The Armenian government rejected on Thursday an opposition proposal to more than double the national minimum wage, saying that the measure would be too costly for both the public and private sectors.
The minimum wage is currently set at 32,500 drams ($80) per month, a figure equivalent to just over one-quarter of Armenia’s existing average monthly pay. A bill drafted by Hrant Bagratian, a parliament deputy from the opposition Armenian National Congress (HAK), would raise it to 72,500 drams.
Prime Minister Tigran Sarkisian’s cabinet formally spoke out against the bill’s passage by the parliament during a weekly meeting. Finance Minister Vache Gabrielian said the sharp wage is “very desirable” but not realistic because it would require at least 28 billion drams ($70 million) in additional government spending on public sector salaries. This would place an “unbearable burden” on the state budget, he said.
The Armenian budget for this year calls for a total of over 1 trillion drams in public expenditures.
Gabrielian said the proposed measure would also hit the private sector. He claimed that it would encourage private employers to underreport the number of their workers to tax authorities and thus expand the already sizable informal sector of the Armenian economy.
Bagratian, who served as prime minister from 1993-1996, dismissed these arguments. “Strangely enough, no extra money is necessary for raising [the minimum wage] to 72,500 drams,” he claimed. He argued that the bulk of the extra government spending required by his bill could be financed by greater proceeds from employee income tax.
“Even if we assume that the government is 100 percent right, 20 billion drams is not a lot of money given that a single oligarch posts $200 million in profits a year,” Bagratian told a news conference. “There is too much wealth in their hands,” he said, referring to the country’s wealthiest entrepreneurs linked to the government. “Let them redistribute it a little. Let them do this at their own expense.”
The government itself pledged to double the minimum wage in its five-year policy program approved by the National Assembly in June. According to Gabrielian, this cannot be accomplished before 2015.
The finance minister also announced that the government’s draft budget for 2013, which will be unveiled soon, envisages a more modest rise in the legal wage threshold. He did not give any numbers, though.