Basic Pension Should Have Been Increased - Gubad Ibadoglu

The indexation of the insurance part of pensions is not sufficient to cover the rising costs of retirees, the economist Gubad Ibadoglu said.

Commenting on the President's decree on indexation of the insurance part of labor pensions in line with inflation in 2016 and setting the minimum wage at the level of 116 manat, the expert said the basic part of pensions should have been raised, too.

Note that at present pensions consist of two parts – the basic part (AZN 110) and the insured part (the balance).

Pensioners received 150 manat (AZN 110 as the basic part and AZN 40 as the insured part) before, but from now on, in accordance with the decree of the President they will be indexed at 12.4% (the official inflation rate in 2016) from 40 manat. In other words, pensions will grow by AZN 4.96, and pensioners receiving AZN 150 up to now, will get AZN 154.96.

“This example shows that, depending on the amount of the pension, they have risen by about 5-10 manat, which does not correspond to the real level of price rise in the country,” said Ibadoglu.

On another executive order to increase the minimum wage to 116 manat, the economist pointed out that the minimum wage depends on the subsistence level, which in turn depends on the minimum consumer basket.

“Back in October, the independent experts’ calculations showed that the subsistence minimum for able-bodied population is 253.4 manat, for pensioners - AZN 200, and for children - AZN 259.9, whereas in 2017 the cost of living for the above categories is set at AZN 164.5, AZN 130.2 and AZN 136.6, accordingly,” he said.

Ibadoglu noted that even after the increase in the minimum wage to 116 manat, it is a 4-hour minimum wage in the United States and a three-hour minimum wage in the UK.   ----71D