The Impact of Minimum Wage Increases on Small Businesses in Ukraine: An Economic Analysis

Siddharth

doi:10.69968/ijisem.2025v4i2267-272

Authors

Siddharth Research Scholar, PhD Economics, West Ukrainian National University

DOI:

https://doi.org/10.69968/ijisem.2025v4i2267-272

Keywords:

Minimum wage, small businesses, Ukraine, employment, operational costs, shadow economy, wage underreporting, economic policy, Russian invasion

Abstract

The rapid increases in Ukraine’s minimum wage, particularly since 2016, have aimed to improve worker welfare and reduce wage underreporting in a shadow-heavy economy. However, these policies have significant implications for small businesses, which form a critical segment of Ukraine’s economic fabric. This study examines the effects of minimum wage hikes on small businesses in Ukraine, focusing on employment, operational costs, and business viability, using data from 2016 to 2024. Drawing on econometric models, statistical data from the State Statistics Service of Ukraine, and regional case studies, the analysis reveals that while minimum wage increases have boosted worker purchasing power, they have also strained small businesses, leading to higher operational costs, reduced profit margins, and, in some cases, layoffs or closures, particularly in economically depressed regions. The ongoing Russian invasion since 2022 has exacerbated these challenges, compounding financial fragility. The study proposes targeted policy interventions, such as tax relief and employment promotion programs, to mitigate adverse effects while sustaining wage growth benefits.

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