Viktor Skarshevsky, an economist from Ukraine, considers the official sustenance level in the country unrealistic and states that the galloping inflation gobbled up all the raises in salaries in recent years. The situation is so dire that no change of government can possibly help the country to get out of the crisis in the next few years. The expert explained his views in an interview to GolosUa.

There had been no factual raise in people’s income in Ukraine

Skarshevsky stated that in fact there was no actual raise in people’s income due to the inflation, which rushed ahead particularly strongly during 2014-2015, following Russia’s takeover of Crimea and the start of Donbas conflict with separatists in the East.

“Social standards of the population are not indexed to the level they were at before,” the expert explained.

Both the minimum wage in the country and the average monthly salaries have gone up in recent years, but people don’t feel any improvement in the standards of life and purchasing power.

  • The minimum monthly wage went up from about US $50 in 2015 to $140 in 2018.
  • The average monthly wage has been consistently rising, too, and has reached 8,480 hryvnia ($323) in April 2018, as per data.

But Ukrainians don’t feel richer, as prices keep climbing up and social payments are falling behind in catching up. Thus, people relying on social security feel an enormous financial pressure. They have to rely on support from kids and family members, which puts further pressure on workers. The people who are employed have to support not only themselves and their immediate dependents, but often provide financial assistance to parents and grown up kids.

Sustenance level

The current sustenance level of 1,800 hryvnia (USD 69) per month is so low that “no one would be able to survive on that”, Skarshevsky stated. According to the Ministry of Social Policies the sustenance level should be on the level of 4,200 hryvnia ($160). But even this number is too low to survive, Skarshevsky believes.

The reason for such discrepancy in the way calculations are made, the economist explains. The specialists project, let’s say, 8% inflation, so the sustenance level is adjusted to match the official expectations. But in reality the inflation could be 15%, so the amount is immediately insufficient, but no amendments are made. Further miscalculations, purposeful or inadvertent, continue and result in extra gaps between the real needs and what is in the budget.

Ukrainian pie.

Galloping inflation in Ukraine gobbled up a large part of the salary increase pie.

Subsidies to low income groups

Ukrainian government provides subsidies to vulnerable groups on low incomes in the way of discounted payments for rates, water and electricity. This is one of the reasons, by the way, why Ukrainians prefer to work without official contracts for less money than to be paid “white wages” and pay full prices for communal services.

In 2017 the budget projected 46 million hryvnia ($1.75 million) for subsidies on communal services, however, in reality 70 million hryvnia ($2.7 million) was spent. This year it’s projected that 70 million would be subsidised, but it may end up that 90 million hryvnia ($3.4 million) will be required.

Technical default

Technically, Ukraine is in the situation of default, because in December 2015 the country refused to pay back 3 billion US dollars of debt to Russia. The case is now in London court and Ukraine’s chances aren’t looking very good, the expert believes. It’s likely that the country would be ordered to pay it back over a period of time.

“From 2015 to 2019 Ukraine is underpaying 15 billion dollars, although it should have paid it,” Skarshevsky pointed out. The debt was restructured to make it easier to pay back over a period of time. From 2019 Ukraine would have to start paying it back. But the government didn’t use the time to improve the situation in the country, the expert believes.

Even if there is a new government, the situation won’t change, Skarshevsky insists.

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Thank you for this very detailed and really interesting information, of course, it is difficult to notice any salary raise when you income leaves much to be desired. But here I should say that this problem is also actual for many people in Russia.