The Ukrainian government intends to significantly increase social spending this year, Prime Minister Yulia Tymoshenko said last week. She pointed out that 83% of Ukrainian pensioners presently “receive identical pensions.” The government plans to raise minimum pensions by 16.9% to UAH 332. At the same time, pensions will be differentiated depending on every individual pensioner’s employment record and salary size. According to Ms. Tymoshenko, the average pension will be increased by 23.5% to UAH 383, while the average pension of retired military personnel will be raised from UAH 533 to UAH 913.
Ms. Tymoshenko also stressed that “in order to pay decent pensions we must start by paying decent wages.” This year the government plans to raise the average wage in the public sector by 56.8%, from UAH 449 to UAH 708. At the same time, it will introduce wage coefficients to differentiate wages of highly skilled and unskilled workers, while the maximum wage will be 3.3 times higher than the minimum wage. The Prime Minister recalled that the proposed budget amendments also envision an increase in the cash payment at birth from UAH 764 to UAH 8,500. Notably, these benefits will be paid out not after the amendments become effective, but as of the beginning of this year.
The Social Democratic Party of Ukraine (united), which is in opposition to the new government, takes a critical view of the government’s social policy. Last Friday, Mykhailo Papiyev, former minister for labor and social policy, referred to the budget prepared by the government for consideration in parliament as antisocial. This sharply-worded statement was provoked by what he called discrepancies among the government’s plans for 2005, legislative provisions, and electoral promises of the president.
Papiyev recalled that Viktor Yushchenko signed “a moral decree” on Independence Square, whereby the minimum wage in 2005 was to be raised to the level of the minimum subsistence income. The current minimum subsistence income for able-bodied citizens is UAH 453. The former minister would like to know why the government is not honoring its commitments by planning to raise the minimum wage to a mere UAH 300. Moreover, the current minimum subsistence income has to be revised, since it was planned based on the annual inflation of 8.5%, whereas that this year’s inflation will be no less than 12.7%. According to him, inflationary processes are underway in the country, touched off by unregulated increases in prices for housing and utility services and energy resources. If the government does not propose a bill on a higher minimum subsistence income before putting the budget bill to the vote, the Social Democrats will come forward with this initiative, Papiyev said.
Papiyev believes that in its bill of amendments to the 2005 budget the new government must provide for cash payments envisioned by the law on social security guarantees and status of war veterans, which is especially important on the eve of the sixtieth anniversary of Victory Day. Under the bill, first degree invalids of the Great Patriotic War are to receive 10 minimum pensions (UAH 3,320) every year before May 5, second degree invalids - 8 minimum pensions (UAH 2,656), and third degree invalids - 7 minimum pensions (UAH 2,324). Meanwhile, the government has proposed keeping these cash payments unchanged from the current level (UAH 400, UAH 330, and UAH 270, respectively) until the law becomes effective in January 2005. Papiyev further explained that the 2005 budget drafted by the Yanukovych government did not provide for an increase in these cash payments because relevant provisions were not yet effective at that time.
According to Papiyev, the mechanisms for securing higher budget revenues to increase social spending are well known. The government has to scrutinize the performance of loss-making enterprises and analyze their production cost structure. Labor costs currently account for a mere 8% to 12% of production costs, while they should account for between 30% and 35%. “There is a possibility to increase wages at least twofold painlessly and without provoking inflation,” Papiyev believes. He thinks that the lawmakers are not likely to support this kind of budget, unless the government makes the necessary changes, and raises social benefits to the levels envisioned by laws before March 21 (the date for submission of the budget bill to parliament). If the “antisocial” budget passes in parliament, the opposition will resort to preventive measures. According to Papiyev, “We are preparing a constitutional motion. There will be at least 45 lawmakers in parliament, who will submit this motion to the Constitutional Court if the budget bill is at variance with the Constitution.”
