Or on the economic basis of social partnership

Today, we are witness to the ruinous effect of the employers’ victory over their workers and the “victory” of state interests over those of civil society. The result is that some 80% of the population is living below the poverty line, mass unemployment, wage already becoming regarded as standard practice, enterprises going bankrupt for want of effective demand for their products, the shadow economy, and soaring crime.

Meanwhile, the Constitution defines Ukraine as a democratic social stated ruled by law, thus placing legality, democracy, and social justice among the top priorities. Thus the President as official guarantor of the Constitution and the rest of the political leadership must exert serious efforts to translate these declared values into reality. This is important today the more so that the Ukrainian society is being further stratified, divided into rich and poor.

The propertied class appeared amazingly quickly, people capable of holding onto considerable property. It should be noted that the process of property formation was activated not as the result of highly productive labor and lawful business activity, as is common practice in the developed countries, but as the result of a simple redistribution of public property carried out for the benefit of a small group of individuals mostly representing the shadow economy and criminal capital. It is safe to assume today that the rich and the poor in Ukraine are divided by an abyss and the divergence in the interests of both strata practically irreconcilable.

In my view, in order to alleviate social tensions and start building a society without conflict we have to utilize the experience of the economically advanced countries where the income ratio of 20% of the richest and 20% of the most impoverished constitutes 8.9 in the United States, 5.7 in Germany, and 4.3 in Japan, compared to 30 in Ukraine. Experience shows that the lower the difference in incomes, the higher the living standard, and the easier to settle any such conflicts as may arise between these social groups.

Social partnership is a general purpose vehicle making it possible to regulate the income ratio in accordance with European standards, ease social tensions, and lay the foundations of effective cooperation.

Social partnership between employers and employees is no platonic love; rather a balance of economic interests clearly pointing to the law of the unity and conflict of opposites. The issue is that the employer is interested in maximizing profits and the employee in getting the highest possible pay. From this flows the inevitable conflict of employer and employee interests. Under the circumstances, a ruinous confrontation or victory of either of the parties means that both parties stand to lose. The employer goes bankrupt, and the worker loses his job. This makes it crucial to understand the need to steer a middle course making possible a balance of the economic interests of employer and employee. Annually, labor unions and employers’ representatives conduct talks sharply debating wages and salaries, working hours, and work conditions.

After reaching such a balance of interests between the parties a contract is signed subject to the condition that the contract-making freedom is observed and the government cannot meddle in the negotiating process. The government simply signs the agreement as a third party, whereupon the agreement acquires the force of law. And so this mechanism of forming wages and salaries could be described as tariff autonomy to be guaranteed by the Constitution.

As a rule, wages and salaries stipulated by this agreement constitute between 50 and 70% of GDP, which is five to seven times higher than they are in Ukraine today. In other words, the employer by agreeing to a fair distribution of profits with the employee by paying fair wages gives the employee buying power. The latter, in turn, constitutes domestic market demand, incidentally, for those very products made by the employer. As a result, the employer reaches his strategic goal to maximize income.

The employee, in turn, by selling his/her labor on advantageous terms, helps form the employer’s incomes. The employer, interested in raising his revenues (given stimulating legislation), invests his revenues in the development of production, thus making more jobs. This in turn makes it possible to increase the output of goods and services which inevitably results in an increased domestic market demand. Employees thus receive their greatest award — more jobs, goods, and services — securing a higher living standard. And the end result is social partnership fostering the fair distribution of income between the employer and employee, creating a balance of supply and demand on the domestic market, this being the foundation of harmonious socioeconomic relationships.