Salary increases for Ukrainians will be among the lowest in Europe this year and in 2008, with inflation offsetting any pay hikes, a study shows
Salary increase rates for Ukrainians will be among the lowest in Europe this year and in 2008, with high inflation actually turning the average pay hike in the nation into a salary decrease in 2007, an international consulting company reported.
According to the Mercer consulting company’s Annual Worldwide Pay Survey, published Nov. 26, the nominal average pay increase in Ukraine by the end of this year will total 10 percent, but with year-end inflation in the country predicted by the company at 11.3, working Ukrainians will actually be making 1.3 percent less than the year before.
For 2008, the Mercer report predicts that the average pay hike for Ukrainians will break even with inflation, with both totaling 10 percent next year.
Ukrainian experts, however, disagree with Mercer’s calculations, saying that salary increase rates in Ukraine will be much higher for the indicated periods.
Meanwhile, Ukrainian economic and investment experts are forecasting year-end inflation of 14-15 percent, with the consumer price index looking no less dire in 2008, given the relentless rise in energy prices, fueled largely by the higher natural gas bills that Russia and Central Asian producers have been slapping on Ukraine in the last several years.
According to Ukraine’s State Statistics Committee, inflation in Ukraine has already reached 14.2 percent in the first 11 months of 2007. Kyiv-based investment bank Concorde Capital has predicted inflation of 15 percent by the end of this year.
While Ukrainians wallow in the mire of negative or zero pay growth this and next year, their counterparts in Western and Eastern Europe will do somewhat better – in any case, their salaries will beat inflation by at least a few percentage points, according to the Mercer report.
Mercer said that average salary growth in Western Europe in 2008 will total about 2 percent above inflation. A more optimistic forecast was set for Eastern Europe, with salaries beating inflation by an average of 3 percent.
Employees in Bulgaria, for example, will take home salaries that beat inflation by 4.9 percent, while Slovakians will smite inflation by a margin of 2.7 percent, and Czechs, by 0.9 percent.
India will see the highest salary growth, 9.8 percent above inflation, according to the report.
Meanwhile, Ukrainian experts say that salary growth will be much higher in the country than indicated by the report.
Hanna Cherednychenko, an economist with the Kyiv-based International Center for Policy Studies (ICPS), said that the application of different research methodologies on salary growth lead to different, higher figures than those offered by the Mercer report, and cast doubt on the possibility of providing a realistic picture of the salary situation in Ukraine from outside the country.
“Of course, it [the average salary rise in Ukraine this year] is lower than last year’s (of 18.3 percent) due to higher inflation rates, though it is far from being eaten up by inflation,” Cherednychenko said.
According to the State Statistics Committee of Ukraine, average salary growth stood at 12.6 percent in the first 10 months of this year.
In addition, it is still difficult to calculate real salary growth in Ukraine, as many employers pay a large portion of their salaries to employees under the table to avoid hefty social tax payments.
According to state figures, the highest salaries in Ukraine are found in Kyiv, where the average monthly pay is around double the average Ukrainian salary of $258. Average monthly salaries in other large Ukrainian cities, such as Kharkiv, Dnipropetrovsk and Donetsk, hover around $300. The lowest salaries, below $200 per month, are found in smaller cities.
According to statistics provided by Rabota.ua, a leading job website, real average salaries are higher than the figures produced by state statistics officials.
In Kyiv, for example, the average monthly salary stands at about $600, but can be much higher, depending on the job and the qualifications of an employee. What’s more, salaries in smaller regions are also going up, according to Rabota.ua.
“Many employers [outside Kyiv] are ready to pay about $500 to qualified personnel, said Viktor Zacotiy, a marketing expert at Rabota.ua.
“In large cities, such as Kharkiv, Dnipropetrovsk, Donetsk, Odesa and Lviv, offers of $600-800 are increasingly common,” he added.
In general, Ukrainian experts predict that salaries on the market will rise sharply in coming years.
Even so, Ukraine should remain a highly attractive source of inexpensive labor for companies based in Europe, or for targeting European consumers with its products.
