Archive 2004

  • 07.06.2004

    Administrative increases of the minimum wage facing the povertyunemployment trade-off


    The Government of Ukraine currently plans an administrative increase of the minimum wage. While such a measure could yield higher incomes for some of the working poor, the government has to respect the trade-off between poverty alleviation and employment creation. Wage increases outpacing real growth in labour productivity will trigger the shedding of low skilled labour on the firm level. Furthermore, resulting rising labour costs will contribute to inflation. Both rising unemployment and inflation will hurt the poor more than other social groups. At the same time, the very scope of the plans will affect most wage contracts in Ukraine while heavily diminishing the role of the labour market.

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