The fight against unemployment will only continue until the end of 2015
More than 18 thousand jobs will be created in all the regions of Belarus in order to guarantee employment to the population. This will allow to lower negative consequences of mass layoffs in industry and construction sectors in the first half of 2015. Most jobs created will be based on previously discontinued vacancies. After the elections the state will not have funds to support them.
In order to ease social tensions 18063 additional jobs will be created in the second half of 2015. In case the project will be fulfilled there will be an equal number of unemployed registered in social security bodies and a number of vacancies available through such bodies. As to June 1st, 2015 there were 18.8 thousand more unemployed than vacancies.
Negative tendencies on the labor market and the electoral campaign are two main reasons behind the creation of new jobs. According to Belstat, in five months of 2015 the number of hired employees is 254.9 thousand people, and the number of fired staff is 313.1 thousand people. 58.2 thousand employees were fired on net basis. Mainly there were mass layoffs in construction and industry branches. Pensioners were specifically targeted in the process of staff optimization. The level of registered unemployment reached 1%. Problems on the labor market may negatively influence the preferences of the electorate during the election campaign and lower the number of supporters of the incumbent president.
The economy of Belarus is unable to generate the appropriate number of jobs. New investment projects are inexistent. Economic recession makes enterprises shrink their activities. In such conditions the most likely option of fulfilling new requirement is employing the workers on earlier retrenched positions. Big state-owned enterprises will receive financial support from the state which will allow them to expand their capacities. A bigger volume of production will require additional labor resources. Housing and utility sector will employ additional staff for the heating season. The funding for industrial enterprises is limited. This funding will be enough for increasing production until the end of 2015. After the elections there will be no more need to demonstrate the stability of the current socio-economical model, the staff will be fired, and staff optimization will continue.
In such a manner the authorities have retreated to the old tactics of the artificial improvement of the situation in the economy by increasing the wages, pensions and employment before the presidential elections. The financial resources are, nevertheless, limited; a new emission of ruble will be needed, after the electoral campaign newly hired workers will be laid off, and a new correction of the currency exchange rate will be needed in order to overcome the consequences of the artificial stimulation of the economy.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.