The new minimum wage and the old living wage: how the two of them are fighting poverty

Yelena Ivanova, Natalia Seibil

At the end of October, the State Duma adopted in the first reading a law on a new minimum wage. Instead of the lower wage limit of 12,792 rubles, working citizens will be paid 13,617 rubles. The increase would be 6.8% . Already at the time of the adoption of the new value of the minimum wage, it was clear that it would not cover the annual inflation.

Less than a month later, the president intervened in the discussion and ordered to increase the minimum wage by 8.6% . Thus, the state compensates low-paid citizens for losses from general inflation. The difference between the proposal of the government and the president is 250 rubles per month. In total, as Vladimir Putin said, the minimum wage will increase by 1,100 rubles. It is only incomprehensible why the government did not go so far as to improve its own proposal and compensate people for their losses in full.

- An increase of 8.6% nominally discourages people from this inflation. That is, they do not really raise their standard of living, but they eat inflation 8.6%. For the budget, this will cost about 50 or 40 billion for the budget. 40 billion is not a bureaucratic game, take it out and put it down. It's another matter when this allowance comes to them. I don’t know, they will not be in time for this year, it will go next year. But this is at least some kind of compensation. It all depends on the budget, - says Georgy Ostapkovich, Director of the Center for Market Research at the Institute for Statistical Studies and Economics of Knowledge, National Research University Higher School of Economics.

An extra thousand rubles a month will not affect the level of poverty in the country. But for people who are on the lowest rung of income, even this small amount seems significant. Over the past one and a half to two years, every quarter, and already in half a year - for sure, additional payments were accepted, which raised the lower threshold for payment. This gave people at least a slight improvement in their situation, says Mikhail Belyaev, Ph.D.

- For the budget, this is an insignificant amount, which the budget can quite afford. We should not only use accounting parameters here, but we must understand that this money is directed to improve people's lives and, in particular, this amount immediately returns to economic circulation, and is, albeit small and insignificant, but a stimulus for the development of the food market, which is also very important.

The Russian poor are so poor because of such an economy, experts say. You can pass a law and make the minimum wage 25 thousand rubles or 125 thousand rubles a month, says Professor Ostapkovich, but we do not produce just such a number of goods and services. In addition, budget items are communicating vessels. If the government spends more on the social sphere, it means that it is taking them away somewhere. Neither experts nor the public know how the redistribution takes place. However, there are reserves beyond the budget.

- We have huge reserves - $ 600 billion in gold and foreign exchange reserves, 42 trillion in reserves. These are two plus the budget of the Russian Federation. Maybe from there? But this is the decision made by the Duma. What can I say. But this will cover the inflationary background. Is it not enough? Of course, not enough! - exclaims Georgy Ostapkovich.

Starting this year, poverty in Russia is no longer measured in terms of the consumer basket, but in terms of median income. At the end of 9 months, 12% of citizens live below this line. By 2030, Vladimir Putin has set the goal of halving the number of poor people.

In the United States, where the poverty line per household is $ 24.5 thousand per year, poverty is considered differently. If a person receives money above the subsistence level, but his roof is leaking or there are no amenities in the house, or his children do not have access to education, and the whole family does not have health insurance, then he belongs to the category of the poor. The family then receives food ration cards and tax breaks.

The UN has identified 9 factors on how to calculate poverty. Now Rosstat has received the task to develop a methodology by which not only monetary income, but also other factors will be used, says Georgy Ostapkovich:

- Relatively speaking, a single mother gets 20 thousand. She is above these 12,600 rubles, but she has two children, and then she receives less. Then you need to count not from the person, but from the family. And there is a single man who receives 10 thousand, and on formal grounds he needs to pay another 2.6 thousand a month. But he has a deposit of 10 million from his old life at 5%, from which he receives 500 thousand. Should I pay him? Do not know. We need targeted help, and we need to help those who really need it, and not only according to who is at what material level.

In the meantime, the country's monetary authorities are struggling not with poverty, but with inflation. Some economists believe that this rise in prices is not the main obstacle to economic development. Mikhail Belyaev says:

- While our Central Bank is fighting by raising the key rate, which is already close to the prohibitive level for the operation of business structures in an effective mode, it is difficult to say that we will move forward in the near future. Maybe it is not worth fighting inflation at the cost of a significant complication of activities for enterprises?

Because the problem of poverty is solved, according to economists, in a completely different way - through the creation of jobs and the payment of decent wages.

- Jobs are created when an economic mechanism can function in the country - active actions of business structures, enterprises. Anything - large, small, medium, individual. They need to be able to act in a productive manner. Then it raises GDP, creates jobs and makes it possible to raise wages. For everything to develop, the country must have a business environment that allows these structures to function . - Mikhail Belyaev is sure.

The main criterion for getting out of poverty is economic growth. The economy, production, profits will grow, Georgy Ostapkovich recalls, which means that they will hire new workers and pay them a salary.

The tax base will rise and businesses will pay more taxes. Then the country can increase aid for the low-income population. The main criterion is the growth of the economy and the growth of goods and services.