Wages dynamics: current situation and threats

Regional authorities are fulfilling their major ideological task concerning wage rises: average wages are approximating desired USD 500. However, they are not ensuring real income growth, rather paving a road for weaker BYR in 2013.

Average wage in August (the most recent Belstat’s reporting month) was BYR 4.0849 million or about USD 490. September report will show an increase because of the pre-election period, when authorities deliberately raised wages. Please note that the average salary in Minsk has already exceeded USD 500. Traditionally, Brest Oblast is lagging behind in this regard.

Average monthly salary by regions and Minsk (Belstat data)

Compared with July 2012, in August the average salary in the country has increased by 4%, or BYR 159 thousand. Real wages (wages adjusted to the increase in consumer prices for goods and services) in January-August 2012 compared with January-August 2011 increased by 13.3% in August 2012 and compared with July 2012 by 1.7%.

The main concern is that 2010-2011 events might repeat, i.e. when artificial wage increases dramatically exceeded labor productivity. According to the National Statistics Committee, in January-July 2012 production has declined to 5.1% from 5.2%. During the same period, i.e. in January-July 2012 the growth of real wages was 10.5% from 7.4%.

For instance, Gomel region has the worst wage growth/production performance ratio compared with other Belarusian regions: during the first seven months of 2012, production growth was 6.8%, while real wages in the Gomel region increased by 19%.

Two years ago, when the disproportion between productivity and wage growth was 10%, a wave of speculative demand for foreign currency raised, which triggered a full-scale financial and management crisis. If current economic policy is preserved, the situation from early 2011 is very likely to reoccur, i.e. a massive speculative demand for foreign exchange, financial regulator’s delayed reactions, step-by-step devaluation and deterioration of the living standards. Authorities’ plans to increase wages up to BYR 4.4 million by December 2012 (overcoming USD 500 goal) will contribute to these developments.

Currently, regardless of wage growth, the living standard is not improving, due to rising prices on fuel, meats, utilities and so on.

For reference, the Ministry of Statistics data:

In August 2012, average wage in industry was BYR 4 666.1 thousand, in transport and communications – BYR 4 658.4 thousand, in construction – BYR 5150 thousand, in education – BYR 2 630.1 thousand, including school teachers – BYR 3 099.1 thousand and university professors – BYR 4 117.7 thousand, in agriculture, hunting and forestry – BYR 3253. Salaries in healthcare and social services in August 2012 were BYR 3022 thousand. Doctors’ average salary was BYR 4 996.3 thousand, nurses’ – BYR 2 999.5 thousand.