HOW MUCH CAN THE MINIMUM WAGE BE INCREASED? A SECTORAL ANALYSIS OF THE 80,000–90,000 AMD RANGE

Abstract

The statutory minimum wage in the Republic of Armenia has been 75,000 AMD (gross) per month since January 2023, which is below the officially adopted subsistence level of the consumer basket. This study quantitatively assesses the direct financial burden and impact distribution of three realistic scenarios of increasing the minimum wage to 80,000, 85,000 and 90,000 AMD. The analysis is based on the log-normal distribution applied to data on 784,964 employees registered in the formal sector provided by the Statistical Committee of the Republic of Armenia. The study reveals the structure of beneficiaries by NACE Rev.2 sectors and forms of ownership. Statistical data indicate that about 45% of the additional costs are borne by the state, primarily through salaries in the education sector. At the same time, it is documented that after the imposition of a 20% flat income tax, the disposable net wage remains below the poverty line in all three scenarios considered. The results obtained justify that a gradual increase in the minimum wage should be accompanied by a targeted reduction in the tax wedge at the bottom of the income distribution.