Putin announced a new increase in the minimum wage: this has pitfalls

Inflation and lack of funds from employers

By 2030, the minimum wage (minimum wage) should increase in nominal terms at least twice to the current level, from January 1, 2024 it will be indexed by 18.5%. This will become an additional incentive for the growth of salaries in the country as a whole, Vladimir Putin said at SPIEF. Meanwhile, according to experts, the good goal announced by the president is associated with a lot of accompanying pitfalls. First of all, it is inflation and a chronic lack of financial resources from employers.

To date, the minimum wage is 16,242 rubles. From January 1, 2024, it will be equal to 19,242 rubles.

Recall that over the past ten years, this figure has more than tripled – from 5205 rubles in 2013. The minimum wage is used to calculate a number of payments to employees – salaries, vacation and business trips, sick leave. Additional payments to pensions, benefits and monthly payments for children depend on it. Accordingly, an increase in the minimum wage automatically leads to an increase in benefits for low-income and socially vulnerable categories of the population.

Vladimir Putin named the figure – about 5 million people who will be affected by the increase in the “minimum wage” But other estimates were also heard at the forum. About six million Russians employed in the economy officially receive wages below the legal minimum wage, and their real incomes are still in the “gray” zone. Another 12 million people do not work anywhere legally. These individuals are neither unemployed nor self-employed, Deputy Prime Minister Tatyana Golikova said at SPIEF, citing estimates from the Federal Tax Service.

“What is really important is not the nominal minimum wage, but the real one,” says Aleksey Zubets, a professor at the Financial University under the Government of the Russian Federation. – We do not know what inflation will be over the next seven years. If during this time it accumulates, say, up to 50%, then in reality the minimum wage will increase not twice, but only one and a half.

Secondly, we must understand that wage growth will directly affect a very small part of the population, those few million Russians whose incomes are close to the minimum wage.

Thirdly, this process will be accompanied by an increase in the tax burden. Increasing the minimum wage is a well-known fiscal measure through which the state stimulates the collection of taxes.

Fourthly, Russia has very cunning employers. For example, they often make a person part-time, but force them to work full-time.”

There is simply no money in the treasury of many companies and enterprises. Only in the event that employers have additional funds, wage funds (payroll) will grow in accordance with the minimum wage parameters established by law or faster. In addition, Zubets concludes, employers should ensure that the rights of staff are not violated, so that there is no practice when de jure people work more hours, and de facto get paid for less. In general, there are pitfalls in raising the minimum wage.

We add that the federal legislation does not spell out a clear procedure for exactly how to increase payments, when and by what amount. It turns out that the indexation of the payroll is a purely internal sphere of responsibility of the employer, at best regulated by some kind of its own regulations, the “good will” of the owners, the presence or absence of the necessary funds. Of course, we are talking, first of all, about private commercial structures: in the public sector, the indexation of the payroll is not so sagging – the budget allocates money for indexation.

“A lot of people with salaries below the minimum wage are employed in our small business or in the informal sector,” says Pavel Kudyukin, a member of the Council of the Russian Labor Confederation. – In general, each office takes into account only the money that it pays to employees at home. The employer does not know how much a person receives in other places (and where exactly). For example, a cleaning lady belongs to this category: she washed the floors for two hours in one organization, two hours in another, and the same in a third. Minimum wage-related legislation can be enforced where the employer’s income is more or less controlled. The gray, and even more so the shadow sector, completely fall out of this zone of control. No one knows if they pay the minimum wage there or not.”