What will raising the minimum wage to a living wage

The head of the government Dmitry Medvedev on may 2 asked the heads of the ministries of labour, Finance and economic development to prepare a draft Federal law on raising the minimum wage (SMIC) to a living wage and to submit it to the government. About plans to raise the minimum wage Medvedev said in April the report on the work of the government in the state Duma. Then the head of government reminded that from 1 July, this figure rises to 7800 rubles, but it is still 27% below the current subsistence level. Increase the minimum wage to the subsistence level, the Prime Minister called the task of the next few years.

What prevented to do it in the last 15 years?

The minimum wage is set simultaneously in the entire territory of the country and cannot be below the subsistence minimum of the working population. This rule is effective from February 1, 2002, but the Russian authorities already for 15 years are unable to equalize these two quantities.

There is a paradoxical situation where people can earn less than a subsistence income — to buy food and clothing, indicates the Professor of the Department of labour and social policy, Institute of public service and administration Ranhigs Alexander Shcherbakov. In fact, he explains, the Prime Minister’s instructions — it’s just a belated enforcement of law in action.

The reason 15-year gap between the minimum wage and the subsistence minimum lies in the confrontation of social and financial and economic blocs, the Chairman of the Duma Committee on labor, social policy and veterans ‘ Affairs Yaroslav Nilov (LDPR). “The financial block is always interested in how to save money, to cut funds. <…> Indeed, for the past 15 years, the law broken, which is bad not only from a legal point of view but also from the moral. However, everything can be solved with political will. As we saw in the case of lump sum payments to pensioners, the hard will of President the money immediately,” he said . It is not clear how the government propose to take means to equalize the minimum wage and the subsistence minimum, said Nilov. “If you take the money from cuts in other social obligations, may suffer even more people than now. If there are other reserves, that’s good, but we have to see how it ends. In this situation we need additional sources of funding,” admits the Deputy.

The common denominator: the minimum wage level to the subsistence minimum

When this might happen?

Unclear the terms in which it is necessary to bring the amount of the minimum wage and the subsistence minimum of a single indicator. In the Prime Minister’s instructions specify only the term draft — may 20, but Deputy Prime Minister Olga Golodets may 2 recognized that a unified position in this matter. “There are workers’ representatives are the representatives of employers who participate in this debate, their positions do not coincide. We have a short period of time that their positions still lead to a common denominator,” she said.

In the three departments responsible for the execution of orders of the Prime Minister was unable to answer the question about the timing of the operation of the law. The Ministry of all the issues associated with the development of the bill was forwarded to the Ministry of labor. The Ministry of labour said they are not yet ready to voice its position. The Finance Ministry did not respond to a request .

Labor Minister Maxim Topilin in an interview earlier told me that his office had offered to negotiate at the Federal level with all partners clear about the range of adjustment of the minimum wage and the subsistence minimum. “For example, from July 1, 2018, the ratio should be 80% from 1 July 2019 — 90% from 1 July 2020 100%”, — he said. According to Topilin, the topic was discussed with the economic development Ministry and the Finance Ministry, fundamental differences with Federal agencies there. “Is that the Finance Ministry might say, let’s slightly shift schedule adjustment. And employers may be asked to conduct adjustment, for example, by 2021, and 2022-mu,” — said Topilin. Now, according to the Ministry of labor, the size of the minimum wage is 70% of the subsistence minimum.

Maxim Topilin

Photo: Vladislav Shatilo /

Who benefits from the adjustment of the minimum wage and a living wage?

From raising the minimum wage to a living wage would benefit the budget and the economy, and workers, says the rector of the Academy of labor and social relations Alexander Safonov. If you follow the economic logic, he explains, then the person with salary below the subsistence level cannot be financially self-sufficient: he doesn’t have money for food or clothes. So the state subsidizes these workers, and this is an additional spending budget. “Raising the minimum wage is the greater economic independence of citizens. Second, we must reduce government spending on social programs by reducing the number of individuals who previously could qualify for this assistance, receiving wages below the subsistence level. The third point — the legalization of companies ‘ expenditure on wages. Fourth — the increase of revenues of extrabudgetary funds, because their incomes depend not only on the rates [of insurance premiums], but the size of the wage Fund” — lists Safonov. If you legalize this relationship, it will grow and the revenue base of the budget in terms of the tax to incomes of physical persons.

From raising the minimum wage will benefit all, agree Shcherbakov from the Ranepa under favorable course of events it will mean the nominal, albeit small, but increasing wages in General, because indirectly from the level of the minimum wage depends on the level of the average salary and many benefits.

In Russia, low level of productivity, which kompensiruet low wages. But to stimulate the economy through support of inefficient jobs, macroeconomic risk, indicates Safonov, the Russian labor market has experienced without any problems and a sharp increase in the minimum wage. “Was the story of 2005: the minimum wage in three years raised more than three fold — from 800 to 2,500 RUB During this time unemployment has not increased, but rather decreased,” — said Safonov.

Why is the minimum wage important?

The salary in Russia should not be below the level of the minimum wage, now it is 7500 rubles. per month, from July 1 — 7800 RUB This amount may include salary, bonuses and compensation. Of this amount, the employer withholds tax on income of physical persons (NDFL) at a rate of 13%, so that in fact the employee can be paid a lower amount. Less than the minimum wage a worker can receive if working part-time or part-time.

Also the minimum wage in some cases is used to calculate benefits for temporary disability and of pregnancy, for example, for those employees whose seniority does not exceed six months or the average earnings during the previous two years below the minimum wage.

Raising the minimum wage may lead to increased burden on individual entrepreneurs. Now the minimum wage depends on the contribution of individual entrepreneurs, pension and medical insurance: it is directly proportional to the value of the minimum wage. The economic development Ministry in April it was proposed to abandon the peg of contributions of FE to the minimum wage and expect them on the basis of a fixed amount, indexed annually with inflation. According to authorities, the elimination of the minimum wage from the formula for calculating contributions will make the load on them is more predictable and will allow to avoid sharp jumps.

The actual increase in the minimum wage may not happen, it will be nominal, admits the head of the Center for economic research Institute of globalization and social movements Vasily Koltashov. “This measure has long been necessary, it is correct. But will it lead to real wage increases in Russia? The minimum wage may increase, but most people transferred at half the rate. It is a known trick. Accordingly, the salary of the people remains the same”, — the expert believes (quote “Prime”).

Raising the minimum wage and bring it up to the subsistence level will facilitate the transition to the high-tech economy and rising wages, said Safonov. “Cheap labor is our beach, as well as oil dependence. In Russia we are traditionally a hostage situation, we kompensiruet low efficiency of the labor force low wages” — he said. You cannot move to an innovation economy, using cheap labor and unskilled personnel, the expert believes. And the pay increase will raise the cost of labor, the employer will seek to improve its performance, and hence to seek better-paid and more skilled workers.

Are there any loopholes for lowering the subsistence level?

The Russian method of calculation of living wage is different from the world, says the authorities in European countries are considered poor those families whose food takes more than 50% of total expenditures. “Our cost of living is calculated normative-statistical method, that is, is the matrix of consumption of calories a person of different sex and age, then it is broken down into fats, proteins and carbohydrates, minerals that a person needs to for survival. Then look for a group of products that meet this task is to gain the necessary energy and the necessary amount of trace elements,” he explains.

Photo: Sergei Nikolayev / Interpress / TASS

The method of calculating the subsistence minimum has been developed in the Soviet Union, says Safonov. Then came not only from possibilities of the budget, but also the economy — whether the country is to produce as many goods as she needs to consume. “Knew that meat for a healthy diet should be more. But the economy of such a quantity of meat is not allowed, therefore, to the maximum extent there was bread, potatoes, cereals — all that cheap relative to other products,” — says the expert.

The composition of the food basket to reduce the cost by including other goods, cheaper, he explains: for example, if you reduce the annual consumption of meat and increase the cabbage, then the cost of living will be reduced. This, for example, it is possible to explain the decline in the subsistence level in the fourth quarter of 2016: April by order of the government it was set at 10 466 rubles for able — bodied population-2% less than in the previous quarter.

Should be whether a living wage is the same everywhere?

The subsistence minimum in Russia is quite modest, says the head of expert-analytical center of Russian Academy of Nikolay Kalmykov, and to raise the minimum wage is necessary not only gradually but also taking into account regional specificities. “Living wage is different everywhere, and much different, and rather, the question here is how to do to avoid unnecessary expenditure of the budget, on the one hand, on the other — that this measure does not put pressure on the business. The business must be able to adapt to change” — reflects the Kalmyks.

Labor Minister Maxim Topilin told earlier that his Ministry has prepared proposals for the regionalization of the minimum wage. “Set the minimum wage equal to the Federal cost of living unsustainable, because the cost of living in every region of the. In Ingushetia or Bryansk region it is 8-9 thousand rubles, and Chukotka — 18 thousand”, — explained the position of Department Topilin. According to the Ministry of labor, the minimum wage at subsistence level, the national average will lead to the fact that in some regions the cost of labor is overstated. “The minimum wage we need to make de facto regional, it must be equal to the subsistence minimum in each region”, — said Topilin.

The government rejected the idea of regionalisation of the minimum wage, said on 2 may, Deputy Prime Minister Olga Golodets. The bill, which will develop in the Cabinet, I will be talking about the Federal minimum wage and Federal living wage. “We are only talking about minimum wage in terms of current legislation. that is, a single Federal subsistence minimum”, — said the Golodets (quoted by “Interfax”).