RECORD MINIMUM

The government of Azerbaijan will increase the minimum wage by ₼50 since March 1, 2019. According to presidential decree, it will be increased from ₼130 to ₼180. Such a record growth (38.5%) of the most important social indicator will help raise the salaries of about 600 thousand employees in state-run organisations and the private sector.

19 steps of growth

In addition, in 2019, the minimum wage in Azerbaijan is equal to the average level of the subsistence minimum, which was one of the main short-term goals of the government.

According to the Minister of Labour and Social Protection of the Population, Sahil Babayev, this growth will affect 450 thousand employees of state-run organisations, whose salaries are paid according to a single tariff table (STT). Their average salary will be increased by 30%, and in some cases up to 70%. These will be individuals working in the fields of science, medicine, culture, youth and sports, agriculture, environment, housing and public utilities, communications and transport, land reclamation, etc. There will also be an increase in the minimum salary of teachers of educational institutions also ranked in the single tariff table.

"In other words, this decision concerns not only those who receive the minimum wage. Today, STT consists of 19 steps, while it has started with an amount of ₼143. Each employee, moving up the career ladder, used to receive a salary increased by a certain coefficient. After the increase in the minimum wage, the first step will start from ₼180, and the salary will increase at all other steps, too," Babayev said.

According to the minister, during a month period, his ministry together with other structures will bring the current salaries in line with the new order to ensure the payment of increased amounts starting from March 2019. But this does not mean that the order will affect only representatives of the public sector. At present, about 150,000 private sector employees receive the minimum wage, and their employers are obliged to ensure its increase to at least ₼180. "I hope that, in general, this decision will serve as an incentive for managers of enterprises in the private sector to increase salaries and other employees," minister added.

However, the reaction of a number of large holdings was not long in coming, and information appeared in the press about the decisions of their leadership to revise the wages of workers in the direction of growth. That is, the presidential order in a relatively short period created a competitive environment in the market and made all employers think about adequate steps.

Socio-economic effect

In addition to direct improvement of the public welfare, a record increase in the minimum wage should help legalise the incomes of citizens. "Certainly, in a market economy, some employers pay salaries below their economic opportunities. But there are quite a few companies where the minimum salary is much higher than in government agencies. Structures that deliberately indicate low wages will have to raise salaries anyway. It is quite obvious that this will have a favourable effect on the state revenues and, last but not least, increase pension benefits in the future, let alone an impact on other sectors of the national economy," Abulfat Maharramov, director of the Labour Policy Department of the Ministry of Labour and Social Protect, said.

In parallel, the deductions for social insurance of employees will also increase, which ultimately will have a positive effect on their retirement benefits in the future. "We expect that tax fees and social insurance payments in general will increase by ₼100-150 million," S. Babayev said.

As it turned out, there is another social effect from the growth of the minimum wage: the proportion of women who receive wages according to STT is higher than men, since the latter are more busy in the private sector and their average wage is higher. But after bringing the minimum salary to ₼180, there will be some "gender balance" in this issue. This moment is also very important for bringing the labour standards adopted in Azerbaijan to global standards.

According to the minister, among the legalization will also serve the growth of GDP by about ₼400-500 million, which is quite significant for the country's economy.

What about inflation?

This year additional ₼335 million will be allocated from the state treasury for this purpose. According to government calculations and given the direct and associated effects, the average salary in the country will increase by 10%.

Meanwhile, both economists and the population have a reasonable question: will the emission of additional money supply in the economy entail an increase in inflation?

Firstly, the government promises to take all necessary measures to prevent an artificial increase in prices due to wage increases. On the other hand, as A. Maharramov noted, the opinion about how profitable it is to raise wages, if at the same time prices will rise, is also wrong. "We live in a market economy, respectively, the economy of other countries inevitably affects ours. Today, Azerbaijan exports a lot of products to the world market and imports a lot of products into the country. In order to ensure a balanced economy, it is necessary to ensure a balance of prices and wages," A. Maharramov said.

He believes that wage reforms include risks and calculations, but economists understand that this step is necessary. "In any case, measures will be taken to prevent inflation. In addition, the market itself will also adjust prices. Those who want to increase prices artificially will eventually fail," Maharramov stated.

In other words, the citizens with increased minimum wage will be able to fully experience the growth in their family budget.