WILL WE HAVE SALARY INCREASE?!

By Maia Razmadze

The project of “state program of the improvement of correlation of minimal salaries and cost of living in 2002-2005” was considered in the government session in March 2002.

This project was prepared by the order of ministries of labour, healthcare and social security. It provides for the increase of salaries up to 50 GEL.
Akaki Zoidze, co-author of the project and vice minister of state.
– What is the purpose of the project?
– The programme comprises a system of measures designed to increase minimal salaries. Its main reason is gradual alleviation of poverty level of employees and creation of conditions for its liquidation. A number of organisational measures envisage for the improvement of state regulation system of salaries as well as labour performance and work quality. Much attention is attached to the realisation of employment structures and staged execution of optimisation process, its adjustment in accordance with real economic requirements.
Programme indices were calculated in accordance with gross domestic product and expected changes of other macroeconomic indices with the consideration of ministry of economy, trade and industry.
The program, principally, provides for the rational and purposeful use of the existing financial resources. The number of measures connected with the introduction of new spheres of financing is very limited. The indices of minimal and average salaries can be reached without the significant improvement of economic growth rate. Greater indices can be reached in the result of the performance of organisational measures and strengthening of administration
– Will salaries increase and will the project work in case our economy does not develop and there is difficult financial situation?
– From the very start, the aim of economic reforms in Georgia was establishment of market-oriented economy. Proceeding from this, state policy should be aimed at the equal distribution of population in accordance with incomes.
– During the determination of differentiation criterion of salaries, the decisive role belongs to the economic situation of the country. Nowadays, it is advisable to reduce differentiation in accordance with salaries. Reduction of poverty level is more actual now than the establishment of reason-why diapason of salaries. In the modern stage of development social policy should be aimed at reducing difference between minimal salaries and cost of living.
The “2002 state budget law of Georgia” provides for significant amendments in the taxation system of income, namely, transition from progressive system to proportional one should be performed with the aim of simplifying income taxes. Non-taxable minimum should be abolished and the minimal salary should amount to 50 GEL since the second half of 2002 by means of additionally mobilised incomes.
Will minimal salaries be increased at the expense of reducing high salaries or imposing higher taxes on them?
– The increase of tax rate will not entail decrease of high salaries. At the same time, the financial state of low-paid people has improved. The mentioned measure should be estimated as positive. Along with this, there will be increase of minimal salaries compared with average salaries.
– Will the increase of salaries affect 2003 budget?
– As mentioned above, under the 2002 state budget law of Georgia, the minimal salary will amount to 50 GEL. This can be achieved on the basis of mobilisation of additional income and simplification of taxation system as well as abolishment of non-taxable minimum.
– Thus, by the reckoning of Georgian Ministers of Finance, assignment of additional amounts from the state budget will not be necessary for the state budget next year.
– Inflation rises yearly. When this project comes in force, the purchasing power can become so low that increase of salaries will not entail any important changes. What do you think of it?
– Growth parameters of minimal salaries and main social-economic indices are calculated for the period of 2005 in accordance with the increase of prices (within the annual 5-8%). Thus, we think that salaries will not be decreased.
– The improvement of legislative normative basis of living cost is envisaged by the project with the same purpose. It is almost ready; the project of Georgian living cost calculation rules law is under consideration in the Parliament Committee.
– What does a project on the legalisation of labour and salaries in private sector provide for?
– Nowadays, minimal salaries represent the only instrument of involvement of the state in the sphere of salaries in non-budget sector. Minimal salaries are not efficient due to the large scale of concealed salaries and illegal employment that, in their turn, represent an important element of hide economy. At the same time, in the conditions of production decline and increase of inoperative enterprises or enterprises with less load, the so-called long-term leave without pay became quite widespread. All this impedes the identification of the employed and unemployed people, reduces the mobilisation level of income and social taxes in the consolidated budget, and hinders the implementation of social security policy. Radical changes are required in the methodology of income tax imposition. Budget revenues are small compared with the mentioned incomes, which is caused by low level of tax administration and disorganisation of the system of income declaration. The programme provides for the realisation of the following measures:
– Improvement of legislative basis of workers’ leave
– Provision of general income declaration
– Strengthening of tax administration.
The project of “state program of the improvement of correlation of minimal salaries and cost of living in 2002-2005” was considered in the government session in March 2002. This project was prepared by the order of ministries of labour, healthcare and social security. It provides for the increase of salaries up to 50 GEL.