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Kazakhstan is seeking to significantly increase the share of wages in its GDP, aiming for a 40% target. Prime Minister Olzhas Bektenov has indicated that future state support for businesses will be directly tied to their social performance, signaling a new era where corporate income growth must align with employee earnings.

The Historical Lag in Wage Growth

An analysis of Kazakhstan's economic history reveals a concerning trend: while the economy has grown, the proportion of GDP allocated to wages has stagnated. In the late 1990s, wages constituted about 37-38% of GDP. Despite periods of rising oil prices, this figure dipped to 30.3% by 2016 and hovers around 31% in 2024. This disparity suggests that the benefits of economic expansion are not being shared equitably, with capital accumulating wealth faster than labor.

Expert Caution on Direct Wage Mandates

According to Zhanar Suleimenova, a representative of the Tax Alliance, forcefully increasing wages from the top down could lead to economic stagnation. She argues that such measures, if not supported by productivity gains, could push businesses towards bankruptcy or informal "grey" schemes. Suleimenova advocates for a more strategic approach, starting with reforms in the quasi-public sector.

Leveraging the Quasi-Public Sector

Suleimenova believes the quasi-public sector, which holds significant sway in large and medium-sized businesses, should lead the way in wage reform. An examination of the National Welfare Fund "Samruk-Kazyna's" 2024 consolidated financial statements shows a substantial revenue of 16.4 trillion tenge with an EBITDA margin of around 30%. However, the wage fund accounted for only about 2 trillion tenge, roughly 12% of the revenue.

While acknowledging that capital-intensive enterprises have unique cost structures, Suleimenova points to a considerable opportunity to revise profit distribution within national companies. She suggests the state should analyze how funds are utilized, assess staffing efficiency, and explore how digitalization can enable higher pay for remaining employees.

The logic is straightforward: if national companies begin offering competitive market wages, private sector and foreign investors will be compelled to match these rates to retain top talent. This would create a market-driven mechanism for wage increases, rather than administrative pressure.

Challenges for Small and Medium-Sized Businesses (SMEs)

SMEs face a different set of challenges. Unlike large resource-based companies, they operate in highly competitive markets with tighter profit margins. Any increase in labor costs can have a severe impact.

Currently, the tax burden on the wage fund for businesses under the general tax regime exceeds 42% of an employee's net income. This includes income tax, social tax, pension contributions, and mandatory health insurance premiums.

Suleimenova highlights that for a small cafe or a manufacturing workshop, each job effectively costs nearly one and a half times the nominal salary. Demanding consistent wage indexation without parallel tax reductions could force these businesses to close.

A Proposed Shift in State Support

The expert proposes a fundamental change in the state support system. Instead of subsidizing current expenses, the government should incentivize modernization. Subsidies should be linked to productivity growth. For instance, if a company implements automation that doubles its output per employee, the state should provide support.

This model, Suleimenova argues, can create a sustainable basis for wage growth without fueling inflation. She outlines a three-pronged strategy: first, optimize national companies to become wage leaders; second, reduce the tax burden on the wage fund for the private sector; and third, redirect subsidies towards automation and digitalization projects.

This consistent, market-oriented approach, rather than a single decree, is presented as the path to ensuring genuine, not just nominal, wage increases. For context, in OECD countries, the average share of wages in GDP typically ranges from 50-55%.

Previously, it was reported that the Ministry of Economy had announced the minimum pension and wage amounts in Kazakhstan by 2028.