pensions in 2017," Solohub said.

Speaking about raising of a minimum wage to UAH 4,200 announced by the President, the NBU representative said, "If this happens on July 1, the inflation index will be at approximately the level of 0.5 percentage point. If the wages are raised starting from April 1, we should expect the inflation to up by 0.8 percentage points."

"The government is free to take any decisions within their scope of responsibilities but they must understand the macroeconomic impact of the decisions. The National Bank is not opposed to raising wages. But speaking in economic terms, if a person after a double-wage-rise continues producing the same volume of products as before the company where this person works will have to face only more problems, because its output remained at the same level while salary expenses increased. If the rising wages are not supported by the increased production this has a negative effect," the NBU official said.

Solohub also noted that the raising of wages in 2017 became an important factor for driving prices up in the consumer market.

"We underestimated the impact the raising of wages would have on the growth of prices. We expected that a minimum wage rise to UAH 3,200 would add 1 percentage point to the inflation, but it gave approximately 2 percentage points. Though, it is true that the inflation growth was also stimulated by overall tension in the labor market that was due to growing migration," Solohub said.

As Ukrainian News Agency earlier reported, starting from January 1, 2018, a minimum wage in Ukraine grew by UAH 523 to UAH 3,723.

In early December, the Verkhovna Rada ordered the Cabinet of Ministers to study an opportunity to increase the minimum wage to UAH 4,200 in 2018.

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