More wage cuts in Belarus

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April 22, 2016 19:29

As of late August, the average wage in Belarus totalled less than USD 430. Wage cuts were due to negative trends in the Belarusian economy and on the Russian market. After elections, Belarusian enterprises may resume their lay-off policies and the gap between wages in Russia and Belarus may widen up to 25-30%. 

According to the National Statistics Committee, the average monthly wage in Belarus in August was BYR 6,971 million, which is BYR 38,000 less compared with July 2015. This is the first reported wage cut in 2015. In US Dollar terms, wages in Belarus have fallen below USD 430 per month. The difference between the highest paid and the lowest paid jobs has increased. For instance, software developers are paid seven times better than house appliances repairers. In early 2015, this difference was 6.1 times. 

Wage cuts only reflect the situation in the economy. GDP has fallen by 3.5%, industrial production has declined, the state budget is lacking funds to subsidise housing construction programmes, which is leading to a decrease in construction and installation works. Sanctions against Russia have reduced the investment potential of Russian companies, and falling oil prices have led to the sequestration of the Russian budget and reduction of subsidies to Russian farmers to purchase agricultural machinery, including that made in Belarus. The fall in global food prices has had a negative effect on the cost of meat and dairy supplies to Russia, prompting Belarusian producers to cut costs. 

In the past, Belarusian workers responded to wage cuts with labour migration to Russia. However, in 2015, the average monthly wage in Russia fell below USD 500 and labour migration to Russia has lost its economic sense. In some areas, wages in Belarus are higher than in Russia. Amid considerable dependence of the Belarusian export on the Russian market, further convergence of wages in Belarus and Russia will reduce the competitiveness of Belarusian products. As a result, after the elections, Belarusian companies may be prompted to resume lay-offs and readjust wages if rouble is not devalued. The estimated average wage in Belarus would then be 75-70% of the average wage in Russia, i.e. USD 370- USD 380 per month. 

Belarus’ high dependence on the Russian market has had a direct impact on the Belarusian labour market. The difference between wages in Russia and Belarus has reduced to 15%, leading to a deteriorated competitiveness of Belarusian products and further wage cuts in Belarus if rouble is not devalued.

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