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IMPACT OF PUBLICS INCOME LEVEL ON HUMAN HEALTH IN COUNTRIES WITH TRANSFORMATIONAL ECONOMY (CASE STUDY: UKRAINE) __________________________________________________

Vera Dolenko, National Aerospace University, Ukraine, vera.dolenko@mail.ru

SUMMARY

The beginning of market reforms in countries with transformational economy was followed by decline in real publics income. High-priority problem of health service in countries with transformational economy is to create conditions for human healthy lifestyle: to improve publics feeding situation, namely help to establish reasonable (but not minimal) standards of consumption, to increase foods goods quality, to guarantee equal access to medical services and to increase their quality with purpose of support and resumption of publics health and extension of longevity and working activity; to develop infrastructure, which ensures healthy lifestyle, helps to prevent and avoid diseases. Healthy people are maximally active, inclinable to self-evolution, liable to perfection of work process and creative rationalization proposal connected with production activity.

Key words: transformational economy, publics income, subsistence minimum, minimum salary, GDP.

INTRODUCTION

In developed countries, where people had reached a certain level of wealth, physiological needs are covered and medical care is in transition from treatment to prevention and healthy lifestyle, the main focus is on development of intellectual and social constituents. In transformation economies with prolonged economic crisis even physiological constituent of publics cumulative human capital assets continues to degrade. Health continues to have strong negative effect on cumulative human capital assets. It yet to be reasonably said, that negative trends in health service were broken off. That is hardly to be expected sudden and dramatic improvement of publics health. Furthermore publics health depends on various factors such as incomes level and life quality, psychological, ecological, social situation in the society, personalitys internality, heredity, culture class and lifestyle.

1. GROSS DOMESTIC PRODUCT AND PUBLICS INCOME

The beginning of market reforms in countries with transformational economy was followed by decline in real publics income. By the example of Ukraine it can be seen that, despite of upturns in economic sphere, living standards of main proportion of the public are

low. Absolute measures of per caput GDP in Ukraine amounted to EC countries 3,4% ($833 vs. $18546), to USA 2,2% ($833 vs. $28901) in 2000 and in 2004 this relation was: to EC countries amounts to 4,1% ($1184 vs. $ 29070), to USA 2,6% ($1184 vs. $46278). (Eurostat) One of manifestations and consequences of transformation crisis became the catastrophic fall of production output. During the crisis (1990-1999) GDPs volume declined by 59, 2%. In parallel with fall of GDPs volume in 1990-1999 publics real incomes and salaries decreased. Meanwhile reducing of labor remuneration outrun fall of GDP and salaries declined even faster. During 1990-1999 labor remuneration of salary earners lowered from 53,1% to 43,0%. Beginning from 2000 official statistics registered considerably dynamic growth GDP of Ukraine: during 2000-2006 GDP grew by 1,65. (Ukrstat) In 2001-2007 took place even more remarkable growth of real salary: according to official data, alary grew by 2,86. A peculiar feature of this growth is systematic excess rates of salarys increase against rates of GDP increase. Relation of real salarys index and GDPs quantum, calculated by author, is shown in Table 1. Table 1. Increase of GDP and salary in Ukraine in 2000-2006

Activities GDPs quantum index in % to the previous year Real salarys index in % to the previous year Relation of real salarys index and GDPs quantum

2000 105,9

2001 109,2

2002 105,2

2003 109,6

2004 112,1

2005 102,7

2006 107,3

99,1

119,3

118,2

115,2

123,8

120,3

118,3

93,6

109,2

112,4

105,1

110,4

117,1

110,3

According to our calculations (based on official data) for the period 2001-2006 real salary grew by 1,84 in comparison with GDP, which might be considered as positive trend, but for following factors: decreasing of workforce, connected with demographic situation and also lowering of tax take but non-increasing of profit (see Table 2) that not allow us to talk about gain of social orientation of production. Table 2. Structure of gross domestic product through income groups.

2000 Gross domestic product Labor remuneration of salary earners Taxes excluding bailouts for production and import Bailouts for products Other production related bailouts Total revenue, mixed income

2001

2002

2003

2004

2005

2006

2007

100,0

100,0 100,0

100, 0

100, 0

100, 0

100, 0

100, 0

42,3

42,3 45,7 45,7 45,6 49,1 49,4 48,8

16,8

13,4

12,2

11,3

10,2

12,7

13,5

12,2

15,2

11,6 10,9 10,1 9,3 12,0 12,9 11,9

1,6

1,8 1,3 1,2 0,9 0,7 0,6 0,3

40,9

44,3

42,1

43,0

44,2

38,2

37,1

39,0

State Statistics Service of Ukraine, 1998-2009.

2. SUBSISTENCE MINIMUM, MINIMUM SALARY AND PUBLICS INCOME IN COUNTRIES WITH TRANSFORMATIONAL ECONOMY.

Type of income spread in Ukraine differs essentially from the type of income spread in countries with developed economy. There is large class of people with middle income, in Ukraine rapid separation into rich and poor occurred. Middle class practically is absent. Only 20% of population can be considered social basis (on income level criterion) for formation of middle class. Suppressive part of population of Ukraine has low and very low revenues and it stands against a few percents (3%) of rich and superrich people.

Poverty level in Ukraine, however is declining gradually, in 2003 amounted to 26,6%, i.e. below the poverty line are 12,3 million people. Whereby in 14 from 27 territorial entities, i.e. half of regions, poverty level was bigger than in the whole country (Ilchuk L.I., Dvornik O.I.). Taking into account that in Ukraine poverty level is measured on basis of subsistence minimum in comparison with other countries where it is measured upon social minimum poverty headcount in Ukraine is notably higher. Table 3 shows consequences of excessive income spread and low income middle level: majority of population hasnt opportunity to undertake expenditures on the level which corresponds at least subsistence minimum. Table 3 Population size with average monthly income below subsistence line.

Year Millions people In percents to the overall population size In percents to the previous year

2000 39,2 80,2

2001 39,9 82,7

2002 39,8 83,3

2003 35,2 76,2

2004 30,3 65,6

2005 25,3 55,3

2006 23,1 50,9

101,5

100, 0

88,4

86,1

83,5

91,3

Certainly considering shadow incomes situation was seen not so penetrating. However, set value of subsistence minimum in Ukraine takes into account only humans basic needs, while in developed countries subsistence level is not limited only by physiological minimum of means of subsistence. The Law of Ukraine About subsistence minimum came into force in 1999. In the first article of the Law the clear definition is given: The subsistence minimum is monetary value of sufficient food package for supporting normal functioning of human organism, securing his health and also minimum package of non-food products and minimal set of service which are necessary for satisfaction of personalitys basic cultural and social needs. According to the Law About subsistence

minimum package of goods known as consumer basket should be determined at least ones in 5 years. In defiance of the Law scope of consumer basket wasnt revised since 2000. I.e. nine years ago Cabinet of Ministers of Ukraine headed by Viktor Yushchenko, the then prime-minister, adopted a resolution About approval of food package, package of non-food products and set of services for basic social and demographic population groups. Human health status depends on 65-75% from quality and type of feeding. Therefore important cause of publics health breakdown is negative changes in consumption pattern. Part of protein and fortified products in the consumer basket decreased significantly; consumption level of all food products is well below all rational standards. In 1995 consumption of meat per caput amounted to 50% from the norm, milk and dairy products 59,2%, eggs 58%, fish 20%, sugar -80%, vegetable oil 88,2%, vegetables and cucurbits 68%, fruits and berries 3,5%. Even bigger decrease in consumption of separate products was seen in 2002: 39% from the rational norm in consumption of meat; 28% - fruits and berries; 48,3% milk and dairy products; 56,3% - eggs. (Zaharin S.) Currently situation becomes critical. It is recognized that food standards, which is laid in subsistence minimum ascertained by law is lower 20% than medical norms, and non-food package doesnt cover most needs of people who live in European country (Tables 4 and 5). Table 4 Product consumer basket in Ukraine (kg/year)

No. 1 2 3 4 5 6 7 8

Item Bread Potato Vegetables and cucurbits Fruits and berries Sugar and confectionary Oil/Butter Margarine Meat

Ukraine 123,4 95 110 64 37 7,1 2 53

9 10 11 12

Fish Milk Eggs (pieces) Other products (tea, coffee)

13 148,5 210 -

Table 5 - Non-product consumer basket (pieces/years).

No. 1 2 3 4 5 6 7 8

Title Winter jacket Demi-season coat Suit (two-piece) Shirt Trousers Sweater Sweat suit Underwear: - panties - undershirt - Slips

Ukraine 1/4 1/5 1/5 5/4 2/7 1/3 1/3 5/2 2/1 1/10

9 Socks 10 11 Headdress Footwear: - winter - autumn-spring - sneakers - shoes - house-boots - rubber 7/1 2/12 1/5 2/5 1/3 2/5 1/3 1/7

Current subsistence minimum ascertained by law and minimum salary is shown in Table 6.

Table 6 - Subsistence minimum ascertained by law and minimum salary in Ukraine during 2000-2008

Year Subsistence minimum, UAH Minimum salary, UAH

2002 362

2003 362

2004 362

2005 453

2006 496

2007 525

2008 626

118

185

237

262

290

465

545

In the prospect subsistence minimum in Ukraine should complete the same role as it is completed in the developed countries: to determine minimum income level, acquisition of whish is guaranteed by the government for every member of society. Such practice of the present social norm is possible only when average salary exceeds in 5-6 times and minimum salary in 2,5 - 3 times. Heretofore guarantee of income equal to subsistence minimum will come into conflict with economic efficiency. (Latik V., 2005)

3. IMPACT OF PUBLICS INCOME LEVEL ON HUMAN HEALTH

Publics health depends on various factors such as incomes level and life quality, psychological, ecological, social situation in the society, heredity and lifestyle. In countries with transformational economies expenditures on public health service increase on the back of medicaments price hikes and commercialization (formal and informal) of services. Health service and health resorts costs in Ukraine, according to official statistics,

amounts to 1,9% of familys total costs (Ukrstat). Unfortunately it can be concluded that public has lack of assets for full-rate health care important component human capital assets (Table 7).

Table 7 Publics disease incidence


Quantity of first time recorded cases of diseases, thousands Including: Blo od circ ulat ory sys te m dis eas es Musc ulosk eleta l syste m and conn ectiv e tissu e disea ses 1571 1593 1598 1572 1609 1600 1597 1569 Congeni tal anomali es (develo pmental delays), malform ations and chromo somal interfer ences 62 59 57 54 55 53 53 51

Total

Neofo Neur rmati opat on hy*

Respir atory syste m diseas e

Der mop athy and hypo derm disea ses

Urog enita l syste m disea ses

Injuries, intoxicat ions and some other external factors action consequ ences

2000 2001 2002 2003 2004 2005 2006 2007

33471 33192 32233 32585 32573 32912 32240 32807

382 394 382 395 406 408 414 407

748 2338 745 2384 748 2370 751 2386 755 2498 754 2430 764 2431 752 2437

14639 1996 14213 2008 13372 1950 13835 1915 13511 1917 13894 1936 13308 1906 13946 1952

1939 2049 2039 2077 2153 2185 2172 2132

2339 2339 2244 2297 2245 2264 2289 2284

*Beginning from 1999 eye and its accessory apparatus diseases, ear and mastoid diseases were eliminated and formed in separate category from neuropathy and sense organs disease category.

Low salary levels force workers to seek for additional employment, which leads to increasing of intensity of work and decreasing of spare time, which might be spend on personalitys potential development, expended reproduction of his qualitative characteristics. In connection with decreasing of publics income in countries with transformational economies in household strategy of survival is dominant. This appears in the following aspects. First and foremost in compulsory expenditure pattern: high share of expenses on products,

minor increase of expenses on durable goods, simultaneous improvement of health service costs (mainly on the back of price increases but not by means of growth of focus on health and disease prevention). Most often health care service, unfortunately, is limited only by medical service. Surely, increasing of medical services quality, expanding its accessibility and population coverage all over the world and all social groups is the most important goal health care policy. However, such shrinkage of the problem ignores even structure of definition health care that is not equal to disease treatment; it is much wider, deeper and more significant due to its impact. According to the data of Russian State Medical University negative impact on publics health is determined as following: bad lifestyle 37,1%, genetic risk 25,7%, harsh environment 19,3%, health care systems faults 17,9% (Mitsenko I., 2004, p.35). Thats why while speaking about formation of physical component of human capital assets it is necessary, in our view, to pay attention to each aspect of public health. First of all, it is necessary to improve publics feeding situation, namely, help to establish reasonable (but not minimal) standards of consumption, to increase of nutritions quality. Secondly it is necessary to renew full-rate available health care system and to increase quality of services. It is important to pay special attention to health of future mothers, children and youth, gradual improvement of nations genetic fund. In the third place, it is important, in our view, to develop infrastructure that provides prospects of obtaining information and unmediated health lifestyle: various sport organizations and institutions, health clubs etc. This infrastructure has appreciated value for disease prevention and support of peoples working efficiency. And in the forth place environmental restoration and conservation is an important trend in securing and supporting of human health.

CONCLUSIONS

Colligating given in literature recommendations which are connected with improvement of incomes policy in transformational economy, the following offers can be conceived. First of all necessity of outrunning growth (in comparison with GDPs growth) of publics incomes should be noted. Publics incomes part of GDP in Ukraine amounts to 56%, while in developed countries its amounts to 63% (Eurostat). Part of compensation of employees in GDP should be increased as far as it is much lower then in EC countries. According to one source, this figures

in Ukraine and EC, respectively, amounts to 45% and 65%, according to other 49,1% and 50,7%. The goal of health service in countries with transformational economy is to create conditions for human healthy lifestyle (including rational feeding, environmental situation, and social climate in society), to guarantee equal access to medical services and to increase their quality with purpose of support and resumption of publics health and extension of longevity and working activity. (Perepelitsa N., 2003) Efficiency of this branch of social sphere is determined by providing reduction of diseases risks, quantity and duration of cases of disablement, increase of terms of working, creative and social activity. People with ill health status cant maintain stable level of working activity, while as healthy people, as a rule, are maximally active, well adapted to the environment, inclinable to self-evolution, liable to perfection of work process and creative rationalization proposal connected with production activity.

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