What will change after subsistence minimum rises on July 1?

According to law, subsistence minimum is the amount an individual needs to buy essential goods and services (informally, “a consumer basket”). This list was last approved by the Cabinet of Ministers in 2016. It includes basic foodstuffs, clothing, footwear, medicines, housing costs, traveling by bus and going to a museum or the movies.   

The subsistence minimum is also established for certain categories of population: it is higher for able-bodied people and for children up to 18 years while it is lower for children up to 6 years and for those who lost their working capacity. It has been increased proportionally for all categories by 4.48%. For persons who lost their working capacity subsistence minimum is now UAH 1,564.

From July, subsistence minimum for different categories of people will look as follows:

• UAH 1,936 the general indicator;
• UAH 1,669 UAH for children up to 6 years;
• UAH 2,118 UAH for children up to 18 years;
• UAH 2,007 UAH for able-bodied persons;
• UAH 1,564 for persons who lost their working capacity.

Previously, the minimum pension was slightly higher than the subsistence minimum for people with disabilities; the two became equal on July 1 of last year. Thus, the minimum pension is currently equal to the subsistence minimum for people with disabilities, amounting to UAH 1,564.

Ukraine’s official subsistence minimum has been growing steadily but it still “lags behind” the actual one quite significantly. Following the July rise the subsequent increase is scheduled for December 2019 with subsistence minimum amounting to UAH 2,027. Subsistence minimum grew over the past 4 years by an average of 8-10% per year. However, one should take into account monthly price increases for all major goods and services (consumer price index or inflation index).

A consumer price index is calculated based on a market basket. Unlike a minimum consumer set of non-foods and services (“consumer basket”), a market basket also includes goods and services that have negative health impacts, such as alcohol, tobacco, etc.

Over the past 4 years, prices for goods and services of the market basket grew by the same 8-10% as subsistence minimum. Therefore, an annual increase in the subsistence minimum allowed the population to buy the same set of goods and services as in 2016, regardless of the increase in their prices.

The impacts of subsistence minimum

In the past, pensions in Ukraine could be lower than subsistence minimum. Today this has been leveled off. Thanks to the July rise, the minimum pension increased from UAH 1,497 to UAH 1,564 (minimum for people with disabilities). Also, due to increased subsistence minimum, other social benefits are adjusted, e.g. social assistance to low-income able-bodied persons increased from UAH 402.41 to UAH 421.47.

The size of subsistence minimum has an impact on payments to persons with disabilities: for 1st group it is 130% of the minimum for those who lost their working capacity, for 2d group it is 115%, and for 3d group it equals the subsistence minimum.

Assistance for single mothers equals the subsistence minimum for children of the respective age, and assistance for children in custody or guardianship is double their subsistence minimum.

At the same time, the increase in subsistence minimum on July 1 does not affect the size of minimum wage: its size – UAH 4,173 – is determined by the national budget and must remain unchanged until the end of 2019.

The size of subsistence minimum impacts on:

• minimum and maximum age-based pension;
• social assistance to low-income families;
• revenues (not) subject to indexation;
• fees for compulsory state pension insurance for certain types of transactions;
• assistance for families with children;
• unemployment benefits;
• maximum salary from which the single social contribution is paid;
• size of the tax social privilege;
• coefficients of indexation of wages;
• fee for state registration of changes and obtaining information from the Unified State Register.

Official and actual subsistence minimum: what’s the difference?

Not too many people know that the Ministry of Social Policy publishes its actual subsistence minimum monthly that significantly differs from the official one in recent years. For instance, actual subsistence minimum for May 2019 was UAH 3,691 which is UAH 1,755 or two times more than official subsistence minimum.

In November 2016, minimum wage for the first time exceeded actual subsistence minimum and still remains higher. (Chart 2).

Thus, there are two “minima”: official and actual. Increasing the official subsistence level allows those dependent on social support to buy a similar set of goods and services. In spite of inflation, consumer goods prices also grew in the range of 8-10%, i.e. inflation did not affect the consumer basket of subsistence minimum. However, its growth does not affect the size of minimum wage that already exceeds the actual subsistence minimum.