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Minimum Wage Increase and Other Bounties: Why Now?

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During the last two weeks, the government announced a number of social initiatives – from raising the minimum wage to the expansion of the consumer basket. Volodymyr Dubrovsky, CASE Ukraine`s Senior Economist, commented to BBC Ukraine on the reasons for this decision.
‘One hypothesis, which I have, of why such seemingly informed and conscious people like Hroisman and Poroshenko started this mayhem, is that they have read some horrible poll results. They were so horrified that they began to panic, because the minimum wage in the amount of UAH 3 200 is a completely unbalanced solution.

What happened to tariffs is a natural thing that many warned against. In fact, gas has its own price, and it should be paid. But people are paying mostly for heat instead of gas. Therefore, increase in tariffs had to be accompanied by a profound reform of natural monopolies in order to make all these district heating companies transparent and having no incentive to keep inefficient technologies.

Instead of that, tariffs were raised, and one did nothing with those district heating companies. Implementing this reform over the last month was impossible. People will soon get bills with the huge numbers. They will apply for subsidies, but the money for it is insufficient and it is being granted not to all of them.

Electronic declarations were added to all that. This, of course, is a very proper thing, but it is very explosive one, when it coincides with increasing tariffs and people`s fatigue that since three years after Maidan little has been changed, and many people`s lives have become even worse.

Populist steps have their consequences. Wealth does not increase the government’s decisions.

Read the full article [in ukrainian].

November 15, 2016