Official 10% increase in Pridnestrovie minimum wage "not enough"

Effective immediately, wages in Pridnestrovie have now increased 10% (file photo)

DUBOSSARY (Tiraspol Times) - In Transnistria, or Pridnestrovie - to use its official name - the minimum wage has increased ten percent effectively immediately. Starting January 1st, 2007, the minimum wage in the PMR went from 4.8 PMR rubles ($0.58) to 5.3 PMR rubles per hour ($0.64).

The increase is slightly more than the 2006 year-on-year inflation. It translates to around a salary of around $110 per month per worker, which competes head-on with Moldova for being the lowest in Europe.

Although keeping pace with inflation, the increase is not enough say some union officials who had hoped for more.

" - Twenty percent would have been better," says Oleg Potapenko, a representative for city workers. "That is what some of my coworkers had expected."

Moldova aside, Transdniester or Pridnestrovie currently has the lowest minimum wage in Europe. This has put pressure on many resident, and emigration is becoming increasingly attractive for the 18 to 35 age group.
Many Tiraspol university graduates emigrate immediately after graduation. Thanks to a bilateral treaty between Russia and Pridnestrovie, degrees issued in PMR are recognized as valid in Russia and vice versa. Salaries, however, are not the same. Taking the short trip to Russia, a worker can earn three to five times as much for doing the exact same kind of job in the same amount of time. Taxes, however, are lower in Pridnestrovie where incomes are now taxed at just 10%.

In 2005, Pridnestrovie's parliament introduced a flat tax of just 10% across the board. Although the actual rate varies from country to country, flat taxes are widespread in Eastern Europe, where they are in place in Russia, Slovakia, Romania, Georgia, Estonia, Latvia, Serbia, Ukraine, and Pridnestrovie as well.

Currency stable, inflation under control

Inflation for 2005 was only 10.83%, and in 2006, it dropped even further, to single digit numbers. Even more impressively, the freely exchangeable currency - Pridnestrovie's own locally issued PMR Ruble - has kept a stable exchange rate for the past year.

Oscilliating in a stable band between 8.20 and 8.50 PMR Rubles per dollar, the currency has kept its value despite pressure caused by what officials here call an "economic blockade" orchestrated by Ukraine and by Moldova. The blockade affected exports and caused losses of more than $400 million for 2006. Although some economists feared that a devaluation was in the cards, the PMR Ruble held steady throughout the year and no immediate change in its value is expected.

" - There appears to be a high level of confidence in the future of Pridnestrovie, and, by implication, therefore also in the value of its currency," says commentator Michael Garner, a previous contributor to The Tiraspol Times.

" - The value of the currency is extremely important. It shows us how the smart money is betting," explains Garner. "Politicians may promise and posture, but in the end, when there is a freely exchangeable currency, it is the market which decides if the bet is worth taking. And in the case of PMR, it looks like the market has made up its mind: This one is a keeper."

Garner warns that when the market senses weakness, the currency can come under attack.

" - Money itself is a powerful weapon. It can, in effect, gamble against national economies and profit from the mistakes of inept politicians. On Black Wednesday, 16 December 1992, British ministers ran around like headless chickens while still claiming to be in control, moving interest rates up and down like a yo-yo. On that day the Bank of England spent £20 billion in a futile attempt to defend the pound. Interest rates were raised to 15 per cent, all in vain. It fooled no one," remembers Garner.

Although not yet a member of the United Nations or recognized internationally, Pridnestrovie functions for all practical purposes as a separate and independent country. For more than sixteen years since it declared independence in 1990, it has shown to be viable as a separate, sovereign state. It has its own flag, national anthem, coat of arms, postage stamps, passports, car plates, border control and police force. It also has a Supreme Court and a Central Bank which issues its own currency, the PMR Ruble, which is produced within the country itself.

See also:
» Pridnestrovie per-capita GDP up 17.3% despite economic warfare
» New, lower income tax: 10% flat tax approved by PMR Parliament