At Thursday's Cabinet session, the government did not approve the draft amendment to the Law on Minimum Monthly Wage, which proposes to increase the minimum monthly wage in Armenia from 68,000 drams to 100,000 drams.
The substantiation of the government's respective decision states, in particular, that according to the government's 2021-2026 program, the government will take steps to set the minimum monthly wage at 85,000 drams by 2026. The continuous increase of the minimum monthly salary will be ensured by taking into account the macroeconomic indicators of Armenia.
If the draft is approved, the minimum monthly salary in Armenia will be about 50% of the average monthly salary.
A sharp increase in the minimum wage may be accompanied by an increase in working hours.
In developing countries, where exports are based on labor-intensive branches, a sharp increase in the minimum wage can lead to a reduction in the competitiveness of the economy and a reduction in exports. In the case of Armenia, this can be important, for example, for the processing industry, as the majority of those receiving the minimum wage are employed in this domain.
Changes in the minimum wage, especially in a large amount, carry considerable inflation risks. According to various analyzes, every 10% increase in the minimum wage can lead to additional inflation of 0.3-0.7 percentage points.
So, as per the Armenian government, in the aforementioned conditions, the adoption of this draft is inexpedient.