“Despite the war, incomes of Ukrainians are increasing”, says the National Bank of Ukraine (NBU) inflation report. “This is happening due to budgetary support, economic revitalisation, and a soft fiscal policy”, according to the financial regulator.
For the second consecutive year, the key sources of household income are pension payments, social assistance, and military personnel salaries. Private sector wages are gradually increasing due to a shortage of qualified, skilled workers in the labour market. For example, there is a shortage of skilled personnel in industries such as mechanical engineering. Additionally, some potential employees have left the country, while others are serving in the Armed Forces.
According to NBU estimates, the real incomes of the population are moderately increasing. At the same time, Ukrainians are not in a hurry to rejoice. Many families who conducted financial self-assessments in the third quarter of 2021–2023 described their situation as challenging. During this quarter, the number of households saving on food almost doubled. At the same time, there are more people who have enough money for large purchases, such as large household appliances, cars, or real estate.
As a rule, people with lower incomes usually cut back on basic necessities, such as food. As of the beginning of 2023, the subsistence minimum for Ukrainians (who are able to work) is 2,684 UAH. The minimum wage was last increased in October 2022 (to 6,700 UAH). The minimum pension is slightly over 2,000 UAH. One might think that people are essentially earning just enough to provide for food or clothing, which, by the way, is another major expenditure for Ukrainians.
In Ukraine, citizens earn 17,176 UAH – this is the average salary recorded by the State Statistics Service in the second quarter of 2023. This is an 11,2% increase compared to the first quarter of this year. The highest earnings growth occurred in sectors such as water transport, wholesale and retail trade, and aviation transport. Agriculture, public administration, and the entertainment industries witnessed the smallest growth.
Consumer sentiments began to decrease significantly with the onset of the 2019 coronavirus pandemic. At that time, due to prolonged quarantine, some companies sent employees on unpaid leave, others announced layoffs, and some businesses closed altogether. The situation did not change even after the start of the full-scale Russian invasion of Ukraine. “As of October 2023, the Consumer Sentiment Index of Ukrainians has decreased by 2,8 points to 79,9 points compared to the previous month”, according to Info Sapiens research. Instead, “food prices in October of this year increased by 0,8%. Since the beginning of the year, the prices have soared 3,8%,” asserts the State Statistics Service report.
“Since the beginning of the full-scale war, those people who found themselves in temporarily occupied territories and in the front line zones have become the poorest,” explains Yaroslav Zhalilo, economist and vice-director at the National Institute for Strategic Studies. “According to statistical data, nearly two million Ukrainians have had their homes destroyed or damaged. Most of these people are unemployed. Some 70% of internally displaced persons claim that they live solely on the assistance they receive from the state. This is also statistical data.”
Public sector employees are in a better position – teachers, medical professionals, as well as municipal services workers. Despite the war, the state continues to fund and ensure the functioning of healthcare, education, energy, and municipal services, among other sectors.
The situation is worse for the private sector employees. Their incomes have either decreased, or people have permanently lost their jobs. This primarily concerns sectors such as entertainment, hotel and restaurant businesses, and public catering establishments.
“At the same time, some non-public sector enterprises have experienced positive dynamics, particularly in the machine-building sector or those involved in the production and repair of military equipment. However, nominally, the salaries of Ukrainian workers have not increased. Inflation has eroded a sizeable chunk of their income. Usually, the minimum wage and pension adjustment occurs post-factum, following inflation. It is meant to compensate for the depreciation of people’s earnings. The effectiveness of this strategy is challenging to determine; it depends on the categories of the population. Those with minimal earnings are typically dependant on goods that become more expensive first”, says Zhalilo.
Starting next year, Ukrainians were promised an increase in their earnings. According to the 2024 budget project, the minimum wage will be set at 7,100 UAH from 1 January 2024 and will increase to 8,000 UAH from 1 April. The subsistence minimum from the next year will be 2,920 UAH. However, this is still 2,8 times less than the actual subsistence minimum calculated by the Ministry of Social Policy based on prices of June 2023 – they estimated it at 8,442 UAH. Most likely, this ratio will increase next year. The subsistence minimum directly affects pensions and other social payments to citizens.
