Azerbaijan to raise minimum wage, JAMnews
Azerbaijan will raise the minimum wage
The Azerbaijani the parliament proposed to raise the minimum wage in the country to 500 manats [approximately $294]. According to MP Vahid Akhmedov, this will ensure a normal life for the population. Opposition politician and economist Natig Jafarli says such a dramatic increase in the minimum wage will cause a new wave of inflation and that other economic levers are needed to normalize the financial well-being of the Azerbaijani people.
Deputy of the Milli Majlis (Azerbaijani parliament) Vahid Ahmedov proposed to raise the minimum wage to 500 manats [approximately $294]. The last time the minimum wage in the country increased in early January 2022, it currently stands at 300 manats [approximately $176].
According to experts, the increase in the minimum wage at the beginning of the year caused a wave of inflation, which practically “ate up” the entire effect of this step in the government of the country.
Inflation in Azerbaijan continued throughout the year and, as President Ilham Aliyev noted in one of his interviews on local television, it is “imported”. In other words, the Azerbaijani economy itself is not able to maintain the inflation rate at the desired level due to the unstable situation in world markets.
According to the Ministry of Finance of Azerbaijan, the official annual inflation by the end of 2022 will be in double digits and will exceed 10%. According to experts, inflation is much higher than declared. An independent assessment of inflation in Azerbaijan, unlike neighboring Turkey, is not underway. For example, in Turkey, estimates of inflation by independent experts are often twice as high as the official figure.
According Natig Jafarli, one of the leaders of the Republican Alternative opposition partythe MP’s proposal deserves attention, because inflation and rising prices “tortured people”, but before taking such a decision, the government must solve several other problems.
“First of all, we must remove the obligation to link individuals’ contributions to the pension fund to the minimum wage. It’s very illogical. For example, a person whose monthly turnover is 500 AZN pays the same amount to the pension fund as a person whose turnover is ten times higher. Because, according to the law, the amount of deductions is 25% of the minimum wage. In some sectors of the economy, this figure reaches 50%.
This approach is fundamentally flawed. We are proposing to set pension fund contributions at 2% of the monthly turnover of an individual doing business,” Jafarli said.
He added that another problem with the country’s current economic system is inflationary pressure on wage and pension growth:
“The mere news that the minimum wage is about to increase drives up the prices of almost all goods.
Therefore, along with the increase in wages and pensions, it is necessary to lower the level of taxes and customs duties, thus preventing a new wave of inflation.
Months earlier, we proposed economic measures that remain relevant today. The value added tax on food and medicine should be reduced from the current 18% to 2%, imported medicines should be exempt from customs duties.
These steps can achieve stable prices for goods and greatly reduce inflation.
And of course, there is a need to solve the problem of monopolies systemically and economically, which has become an ‘ulcer’ of our economy throughout the period of the country’s independence,” Jafarli continued.
“The country should also change the pension fund rules. Today, the fund manages our retirement savings at its discretion, but at least our funds are not indexed, not to mention the dividends from transactions with them.
For example, I already have about 20,000 manats [about $12,000] on my pension account. But the purchasing power of this money decreases every year, and there is no question of indexation.
If the problems I have indicated are not resolved, then the next increase in the minimum wage will have no real effect for citizens,” Jafarli concluded.
Azerbaijan will raise the minimum wage