A Matter of Money

Proposal on Salary Increase Dominates Pre-election Agenda

On January 13 President Eduard Shevardnadze said the proposal of the United Democrats to increase the minimal salary to the subsistence level would lead the country to stagnation. The proposal continues to dominate the political agenda and shapes the pre-election agendas.

After the initiative found strong resistance of the government, the United Democrats started to actively promote the idea among the public.

It seems that the issue will become a cornerstone of the election campaign of the United Democrats, led by the former Parliamentary Chairman Zurab Zhvania.

According to the initiative of the United Democrats, the budget must include additional 116,1 million Laris (roughly 60 million USD) to increase minimal salary to the subsistence level – 115 Lari – from May 2003. It is proposed to cover the additional spending from increase in tax revenues, projected by the government at 210 million Lari. The United Democrats’ proposal would consume 65% of the projected tax revenue increase.

At the same time the initiative also considers increased funding of the Social Security by 71 million, Medical Insurance – by 10,2 million and employment funds – by 2,6 million Lari – all at the expense of the projected revenue increase.

The initiative has become a major issue since December, when the United Democrats wanted the Parliament to discuss their initiative on minimal salaries before approval of the 2003 draft budget, however the pro-governmental factions went strongly against. As a result, the budget was not approved.

On January 10 the Parliamentary Committee on Health and Social Security with participation of the Parliament’s leadership, economic ministries and experts, discussed the United Democrats’ initiative.

At the committee meeting Finance Minister Mirian Gogiashvili remained strongly critical of the increase. “I can not accept this hasty decision which would lead the country to stagnation,” he stated at the committee hearing.

He said that United Democrat’s arguments come from ‘the air’. The minister believes that implementation of the idea might lead to inflation in the country, as well as reduced exports, more unemployment, less purchasing power and other negative processes.

On January 13 President Shevardnadze also criticized the United Democrats demand and repeated the Finance Minister’s arguments that “the initiative would lead the country to the stagnation”. 

The government declares that it spares no efforts to increase the minimal salary. As Amiran Gamkrelidze, the Minister of Labor, Health and Social Security stated, in 2002 President Shevardnadze approved three-year program of gradual increase of the minimal salary to the subsistence level.

After more than 6 hours of tense and clamorous debates, the hearings of the Parliamentary Committee ended without any particular result. The only decision that was made during the session was to create a joint working group of the Parliament and the Government, which would continue to work on the issue.

After they realized that the government would not make any compromises, the United Democrats started to publicly promote their idea and held several meetings with representatives of various professions. Their opponents believe that the United Democrats can make good use of their proposal during the election campaign.

Economic expert Niko Orvelashvili thinks tends to disagree with positions of both sides involved in a debate. He argues the government has multimillion external and internal debts and in this conditions it sounds very strange to talk on increase of the salary.

“The government should first repay that multimillion debt to the citizens and the foreign creditors. Only after this the government will have a right to announce increase of the minimal salary,” Orvelashvili told Civil Georgia. He said that nothing is being done in the country to stimulate economic growth, which is necessary for increasing minimal salary.

Even if the government agrees to implement the United Democrats’ idea, it is very likely that in fact the increase would prove impossible.

Even the 2002 budget considered increase of the minimal salary to 50 Lari as a first step towards the minimum subsistence level, but the government did not implement the provision, as the budgetary provisions on increased revenues were not fulfilled.

By Nino Khutsidze, Civil Georgia