The subsistence minimum in Georgia and the necessity for determining its optimal level
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Date
2020
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Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
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.
Description
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Keywords
Cost of living, standard of living, food Security, grocery cart
Citation
Economics and Business, №1, 2020, pp. 13-29