Economic Reform And Poverty In Ukraine

Ukraine was subject to a number of hindrances during the 1990s. Shock in energy prices, breaking partnerships in trade, lessening military demand, all these contributed to considerable disturbance in the economy of the country.

The other areas of agony were-
Indiscipline pertaining to the implementation of monetary as well as fiscal policies which increased the rate of inflation Trade liberalization, privatization, limited price policies were not of much help to the economic growth of Ukraine. It also led to poverty in the country.
However, there was improvement in the economic reform and poverty in Ukraine towards the latter half of 1994. Even though the renewed economic reform had just started to show results, but the damage, which it inflicted in the initial stages was difficult to reverse at least for a specific period of time.

Damage inflicted on the economy of the country had affected household in different ways, the prominent ones being as under:
As the demand for labor declined, it led to a fall in real wage. The percentage fall of real wage between the years 1990 to 1993 was 63%.
Hyperinflation had gnawed away the savings of the common people. People were subjected to poverty.
There was decrease in social benefits.

Owing to the above exigencies, the informal sector had gained importance. However, the informal sector was not able to cover the macroeconomic downfall in Ukraine.

The association between economic reform and poverty in Ukraine could be best understood by ascertaining the labor market. The decline in real wage is responsible for poverty to a large extent. The percentage decrease in real wage during the period 1990 to 1993 was found to be 60%. The government in Ukraine imposed 52% tax on the wage of the workers. As a result, the amount held by the worker thereafter would be very nominal not enough to suffice a day’s meal. This greatly affected the rate of employment and majority of the informal sector workers were reluctant in reverting back to the formal sector jobs. It is often said that if economic reform would have been more effective, poverty would not have resulted.

With regard to this, as part of the economic reform, the government in Ukraine suggested the following:
Purpose of social protection ought to be fulfilled.
Child allowance should be further worked upon.
Social protection should also be rendered to the senior citizens. Both the above should be funded by the government in Ukraine.
A pension system may prevent an individual from being exposed to poverty at a later stage in life.
Health insurance is also another sphere to be looked into by the government in Ukraine. If the government in Ukraine implements economic reforms, which are efficient enough to meet the above requirements, poverty may be kept at bay to some extent.

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Last Updated on : 26th June 2013

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