Enforcing full employment could lower average pay in Belarus

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March 13, 2017 9:46

Official unemployment in Belarus was reported at 1% of the working age population. In the last two years, the employment issue aggravated in Belarus due to the deteriorating situation on the Russian labour market. The Belarusian authorities have been tasked to ensure pay rise and simultaneously to reduce unemployment, which would be a challenge. Enterprises are likely to ensure full employment by the due reporting date, and lay off unnecessary labour force right after.

Last week, the president tasked the government to employ all unemployment in Belarus by May 1st, 2017. According to the Labour and Social Protection Ministry, as of March 1st 2017, official unemployment was 42 762 people, which was 2 900 more than in on February 1st, 2017. On March 1st, the official unemployment rate totalled 1%. According to international methodology, the unemployment rate in Belarus in 2016 was 5.8%. As of March 1st, 2017, employment services offered 40209 job vacancies.

Over the past ten years, the employment issue in Belarus has arisen twice. In 2009, amid the world economic crisis, there were fewer jobs in Belarus amid simultaneous growth in unemployment, which was overcome after the global economic recovery began. The current problem on the labour market is due to a fall in oil prices, which deteriorated the labour market in both, Belarus and Russia. According to Belstat, in early 2016, Belarus' labour force totalled 5.9 million people with 4.5 million employed in the economy. Taking into account students and other temporarily unemployed citizens, at least 700 000 people were employed in the shadow economy or were migrant workers in other countries. Reduced salaries in Russia prompted Belarusians to look for jobs in Belarus, which exacerbated the situation on the labour market in the view of layoffs at most industrial enterprises.

Amid recession in the Belarusian economy, the tasks to ensure the pay rise up to USD 500 and the maximum employment contradict one another. In order to fulfil both tasks, the government may fiddle with some data. Registering as an unemployed would become more difficult, while de-registering would be simplified. Enterprises are likely to create part-time jobs (shortened working week of 3-4 working days or work for 4-5 hours a day) by shifting current employees to part-time jobs. The Belarusian statistics counts two workers, employed for 4 hours a day as one average worker, and salaries of two employees will be counted as one salary. Some jobs will be created for a short-time and reduced after reporting statistics to the authorities. Thanks to these measures, enterprises would be able to report additional employment without changing the size of the wage fund and simultaneously nominal wages would not decrease, while part-time employment would increase. An attempt to ensure full employment would either prompt enterprises to taking loans to pay salaries, which would deteriorate their financial health in the short-term, or require a reduction in salaries, which could lead to changes in the management at some enterprises for failing to fulfil the pay-raise task.

Overall, amid economic recession in Belarus, managers at state enterprises have been challenged with two mutually contradicting tasks. In the given circumstances, part-time employment is likely be used instead of wage growth, in order to achieve the 100% employment task by the due date, however, after reporting, new employees would be dismissed.

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