Russia to hike minimum wage shortly before general election

Russia to hike minimum wage shortly before general election
By bne IntelliNews March 28, 2016

The Russian government intends to hike the minimum monthly wage by 21% in July, just two months before general elections are held, Prime Minister Dmitry Medvedev reportedly announced.

The minimum wage will be hiked to RUB7500 ($111 at current exchange rates) from July 1, according to the premier.

"As chairman of the party and the Prime Minister, I would like to inform you: I made a decision - to install from July 1 this year a minimum wage in the amount of RUB7,500, having increased it by almost 21%," Medvedev told delegates from the United Russia party that currently holds the majority of seats in the Duma, but will struggle to maintain its grip on power in September due to the economic slowdown.

Medvedev noted that despite the fact that since January 1 this year the minimum wage rose by 4%, the minimum amount of payment labour is still small.

The minimum wage level is important as many of the social payments and other benefits are calculated as multiples of the minimum wage and so the government's move will have a large effect on social spending.

The decision will not be well received by the Finance Ministry, which is already struggling to contain costs and was hoping to shave 10% off budget expenditure across the board. President Vladimir Putin has called for the budget deficit to be held at 3% of GDP, but Russian Economics Minister Alexey Ulyukayev said the deficit will top 5% this year if oil prices average $40. The price of oil was $40.44 as of March 28.

Russian analysts have warned that while the state needs to cut spending, political goals are paramount at the moment.