Politics • 23 October, 2018

Expert opinion on the President’s Address: Increase in minimum wage will boost country's GDP

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On the instruction of the Head of State, from January 1, 2019, the minimum wage will be increased 1.5 times to 42,500 tenge. An expert of the Center for Macroeconomic Research and Forecasting at the Economic Research Institute JSC Henrietta Stroeva described how this initiative of the President will affect Kazakhstan's GDP.

In the Address of the President to the people of Kazakhstan “Growing Welfare of Kazakh Citizens: Increase in Icomes and Quality of Life” it was noted that the well-being of the population, first of all, depends on stable growth of incomes and quality of life. The Government was instructed to increase the minimum wage by 1.5 times from 1 January 2019 — from 28 to 42 thousand tenge. This will directly affect 1.3 million people working in all industries and enterprises of various forms of ownership.

There will also be provided an increase in wages by 35% for 275,000 civil servants, workers in budget organizations.

As Stroeva noted, the proposed measures to increase the income of the population will contribute to the improvement of the Kaitz index (the ratio of the minimum wage to the average monthly wage) to 25%. Today this figure is 17.6%. In proportion to the increase in tax deductions with an increase in the minimum wage, the tax burden for the employed population will decrease.

“The current economic growth and the business support provided by the Head of State will allow private sector enterprises to support the initiative to increase wages in the economy,” the expert said.

Recall that during the working visit of the Prime Minister of Kazakhstan Bakytzhan Sagintayev to the East Kazakhstan region a number of enterprises, expressing support for the President’s Address, declared their intention to raise the minimum wage to their employees.

As a result, according to the expert, a “spillover effect” may be observed in the economy, which will lead to an increase in citizens' incomes of at least 96 billion tenge with the same level of employment.

“This will have a multiplicative effect on the growth of the solvency of the population, the increase in aggregate domestic demand and the decline in the shadow economy. If the inflation corridor is observed, the proposed initiative will contribute to the growth of the country's GDP,” said Stroeva.

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