In 2014, the government dedicated 250 billion MNT for pension and salary increases for state employees. The decision was officially made on January 15 to increase salary and pensions by 10 percent, following the results of a three-party municipal labor concession agreement, the Agreement of Labor and Society, made between the Labor Ministry, Mongolian Trade Union, and Joint Union of Employers.
Accordingly, a total of 103 billion MNT will be additionally allotted for the increase in the 2015-2016 state budget. Ninety billion MNT will be spent on salary increases for civil servants and 13 billion MNT will be devoted to pension and allowance increases. A discussion regarding when to increase the salaries and pensions, as well as which departments will first see the increases, will be held after the approval of 2015 budget amendments.
The agreement also includes the decision to exempt the payment of personal income tax for those earning minimum wage to increase the real income of taxpayers. The minimum monthly wage in Mongolia is 192,500 MNT, which means that approximately 12,000 MNT will not be withdrawn from minimum wage salaries each month.
The three-party labor talks also resulted in the agreement that when private sector businesses are about to make a decision to liquidate, file for bankruptcy, or carry out job cuts, an employer should discuss the decision in advance with employee protection agencies and take measures to save jobs.
Critics question how the salary and pension increases will be funded when the state budget is in crisis. According to MP Ch.Khurelbaatar, the government estimates it will be able to finance the expenses by imposing a tax on imported oil products and increasing the excise tax amount. However, a decision on these tax changes has not been finalized yet.
Labor representatives say there is an urgent need to increase salaries and pensions, as salary increases are not catching up with inflation rate increases. According to a survey by Mongol Bank, 1.2 million people are working in the industrial sector and 35 percent of them took out salary loans of 1.2 trillion MNT. Some sixty-five percent of pensioners have taken out pension loans.