How Much Should the Minimum Wage be Increased?

Proposals for increasing the minimum wage in Azerbaijan will be prepared. This is stated in the "Labor Market" working group's 2024 Action Plan of the Business Environment and International Ratings Commission.

Although pensions and benefits increased at the beginning of this year in Azerbaijan, the minimum wage remained at 345 manats. At the beginning of last year, the lowest level of wages was raised from 300 to 345 manats.

Recently, there were reports that the minimum monthly wage would be replaced by an hourly wage system implemented in developed countries.

Currently, a person working in the private sector in Azerbaijan and earning 345 manats has a total of 29 manats and 13 qepiks deducted from their salary (20 manats 50 qepiks for the State Social Protection Fund, 1 manat 73 qepiks for unemployment insurance, and 6 manats 90 qepiks for compulsory health insurance). For those working in the public sector, this figure totals 39 manats 28 qepiks.

As the minimum wage increases, the social payments for those working under the VÖEN system also increase.

Although the number of people earning the lowest monthly wage in Azerbaijan is not officially announced, the government stated in 2022 that increasing the minimum wage affected 600,000 people.

"The Increase is Expected to be Double-Digit"

Member of the VI convocation of the National Assembly, Vugar Bayramov, told Turan that the Ministry of Labor and Social Protection is preparing proposals for increasing the minimum wage and these proposals will be submitted for discussion by November 1 this year: "Expectations are for the minimum wage to be increased from January next year."

According to Bayramov, the increase rate is expected to be double-digit: "Because in recent years, there has also been a double-digit increase in the average wage."

He noted that as a result, this increase could directly affect the wages and incomes of more than 700,000 citizens: "Considering that those earning the minimum wage are the citizens most in need of social security, this will further strengthen their social protection."

"As Minimum Wage Increases, Tax Burden Also Increases"

Economist Natig Jafarli told  Radio Azadliq that it would actually be good for Azerbaijan to transition to an hourly payment system like in developed countries: "But in the current economic relations, this does not seem very realistic. The public sector dominates the labor market in Azerbaijan - 900 thousand out of 1.7 million employees work in budget organizations. There are fixed working hours there."

He believes that the minimum wage in the country will be increased next year: "At present, it is necessary to allocate funds for this increase in the budget. The new budget will likely be adopted by the new parliament in November-December. After that, a decision can be made regarding the minimum wage."

According to Jafarli, the minimum wage has a direct impact on the social payments of those working under the VÖEN system: "They have created a very meaningless dependence in the law, and as soon as the minimum wage increases, the tax burden for those working under the VÖEN system also increases. Firstly, this should be eliminated by law. Secondly, the calculation of the minimum wage should change. The minimum consumer basket should be recalculated, and the living minimum should reflect more realistic figures."

The economist believes that in the current conditions, the minimum wage should be 500 manats: "This amount can meet people's minimum needs. But this is not enough either, because there are families where only one person works out of four or five. If that person also earns the minimum wage, it causes the family to fall into a very poor situation."