Minimum size of wage and its differentiation

Abstract

Raising minimum wage can lead to such a contraction in its differentiation that weakens the stimulating function. The article raises the question of the influence on this function of the minimum wage growth to the level of the subsistence minimum of an able-bodied person. According to Rosstat information, the decrease in the differences in earnings of workers depending on their qualifications began in 2017 and continued in 2019. The R/P10% ratio also declined but was still too high. The study of the causes of this phenomenon is based on the hypothesis that, first of all, it is rooted in the earnings differentiation by type of economic activity (industry). For the analysis, industries were selected in which the key professional groups consist of the most qualified personnel, namely highly qualified specialists and skilled workers. Contraction of inter-qualification differentiation below the reasonable standards took place in industries with wages not higher than the average for all employees. This process began in 2017, when the minimum wage had not yet reached the subsistence level. In key occupational groups in some high-wage industries the differences under consideration reached excessively high values. And in industries with low wages, the differentiation by key groups slightly increased in comparison with 2017. This can be explained by weakening of labor incentives and an attempt to restore them after this weakening. This confirms that ensuring of the reproductive function of payment for labor should be consistent with the effectiveness of the stimulating function. However, without reducing the differences in earnings by industry, achieving such consistency is not possible.