NBU: mass closure Flow will reduce formal employment

The rising cost of labor, especially for small and medium-sized businesses, will lead to a more significant reduction in employment than previously forecast. This is stated in the inflation report National Bank in January 2017, published on the official website of the institution.

Gontareva: we are not talking about «layoffs», and the reduction of formal employment

«According to the NBU, the total number of employees in the formal sector of the economy in 2017 will be reduced by 9% compared with the year 2016. The contribution of reduction by raising the minimum wage will amount to 5.4 percentage points (or about 630 thousand people)», — it is noted in this 70-page document.

At the same time, the decline in formal employment would be disproportionate. More it will happen at the expense of small and medium business and physical persons-entrepreneurs (FLP). «First of all it is explained by the nearly twofold increase in the tax pressure on enterprises on the single tax,» — said in the report.

Also, the NBU said that part of this decline kompensiruet increase in informal employment.

In addition, the increase in the average level of wages in the economy can stimulate return to the labour market of those desperate people who will start job-hunting, and, as a consequence, the unemployment rate may further increase.

In General, according to NBU estimates, employment will decline by 5 percentage points compared with the year 2016, which would correspond to a 10% unemployment on methodology of the International labour organization.

Gontareva: we are not talking about «layoffs», and the reduction of formal employment

Chairman of the National Bank Valeria Gontareva in the special comments stated that information about «the dismissal of 600 thousand due to the increase of minimal salary», which on 3 February reported by many media, is an inaccurate interpretation of the data of the NBU.

We are talking about the decline of formal employment in the first place due to the closure of «dormant» FLP, as «raising the minimum wage to 3200 hryvnia was accompanied by a number of tax changes, including the obligation to pay a single social contribution (single social contribution — ed.) for individuals — entrepreneurs who do not operate».

In addition, Gontareva criticizes the decision of the government of Vladimir Groisman to raise the minimum wage, but on the contrary declares that it would have «some positive effects» for prostimulirujte «the growth of domestic consumption, and hence economic activity» and therefore «increase the demand for labour and increase employment in the future.»

«…Raising the minimum wage will contribute to the growth of material incentives to return to the labour market of persons previously not seeking work due to the lack of material incentives,» — said in comments the head of the NBU.

In General, the positive effects of increasing minimum wages on GDP in 2017 was estimated by the specialists of the NBU 0.5%. And that raising the minimum wage was a major factor in the revision of economic growth forecast to 2.8% in 2017, says Gontareva.

«Raising the minimum wage, together with structural reforms in the country in the long term will have a positive impact on employment of the population», — she summed up.

We will remind, the minimum wage from 1,600 to 3,200 hryvnia in Ukraine rose from 1 January.




NBU: mass closure Flow will reduce formal employment 03.02.2017

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Февраль 3rd, 2017 by
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