Living wage in 2020: federal and regional values

Living wage in Russia

— the minimum level of income that is considered necessary to ensure a certain standard of living in Russia[1].

This is the cost of a conditional consumer basket. In Russia, the annual consumer basket of a working-age person includes 100 kg of potatoes, 126.5 kg of bread, pasta and cereals, 60 kg of fruit, 58 kg of meat, 210 eggs, etc. In addition to food, the basket also includes non-food products, which are estimated at half the amount spent on groceries. Utility bills and other services are also taken as 50% of the cost of the food basket[2]. At the same time, the cost of living is calculated separately for each region[3][4]. And also for three groups of the population - children, pensioners and able-bodied people[5]. It is believed that pensioners need the least amount of money. The subsistence minimum is a conditional value needed for statistical accounting.

Indicators

The cost of living is usually established based on the results of the past period, which is why the formulation “per quarter” is used. For the second quarter of 2020, the cost of living in Russia as a whole is set at the following levels: per capita 10,329 rubles, for the working population - 11,163 rubles, pensioners - 8,506 rubles, children - 10,160 rubles[6].

The minimum wage (minimum wage) in the Russian Federation from July 1, 2020 is 7,800 rubles per month[7].

Meanwhile, since 2002, the Labor Code of the Russian Federation states: the minimum wage is established throughout the territory of the Russian Federation by federal law and cannot be lower than the subsistence level of the working population, and the “terms and procedure” for the gradual increase of the minimum wage to this very minimum must be established by federal law. This law has not yet been adopted. In 2014, the Ministry of Labor promised that the minimum wage would be brought to the level of the officially established subsistence level by October 1, 2020[8] From October 1, 2020, it was planned to abolish the federal minimum wage and replace it with a regional one, which would be established for each subject of the federation separately and depend on the subsistence level[9]. However, it was decided to abandon these plans[10].

from 01/01/2018, the minimum wage is 85% of the minimum monthly wage for the working population in the Russian Federation - approximately 9,500 rubles.

from 05/01/2018, the minimum wage will be 100% of the minimum wage for the working population in the Russian Federation.

On April 19, 2020, Russian Prime Minister Dmitry Medvedev, speaking in the State Duma with a report on the government’s work for the year, said that the minimum wage will be raised to the level of the subsistence level of a working person in the next few years[11].

The minimum subsistence level for a pensioner in the Russian Federation as a whole to determine the size of the federal social supplement to the pension is established in accordance with Article 4 of the Federal Law of October 24, 1997 No. 134-FZ “On the subsistence level in the Russian Federation” for 2020 in the amount of 8,540 rubles ( Article 8 of Federal Law No. 415-FZ[12]).

As of August 2020, the median salary in Russia is 23,548 rubles (according to the definition of the median, 50% of working Russians earn more than this number, and 50% earn less). After deducting income tax, an employee with such a salary receives 20,487 rubles[13]. According to Rosstat, in October 2020, the real salary of the average Russian decreased by 10.9% compared to October 2014.[14] According to VTB Capital, this year Russians spent 50-55 percent of their family budget on food purchases[15].

The cost of living

, according to Rosstat[16], in accordance with the Federal Law of October 24, 1997 No. 134-FZ “On the subsistence level in the Russian Federation” is a valuation of the consumer basket, including minimum sets of food products, non-food products and services necessary to preserve human health and livelihoods, as well as mandatory payments and fees.

The consumer basket in the constituent entities of the Russian Federation is established by the legislative (representative) bodies of the constituent entities of the Russian Federation.

What will be the relationship between the minimum wage and the cost of living in 2018?

The onset of 2020 was marked by the introduction of a new federal minimum wage (RUB 9,489), which again did not reach the subsistence level. But the same law (“On Amendments...” dated December 28, 2017 No. 421-FZ) established the rule that starting from January 1, 2019, the minimum wage in Russia will be established annually in the amount of the subsistence minimum calculated for the working population for the 2nd quarter of the previous year. And if for the next year of calculation this value turns out to be less than for the previous one, then the minimum wage will not change towards a reduction.

Thus, the rule on the annual revision of the value of the federal minimum wage, linking it to the value of the subsistence level, is enshrined in law.

However, the President of the Russian Federation decided not to wait for January 2020 and signed the law “On Amendments...” dated 03/07/2018 No. 41-FZ, according to which the minimum wage will be equal to the subsistence level as early as 05/01/2018 and will be 11,163 rubles.

See here for details.

Setting a living wage

The subsistence minimum for the Russian Federation as a whole is intended for:
justification for the minimum wage and minimum old-age pension established at the federal level, as well as for determining the amounts of scholarships, allowances and other social payments established at the federal level;
formation of the federal budget.
The subsistence minimum in the constituent entities of the Russian Federation is intended for:
providing the necessary state social assistance to low-income citizens;
formation of budgets of the constituent entities of the Russian Federation.
Employment centers, in order to determine “suitable” work for officially registered unemployed[17].

Living wage in 2020 in Russia

Information has been received from the Ministry of Labor about increasing the cost of living by the year 20. As the Cabinet of Ministers assures, by next year the minimum wage will increase by 2.9 percent, and by 21 it will increase by another 2 percent.

What is known from this news, whether the Russian population should expect an increase in the minimum payment for living or the news is just rumors, is discussed in this article.

Where did the news come from?

This information about the “jump” in the minimum standard of living began to appear in the media and on the Internet since 2020. The government has repeatedly provided information that by 2020 the amount of payments will increase significantly. According to the forecasts provided, the increase is indeed occurring.

The main problem is that the established rate of increase does not correlate in any way with the increase in prices for products, essential goods and the cost of fuel. As a result, it turns out that the promised increase in the minimum labor payment and the living wage does not contribute to improving the life of the population as a whole.

What is known is not the current moment

The first information appeared on January 15 of this year. The message came from Deputy Prime Minister Tatyana Golikova. According to the Russian Ministry of Labor, work is underway to improve the standard for assessing the amount of the minimum payment for life. An interdepartmental group also approached the procedure.

The very concept of a living wage was introduced back in 1992. This value was set for the period of economic stabilization.

How the work is planned to be carried out

The procedure for introducing a new assessment form will be introduced gradually. This will be done to avoid creating additional problems with the implementation of the project. The Ministry and the interdepartmental group are not going to create a “revolution” in this field.

The main task is to increase the minimum wage and the living wage. Both values are inextricably linked with each other and their growth will lead not only to an increase in wages, but also to the establishment of a new level for social and government payments to the needy segment of the population.

About the amount of payments

Currently, the average minimum wage in Russia is 11,280 rubles for the working population. The indicator for pensioners is 8,583 rubles, for minors – 10,390 rubles.

The cost of living corresponds to the indicated figures; accordingly, this point of legislation was fully complied with. As can be judged from the presented figures, the amount of payments increased by 1 percent, but this is an indicator only at the beginning of this year.

Social orientation of the living wage

The subsistence level indicator is of a social nature and is used to assess the standard of living of the population, and is also an important guideline in establishing the minimum wage. Thus, the minimum wage cannot be lower than the subsistence level of the working population (Part 1 of Article 133 of the Labor Code of the Russian Federation).

There are no norms stipulating the use of the “living wage” by employers either in labor or tax legislation.

The cost of living

For the Russian Federation as a whole and in the constituent entities of the Russian Federation, the cost of living is determined quarterly on the basis of the consumer basket and data from the federal executive body for statistics on the level of consumer prices for food, non-food goods and services and expenses for mandatory payments and fees.

The cost of living per capita and for the main socio-demographic groups of the population in the Russian Federation as a whole is established by the Government of the Russian Federation, in the constituent entities of the Russian Federation - in the manner established by the laws of the constituent entities of the Russian Federation.

The living wage is set in rubles/month, separately per capita, for the working population, for pensioners, for children.

The cost of living, rub./month, according to data for the 2nd quarter. 2020	Russia[6]	Moscow[18]
per capita	10 329	16 426
for the working population	11 163	18 742
for pensioners	8506	11 603
for children	10 160	14 252

A similar division of the cost of living with its own personal values exists in each subject of the Russian Federation[19].

Assessments and opinions of independent experts

Many independent economic experts, including the head of VCUZH Vyacheslav Bobkov, believe that the officially established cost of living in Russia is artificially low by 2-2.5 times compared to the real one. From January 1, 2013, the Russian Government changed the principle of forming the consumer basket. Now it takes into account only the cost of food products, and the cost of non-food goods and services is taken as 50% of the cost of the food basket[20]. According to experts, this makes it possible, through “statistical manipulation,” to artificially restrain the officially established cost of living. Thus, “ the state is trying to reduce the social burden on the budget

“- said the Russian expert in an interview with Deutsche Welle[21].

Notes

Ravallion, Martin Poverty Comparisons: A Guide to Concepts and Methods. Living Standards Measurement Papers, The World Bank, 1992, p. 25
Living wage 2015-2016 in Russia regions, regions, regions, subjects of the federation
Living wage 2015-2016 in Russia regions, regions, regions, subjects of the federation
potrebkor.
Living wage by regions of the Russian Federation in 2020 and in 2020. — Consumer basket and living wage (Russian). potrebkor.ru. Retrieved January 28, 2020.
Official Internet portal of legal information. publication.pravo.gov.ru. Retrieved January 28, 2020.
↑ 12
Decree of the Government of the Russian Federation dated September 19, 2017 No. 1119 “On establishing the cost of living per capita and for the main socio-demographic groups of the population in the Russian Federation as a whole for the second quarter of 2020.”
The government decided to increase the minimum wage
The minimum wage strives for a living wage. Gazeta.Ru. Retrieved November 11, 2020.
The Ministry of Labor proposes to tie the minimum wage to the subsistence level
The Ministry of Finance proposed to postpone the increase in the minimum wage
Medvedev promised to increase the minimum wage to the subsistence level
Official Internet portal of legal information. publication.pravo.gov.ru. Retrieved January 28, 2020.
Over the past year, the number of poor people in Russia has increased by almost one and a half times | RIA FederalPress
Russians experienced a record drop in real wages since 1999 :: Economy :: RBC
Pensions in Russia increased by 853 rubles over the year: State Economy: Finance: Lenta.ru
Methodological notes
Article 3. Procedure and conditions for recognizing citizens as unemployed / ConsultantPlus. www.consultant.ru. Retrieved November 11, 2020.
Decree of the Moscow government of September 12, 2020 No. 663-PP “On establishing the cost of living in the city of Moscow for the second quarter of 2020.” Consultant Plus
.
Table of living wage values in 2015-2016.
Federal Law No. 227-FZ “On the consumer basket in the Russian Federation as a whole.” Retrieved November 11, 2020.
Experts: The cost of living in Russia is artificially low. RT in Russian. Retrieved November 11, 2020.

What do minimum wages and PM affect?

The minimum wage and the cost of living affect the following payments:

Wage. In 2020, a citizen cannot receive an income per month below the established figure. If the salary is below the subsistence level, the employee has the right to file a complaint with the appropriate organization. After this, sanctions are applied to the company owner and fines are imposed. At the same time, real earnings may be lower than the minimum wage if a citizen works part-time, does not meet the time and labor standards, or works part-time.
Benefits. Benefits for pregnancy, childbirth, child care up to 1.5 years old, and sick leave payments depend on the minimum income.
Taxes. The amount of taxes also depends on the minimum wage. As the minimum wage increases, tax deductions increase.
Regional coefficient . Additional payments are assigned to those citizens who work in special climatic zones.

Minimum wages can have a negative impact on small businesses. Entrepreneurs are not able to pay salaries in this amount. In addition, a number of citizens have reduced motivation to develop and improve professional skills.

If a Russian’s pension is less than the minimum subsistence level, then the payments reach the required level. The pensioner will need to contact the social protection fund at the place of residence or the Pension Fund and submit a written application.