Why did wages increase by 15% and prices by 33%?

Baku/01.02.23/Turan: By the Tariff Council (TC), the fare in public transport will be increased in Azerbaijan from February 3 Thus, the fare for intra-city bus routes and the Baku Metro has been increased from 0.3 manat to 0.4 manat; the growth is 33%. The fare on suburban and intercity bus routes, depending on the distance, will be 0.4-1 manat, on intercity bus routes - 0.03 manat per kilometer. Previously, this tariff was 0.024 manat.

But why did wages increase by 15% and services by 33%?

Economist Natig Jafarli answers this and other questions in the “Difficult Question” program.

According to him, the increase in public transport fares was not a surprise. Throughout the past year, the leadership of the Metropolitan, “BakuBus” and other companies involved in the transportation of passengers have repeatedly stated the high cost of passenger transportation, unprofitability, expressed dissatisfaction with the tariffs. Therefore, the rise in fares this year was expected,” Jafarli said.

He noted that the increase in the minimum wage and minimum pension was directly related to inflation.

“Since 2016, the highest level of inflation has been observed in Azerbaijan. According to official figures, the headline inflation rate is 14%, while food inflation is close to 20%. But again, these are the official figures of "the Azerbaijani-style reality". If the inflation rate were calculated according to international standards and norms, it would become clear that the growth of food inflation exceeds 40%. Therefore, the government was forced to carry out a certain indexation. In addition, this was required by law. This is how the average indexation was carried out, the minimum wage and the minimum pension were raised,” the economist explained.

He stressed that if the indexation of pensions affected only 100 thousand people, the increase in the minimum wage affected a greater number of people.

“The fact is that often the official registration of those working in the private sector and working under labor contracts, to reduce the burden of tax and social payments, is within the limits of the minimum wage. Thus, if earlier the minimum wage for these citizens was 300 manats, now it is 340 manats since it is no longer possible to pay below this level. Therefore, it is not necessary to say that the increase in the minimum wage had a serious impact on the incomes of citizens,” the expert said, adding that, on the contrary, there were many more citizens dissatisfied with this increase.

“Since the tax burden of self-employed entrepreneurs working under VÖİN (TIN – Taxpayer Identification Number) has increased, payments to the social security fund have increased.”

About 800 thousand people work for VÖİN in the country. If earlier those who work in Baku paid 75 manats to the social fund, now they will have to pay 86.2 manats. Their taxes increased by 11.2 manats, Jafarli noted.

As for transport, according to the economist, neither TC, the Metropolitan, nor “BakuBus” and other state-owned companies have yet provided the public with any information on how they calculate the cost.

“When the cost is too high, then first, they optimize costs. But we are not doing anything in this direction. In our country, under the pretext of high cost, they burden citizens,” he said. –0—