Raising wage is now a cardinal problem due to the promises that politicians have been dishing out in the past few months. “The future of our whole economy now depends on how the problem of wages will be solved,” said Anatoly Rachok, director of the Razumkov Center for Economic and Political Studies, addressing the roundtable “Reforming Wages in Ukraine: a Jump over a Social Abyss.” Although wage reform has been going on for more than five years, it not only failed to raise the living standards but also provoked a protracted socioeconomic crisis and sharp polarization in society, caused by a depreciation of the workforce and emergence of a class of “the working poor,” he added. According to Liudmyla Shangina, social programs director at the Razumkov Center, the poverty line in Ukraine has remained unchanged for many years. Even unreported incomes cannot offset the difference between the official data on poverty and the minimum subsistence level.
Even though there are vacancies in almost all sectors and in all regions of Ukraine, nobody wants to fill them because it is difficult and humiliating to live on the wages that are offered. Ms. Shangina estimates that in order to live a decent life and be able to have permanent housing, an individual should earn about $1,000 US per month. According to the most liberal estimates, only 5% of Ukrainians draw an income like this. While in most developed countries wages are the main source of income for 70% of families, in this country this index is only 14%, while the rest have to seek “other ways” of earning a living.
In view of these conditions, it is simply absurd to talk about a middle class; moreover, the very prospect of its emergence is under threat. “For the first time in the postwar period, the census indicates that the number of people with a higher education dropped between 1989 and 2001,” said Ella Libanova, deputy director of Ukraine’s Institute of Demography and Social Research, “although investments in education and the number of university graduates have been increasing. Still, young specialists cannot find a job in this country and thus have to go abroad.”
The Razumkov Center has proposed a plan for the government to implement in 2005-2007, which includes a proposal that the wage fund be “lightened” by introducing a 20-% uniform social tax in lieu of several existing social taxes.
In general, experts recommend that work be launched in several directions. Experts from the Razumkov Center believe it is important to shape a socially and economically effective policy of incomes by revising the subsistence level, and also to strengthen the social security system, and to support families with children. The state should also do its utmost to raise employment, create favorable conditions for the development of small-scale and medium business, and strengthen the rights of hired employees and of owners. No less important are opportunities to receive a high-quality education, obtain a first profession, and introduce social standards in the health care sector.