Effects Of Minimum Wage In Russia

Introduction

The minimum wage remains as one of the controversial issues in the economic policy, labor economic and politics, which was introduced in order to deal with the reduction of inequality and poverty. The minimum wage, by definition, is the minimum amount of compensation that the employee receives for his/her labor performance. The level of the minimum wage is typically established by the legislation or the contract of the government. As such, it is illegal to pay any amount that is less than the minimum wage for the labor1 . The rate of the wages changes from year to year. The minimum subsistence cost2 is the minimum level of the income that is considered to be necessary to ensure the subsistence and basic personal needs of the individual

1 Definition is given by the Investopedia.

2 Subsistence level – also referred as cost of living and living cost.

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Minimum wage

To begin with, in Russia, the minimum wage is regulated by the Federal law № 82-ФЗ on the Minimum Wage Size since 2000 as well as by the Art. 133 of the Labor Code (Wage

Indicator official website). Since 2007, the minimum wages in Russia is calculated on the quarterly basis and includes the compensation, incentives payment and social benefits. First of all, the minimum wage is the lowest threshold for all the wages and salaries in the private Russian institutions. Secondly, it is the main basis of determining the salaries at the state institutions such as health care institutions, public schools, etc. This computed by the minimal wage that is paid monthly multiplied by the coefficient respectively to the category of the employee3, but Russia try to give up this system of calculation. Lastly, this type of wage is convenient for the determination f the fines, alimonies, sick benefits and so on (Gluschenko).

Officially, the Russian minimum wage refers to the lowest wage paid monthly that cannot go below the minimum subsistence level established by the Russian government.

This fact with the considerations above gives a clear evidence that the minimum wage is not a proper indicator in order to judge the level of the subsistence cost in the Russian Federation (Gluschenko). This means that the huge stratification of the population on the basis of income level in Russia exists in great forms, which is negatively reflects to the citizens of the country as well as the economy of the country.

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Conclusion

To conclude, even though that the official laws and regulations in Russia prescribe the minimal threshold of such indices as the minimum wage and the subsistence level in both federal and regional levels, they do not correspond to each other. In addition to that, it is almost impossible to get along or, in other words, to survive only living relying on the minimum wage in Russia, as it is just 60% of the subsistence level. Hence, there is a significant issue of the prospering stratification of the population in Russia, mostly referring to the high level of the poverty. Moreover, the hypothesis stated before – whether the issue between the level of the minimum wages and subsistence cost level have a huge gap, which deplorably affects