Increase in Minimal Wages Poses a Dilemma to the Government
The United Democrats have scored a major victory by passing through the parliament their critical pre-election proposal of increasing the minimal salaries to the subsistence level. The parliament decision poses a dilemma for the government and, it seems, any move to block the implementation of the decision would cost the votes during the looming parliamentary elections.
In the radio interview on March 3, President Eduard Shevardnadze said that the government would not permit instant increase of the minimal salary to the minimum subsistence level of 115 Lari (USD 52.9) for this would result in “irreversible economic disaster”.
President can now veto the law, but this would damage Shevardnadze’s and his party’s reputation. Both Shevardnadze and the Citizens Union won their last elections under the slogans “from stability to prosperity.” The political opponents, and especially the leader of the United Democrats, Zurab Zhvania would have excellent grounds to slam the governmental policies if the promised “prosperity” fails to live up to the minimum subsistence level.
The draft law on increase of the minimal salary obliges the executive government to allocate additional 116 million Lari for this purpose in the state budget for year 2003.
However, as the government ended all recent years with significant budgetary shortfall, and its ability to implement the law is questionable.
“This [proposal of the United Democrats] was a carefully planned trick and the United Democrats would make good use of it during the elections. Initially it seemed that the Parliament would reject the draft law, but in fact this was an initiative to which most of the political parties would not dare to object before the elections,” Ia Antadze, political analyst for the Radio Liberty, told Civil Georgia.
Trying not to expose its political vulnerability, President Shevardnadze tries hard to convince the population that the initiative is economically unfeasible and dangerous.
“[Implementation of the law] might trigger irreversible and uncontrollable processes in the economy, such as inflation and jeopardize stability of the national currency. We might witness the same situation as we had during the hyperinflation [in yearly and mid-90s],” President Shevardnadze said on March 3.
President said that the international financial originations also criticize the initiative. The International Monetary Fund mission warned the Georgian authorities “the fiscal pressures would be worsened by any move to implement the proposed new monthly minimum wage of GEL 115.”
As an alternative to the United Democrats’ initiative, the government suggests gradual increase of the minimal salary, which would take, as Shevardnadze said, approximately 3 years.
“The State Minister and I have been working on the issue together with various experts for the whole year and came to the conclusion to increase the minimal salary from 20 to 35 Lari. Of course this is a very small amount, but I would assure you that this way is much more efficient. For the next year the salaries will be increased to 60 Lari. Our project suggests gradual increase of the minimal salary,” Shevardnadze said on March 3.
Zurab Zhvania completely rules out possibility of inflation, as the United Democrats are not requesting additional emission of the currency to increase the minimal salary. Zurab Zhvania believes that the law could be implemented through “reallocation the existing budget funds”.
Economic expert Vladimir Papava of the Georgian Foundation for Strategic and International Studies (GFSIS) tends to agree with this argumentation. At a press conference on March 4, Papava said increase of the minimal wages is economically feasible. “If the growth in wages would be done through reallocation of the budgetary funds, not the emission of the additional money, certainly no inflation would follow. However, certain increase in demand may trigger slight growth in consumer prices,” Papava said.
Zurab Zhvania said at the March 3 briefing the government is using the economic jargon to cover up the comfortable dealings of the budget. “The 2003 budget allocates 120 million Lari for “special funds” of the various ministries. These are the funds, used to buy expensive cars for the high-ranking officials. Reallocation of these special funds will be quite sufficient to increase the minimal salary to 115 Lari,” Zhvania argued.
President is hesitant to veto the law. Some experts believe that in his traditional manner Shevardnadze will wait and try to evade responsibility.
“I do not think that President would use the veto right. This would mean confrontation and opposition, which is not Shevardnadze’s style. I think he will not veto the law. And if the law would not be successfully implemented, which is most likely to happen, he will put responsibility on somebody else,” Ia Antadze told Civil Georgia.
In the meantime, the United Democrats continue to dominate the political agenda with widely popular theme. If the government fails to provide for an adequate response, the heads might start falling. Many say it can be the State Minister Avtandil Jorbenadze, to suffer first the wrath of the cornered president.
By Giorgi Sepashvili, Jaba Devdariani, Civil Georgia
