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NBU head denies 600,000 jobs cut over minimum wage hike

The decrease in formal employment figures is mainly due to the closure of "sleeping" private entrepreneur firms.

NBU head denies 600,000 jobs cut over minimum wage hike
Valeriya Hontareva
Photo: Photo: flickr.com

The head of the National Bank of Ukraine (NBU), Valeriya Hontareva, said on 3 February that numerous media reports about "the dismissal of 600,000 individuals due to the increase in minimum wage" were due to the misinterpretation of the data of the NBU.

In a press release on the financial regulator's website, the NBU governor said that the statistical decrease in formal employment figures is mainly due to the closure of inactive private entrepreneur firms.

On the contrary, the raise in the minimum wage will have a number of positive effects, Hontareva said. The policy will stimulate the growth of domestic consumption and consequently spur the economic activity. Furthermore, it will increase the demand for labour and raise employment in the future.

Eventually, the increase in the minimum wage will stimulate the return of persons, who previously has not been looking for work because of low salaries, to the labour market.

In general, NBU experts have said the increase in the minimum wage will add some 0.5 per cent to Ukraine's GDP in 2017. This increase in the minimum wage was a major factor in the revision of the forecast for economic growth to 2.8 per cent in 2017.

"The raise in the minimum wage, coupled with structural reforms in the country, will in the long term have a positive impact on employment figures," Hontareva assured.

Earlier, some experts warned that the minimum wage increase to 3,200 hryvnyas is fraught with risks to the economy.

Increasing the minimum wage deepens the discrepancy in wages between skilled and unskilled workers, widens the gap between the retirement benefits and the minimum wage. It includes the risk of growth of social tension and is capable of intensifying the pressure on the government to further improve social standards, not harmonized with the improvement of the economy, which could lead to further inflationary risks.