Promise of USD 500 average wage is doomed to failure without fiddling with statistics

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January 30, 2017 11:55
Image: Mikita Cherkasau

In late 2016, wages in Belarus passed the USD 400 threshold due to the year-end bonus payments. In previous years, Belarus reported wages at USD 500, but it led to devaluation and consequent slump in wages. The Belarusian economy in 2017 is unlikely to ensure wages at USD 500 without fiddling with statistics, and the most likely solution would be to abandon the ‘USD 500 wage’ plan.

According to the National Statistics Committee, in December 2016, the average monthly wage in Belarus was BYN 801.6 or USD 408.3 USD, i.e. increased by 10% as compared with November 2016. A 7%-15% growth in wages in December, occurs annually and is related to the end-of-year bonus payments at enterprises. For the first time in 2016, wages bypassed the USD 400 threshold and exceeded wages in 2015. Regionally, the highest wages were reported in Soligorsk region at USD 659, and the lowest in Šarkaŭščyna region at USD 224.

In previous years, Belarus reported average wages at USD 500 several times. In December 2010, wages totalled USD 527, which was inconsistent with the economic growth and led to a three-fold devaluation in 2011. During the period of high oil prices, in 2012-2014, wages in Belarus grew up to USD 600, but the drop in oil prices led to a staged devaluation in 2014-2015. High dependence on the Russian market has formed a proportion of wages on the labour market of Russia and Belarus. If salary in Belarus exceeds 70% of salary in Russia, the Belarusian economy will fall into devaluation with wages in Belarus stabilising within 55%-60% of wages in Russia.

In 2017, regardless of the socio-economic development plan, not envisaging significant growth in real wages, the president promised an average wage at USD 500. In order to meet such a promise without fiddling with statistics, Belarus would have to either raise more than USD 5.5 billion in a year, or layoff more than 700 000 employees. Fundraising in such an amount is unlikely and mass layoffs would entail social instability undesirable for the country's leadership. The only option, when the authorities could report a USD 500 average wage without any external financing or large-scale layoffs, would be to adjust labour schedules by shifting some workers to work part-time. Without changing the wage bill, by reducing the number of working hours, the nominal average number of employees would reduce, the production plan would remain unchanged, and labour productivity would increase by one average worker, which would lead to a proportional increase in the average salary at an enterprise. However, such an approach would distort statistical reports, therefore the authorities are likely to back off with the promise of a USD 500 average wage by referring to some external factors, which hampered the fulfilment of the task.

In the past, significant wage growths led to devaluation in the economy. Provided the economy is unable to ensure the promised wage growth, the authorities are likely to either abandon the promise of a USD 500 wage in 2017, or fiddle with statistical data in order to distort the real wage size.

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