Minimum Wage Rise Might Set off Inflation
Friday, 7 September, 2007
Minimum Wage Rise Might Set off Inflation
Friday, 7 September, 2007
On September 2, the secretary general of Kazakstan’s Labour Confederation, Murat Mashkenov, asked parliament to consider raising the minimum wage.
The minimum wage currently stands at 10,310 tenge, or just over 80 US dollars a month, but only applies to public sector workers.
The average monthly wage in Kazakstan is around 60,000 tenge or 450 dollars.
The minimum wage is determined by looking at the average price of food, bills and services across the whole country, then calculating the lowest amount that one person could survive on.
Yuri Dadonov, an academic at the Institute for Economic Studies, argues it would make sense to raise the minimum wage.
“One needs to bear in mind that this sum is averaged out for the whole of Kazakstan,” he said. “It does not actually mean very much, but it’s clearly not enough.”
There is, however, a risk that the injection of extra cash into circulation could cause inflation, so that as a result people would not end up with much more spending power.
When the government budget is formulated at the start of the financial year in January, wage levels are adjusted to take projected annual inflation into account. As political scientist Eduard Poletaev points out, the purchasing power of wages set at the start of any given year will be considerably less by the end of that year.
Raising the minimum wage may be good for social stability, but it could also contribute to higher inflation, he said.
The official forecast for year-on-year inflation in 2007 is between 7.3 and 8.3 per cent.
It is not yet clear how much the minimum wage would go up by if parliament says yes, but Dadonov suggests that public sector workers need three times their current salaries.
(NBCentralAsia draws comment and analysis from a broad range of political observers across the region.)
