The subsistence minimum in Georgia and the necessity for determining its optimal level

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Ivane Javakhishvili Tbilisi State University Press
Subsistence minimum is a kind of social reference, social standard of living used for fixing the amount of the wages, pensions, stipends, allowances and other social benefits. The full value of subsistence minimum consists of the cost of food products (the so-called “food basket”) required for a healthy and productive life of an able-bodied person as well as the minimum costs of nonfood consumer products and services (at market prices). The population of Georgia has been malnourished for years, unable to purchase and consume relatively expensive products (meat, milk and dairy products, fish, fruits, vegetables) in accordance with the real physiological standards, and satisfied food demands mostly by cheaper products, such as bread, which represents almost half the ration of food, while in the developed countries, the share of bread in the ration is only 12-15%. Because of all this, for years, the population has been suffering from protein deficiency, as well as lack of vitamins and microelements. With this in mind, one of the pressing problems that lie ahead in Georgia to addressed in the near future is to improve the food ration of the population and to ensure its pacing factor - food security. Its solution is a major socio-economic challenge. It implies the country’s ability to provide the basic foodstuffs to its population through indigenous resource production. Without this, not only the possibility of providing food to the population at the subsistence level will be called into question, but this also will increase the government’s motivation and “temptation” to revise these norms downwards in order to show the de-facto situation better than it is, as it once did in 2003. In particular, the Order No. 111 of the Minister of Labor, Health and Social Protection from May 8, 2003, approved norms that lagged significantly behind both internationally recognized and preexisting standards: for example, the meat consumption rate of 80g/day is 2.5 times lower than internationally recognized norm (200 g/day), the rate of milk and dairy products consumption decreased by 4.5 times (!) - from 960 grams to 215 grams, the vegetable consumption rate was halved - from 370 grams to 182 grams, sugar consumption rate decreased from 100 grams to 55 grams, while the rate of consumption of cheaper products, such as bread, which already exceeded significantly the international standard (200 g/day), increased from 350 grams to 400 grams per day (!). As a result of this methodological manipulation, the minimum amount of food that the population consumed was considered to be a physiological norm. The alarming situation of food security violations has been “resolved” in such a simple way, without utilizing budgetary resources and taking appropriate measures. As a result, in accordance with the so-called “norms”, the food consumption situation of our population looked “not so bad” visually (!). However, these standards lag significantly behind both internationally recognized and preexisting standards fall far short of those recognized by international standards, including those recommended in the US: 3.2 times lower for meat, 3 times lower for dairy products, 2.3 times lower for fruits, and 2 times lower for vegetables. Because of this, the contents of essential nutrients of proteins, fats and carbohydrates in the human diet also decreased significantly in Georgia. In general, this farce was done to reduce the cost of the food basket, in order to minimize as much as possible this huge difference between the actual basket and pensions, benefits and other allowances (and unfortunately, it still exists). Through this measure, the government attempted to close the gap between supply and consumption of food and create a visual image that is close to normal. Despite this decline, the amount of food resources currently existing in Georgia (except for eggs) is significantly lower not only in comparison with optimal, but also as compared to critical. The fact that agro-food products imported to Georgia in 2011-2019 worth more than US$ 11.0 billion (92.5% of the country’s GDP in 2019) indicates serious decline in the agrarian sector and insufficient level of the country’s food security (consisting of four key components, such as - Providing the population with: 1. Adequate quantities of food stocks; 2. Nutritious and balanced food; 3. Safe food; 4. Affordable food). The current subsistence minimum is unrealistic - it creates a false picture of the adequacy of the amount of food consumed by the population, as well as it gives off the illusion that its food ration (which is completely out of real physiological norms) is normal. As a result, focusing on them increases the risk for people to become a victim of various severe diseases. With this in mind, the existing methodology for calculating living wage calculation the subsistence minimum requires urgent modification, and in order to determine a real subsistence minimum, it is necessary: 1. To restore and adhere to the actual physiological norms established for the population of Georgia, harmonized with international standards; 2. To use the actual cost of food to be taken into account in current prices, when defining the food basket based on these norms. The most optimistic calculations resulted in 13.5% discount rate for bargain with, but in practice, it should not actually exceed 2-3%. 3. In the subsistence minimum, the share of food basket should not be 70% (which is completely unacceptable), but only 50%, and the ratio of food and other costs in the subsistence minimum should be not 70/30, but 50/50. If the proportion of calories recommended by nutritionists is observed in terms of vegetable and animal origins (40/60, instead of the current 60/40), this will increase considerably the cost of per 1,000 kcal: calories of animal origin cost 5-6 times as much, than calories of vegetable origin (for example, the latest data on this difference for bread and beef have been confirmed by 13-fold increase in favor of beef), and this difference is even greater from to year. By changing the proportions in favor of animal origin calories, the food component of the subsistence minimum will increase further, which will eventually give us the subsistence minimum worth almost GEL 520 (I believe that this proposal should be acceptable and accessible to the authorities for the first step). In order to translate the subsistence minimum into reality, it will be necessary to implement actively the social programs at the State level, generate new jobs, increase salaries, pensions, tax benefits and so on, which will boost people’s income generation, raise their purchasing power and access to food, basic necessities and various services.
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Cost of living, standard of living, food Security, grocery cart
Economics and Business, №1, 2020, pp. 13-29