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30 Oct. 2022

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Living wage 2023: what changes are planned and the amount of the minimum salary

Finance
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Ukraine

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Living wage 2023: what changes are planned and the amount of the minimum salary

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Today, the greatest benefit from the increase in the living wage is not received by those citizens who need the most help from the state. Why so?


Currently, quite numerous of various payments are tied to the amount of the subsistence minimum. Therefore, the increase in the living wage is more felt by citizens with good financial status.


The subsistence minimum in Ukraine today does not fulfill its key role as an income indicator. That is, how much a family should receive in order to live comfortably.


When is the increase in the living wage expected?


There are no plans to raise the living wage in Ukraine next year. The next increase will take place in December 2022 and will continue throughout 2023.


As you know, now the living wage for able-bodied persons is 2,600 UAH, and for the disabled - 2,027 UAH. From December 1, it will be increased to 2,684 UAH and 2,093 UAH, respectively.


In particular, the estimated amount of the minimum wage from January 1, 2023, should be 6,700 hryvnias.


What is the impact of the living wage in Ukraine?


More than 150 payments are tied to the living wage in Ukraine. Including:


the minimum pension that Ukrainians receive by age and which is equal to the subsistence minimum for disabled persons, as well as all other pensions, including the maximum, which cannot exceed 10 of the minimum for disabled persons;

payments for children, here a separate living wage is calculated for children under 6 years old and for children from 6 to 18 years old;

assistance for children with disabilities;

payments to mothers raising a child independently, the amount of such assistance is equal to the difference between the subsistence minimum and the average monthly total income of the family for each family member, taking into account the age of the child;

maternity benefits for women who do not work, they can receive a minimum of 25% of the living wage for able-bodied persons (payments for women who work are tied to the salary at the place of work of the woman);

alimony, the guaranteed minimum amount of payments per child paid by the father or mother if they have low incomes, is at least 50% of the subsistence minimum for a child of the appropriate age.


Also, such payments as fines, the amount of the ESR, fines for administrative, criminal and other violations, etc., are tied to the living wage. The amount of these payments has nothing to do with the subsistence minimum as a poverty criterion. But raising the living wage automatically affects the need to recalculate a large number of other payments.


How will the calculation of the subsistence minimum be changed?


In order to solve the problem, draft law No. 5045 was developed and registered in Ukraine. If it is adopted, the living wage in Ukraine will determine only the amount of the minimum wage, minimum pension, state social assistance to low-income families and other types of social assistance, which are the main source of income.


As part of the new calculation, it is assumed that the size of the subsistence minimum will consist in determining the food component in accordance with the physiological needs of the human body. In the structure of the subsistence minimum, the specific weight of the cost of food and non-food items will be 50/50%. That is, half of the amount of the subsistence minimum must provide monthly food, and the other half - other non-food items.


For example, as of mid-autumn 2022, the average cost of a borscht set is approximately 115 hryvnias. The set includes a set of products that will be enough to prepare approximately 3 liters of Ukrainian borscht: vegetables (onions, beets and carrots, potatoes, tomatoes, cabbage) and half a kilo of pork ribs. Today, this amount is approximately 5% of the subsistence minimum.


Food prices are expected to rise next year. According to various forecasts, the price increase will be from 10% to 30%.