Wages and Prices

Wages and Prices

Until 1991 Georgia's price system and inflation rate generally coincided with those of the other Soviet republics. Under central planning, prices of state enterprise products were fixed by direct regulation, fixed markup rates, or negotiation at the wholesale level with subsequent sanction by state authority. The prices of agricultural products from the private sector fluctuated freely in the Soviet system.

Once it forsook the artificial conditions of the Soviet system, Georgia faced the necessity for major changes in its pricing policy. Following the political upheaval of late 1991, which delayed price adjustments, the Georgian government raised the prices of basic commodities substantially in early 1992, to match adjustments made in most of the other former Soviet republics. The price of bread, for example, rose from 0.4 ruble to 4.8 rubles per kilogram. By the end of 1992, all prices except those for bread, fuel, and transportation had been liberalized in order to avoid distortions and shortages. This policy brought steep inflation rates throughout 1993.

Beginning in 1991, a severe shortage of ruble notes restricted enterprises from acquiring enough currency to prevent a significant drop in real wages. In early 1992, public-sector wages were doubled, and every Georgian received an additional 40 rubles per month to compensate for the rising cost of living. Such compensatory increases were far below those in other former Soviet republics, however. In 1992 the Shevardnadze government considered wage indexing or regular adjustment of benefits to the lowest wage groups as ways of improving the public's buying power.

In mid-1993 the majority of Georgians still depended on state enterprises for their salaries, but in most cases some form of private income was necessary to live above the poverty level. Private jobs paid substantially more than state jobs, and the discrepancy grew larger in 1993. For example, in 1993 a secretary in a private company earned the equivalent of US$30 per month while a state university professor made the equivalent of US$4 per month.


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