REUTERS
The Ukrainian government's decision to increase the minimum wage in Ukraine to UAH 3,200 may add to unemployment, as up to 630,000 people may lose their jobs, especially in small- and medium-sized businesses, according to a report on inflation by the National Bank of Ukraine (NBU).
"According to the NBU estimates, the growth of labor costs, especially for small- and medium-sized businesses, will reduce the employment rate more significantly than it was earlier predicted. The share of layoffs due to the increase in the minimum wage will be 5.4%, or about 630,000 people," NBU said in the report.
In general, the unemployment rate is expected at around 10% if calculated according to the methodology of the International Labor organization (ILO).
The National Bank also predicted that the increase in unemployment could be partly compensated by the growth of unofficial employment.
Later the National Bank explained that there is no direct correlation between the increase in the minimum wage and a reduction in the number of the employed, and it is wrong to consider their correlation. Moreover, as the National Bank of Ukraine said, the number of the unemployed will increase mainly due to the fact that private entrepreneurs terminate their activity because of new regulations obliging them to pay taxes when their income is zero.
As UNIAN reported earlier, the regulation that doubled the minimum wage up to UAH 3,200 came into effect in Ukraine on January 1, 2017. Additional budgetary costs for this move will be over UAH 40 billion, according to government estimates. In addition, the legislative norms providing for a fine of 100 minimum wages for the payment of salaries "in an envelope" (untaxed) came into force early this year too.