Why raise the minimum wage: the expert explained the “handout” of the government

Speaking with a report in the State Duma, Prime Minister Mikhail Mishustin said that from the beginning of next year, the minimum wage (minimum wage) will be indexed by 18.5%. At the same time, he clarified that the size of this indexation will be higher than the level of annual inflation. And accordingly, it will be another step towards improving the standard of living of Russians. Due to what it will be possible to increase the minimum wage, and what is the point of this increase, we asked the expert.

So, starting next year, the minimum wage in the country will be 19,242 rubles, which is 3,000 more than this year.

Recall that in 2022, due to high inflation, the minimum wage was raised twice. In total, the minimum wage increased by 17%, and the cost of living (PM) by 13.5%. This allowed 15 million of our fellow citizens to save their income.

And from January 1 of this year, the minimum wage was again indexed – by 6.3%.

There are no words: the government and the president care about the well-being of Russians, even in the face of severe economic sanctions, they find opportunities, if not to raise, then at least to support to raise the standard of living of their subjects.

In the country, according to Rosstat, there are 75 million people of working age, of which about 71.2 million work at enterprises of various fields of activity and forms of ownership. Formally, it is believed that there are about 700,000 workers in the country who receive wages at the minimum wage level or even lower if they work under a civil law contract. However, experts do not believe in these data, they say that in fact this army is many times larger.

Questions are raised by another moment. Why is indexation of the minimum wage being announced long before the upcoming increase in power? After all, there are many other types of indexed payments and salaries in the country – here, at least for state employees or at the subsistence level. However, with a significant lead, we are announced the indexation of the minimum wage? As about a matter long resolved and with found sources of funding.

On the one hand, everything is clear. In conditions when the real disposable income of the population is not growing, but declining, people need to show the light in the window that the government will soon raise the minimum wage. You need to be patient a little more, and then it will become easier.

We asked Pavel Kudyukin, a trade union leader and former Deputy Minister of Labor of the Russian Federation, to comment on the situation.

– If the minimum wage increases by almost 20% next year, how will this really affect the average wages in the country? For example, how much will the salary of a turner at a factory increase?

– The state sets and pays wages to a relatively small part of the workers. The minimum wage legally outlines the lower bar in the remuneration of an employee working under an employment contract. The state has nothing to do with the turner at the enterprise. The employer pays him, and he cannot pay below the minimum wage – of course, subject to labor discipline. That is, with an 8-hour working day, a five-day working week and the fulfillment of the production norm.

– And state employees are somehow tied to the minimum wage, is there any proportion?

– The minimum wage is the only salary indicator that the state is obliged to establish in accordance with the law. All other salaries are regulated solely by the employer. Even state employees working in state and municipal institutions.

– Are the cost of living and the minimum wage related?

– According to the law, the minimum wage cannot be lower than the subsistence level. These two quantities are close in size, but they are not rigidly related to each other and are calculated autonomously from each other.

– There are a lot of fraudulent schemes in our country, the most popular one is salary in envelopes. Officially, the employee is assigned a minimum wage, from which the company pays taxes to the state. And the rest – in envelopes. By raising the minimum wage, the government, thereby, increases the collection of taxes. Can you say so?

– Undoubtedly. This is beneficial for the employer, who avoids taxes, and is beneficial for the employee, from whose envelope income tax is not withheld. Although on the other hand, he receives smaller contributions to social funds. Which will definitely affect the size of his pension when it’s time to go on a well-deserved rest. But who in his youth thinks about old age? Our pension rules are changing, so many workers prefer to earn here and now (in an envelope) as the most rational option, rather than catching a pie in the sky.

As for the replenishment of the budget from tax revenues, I do not think that the indexation of the minimum wage gives a significant increase. At the minimum wage level, we have about 5 million people, and not all of them are involved in fraudulent schemes.