The Belarusian system of governance faces staff shortage
The number of reports in the Belarusian media about the staffing shortage in the government, associated with low salaries in the public administration, has increased.
The devaluation of the national currency in 2011 dropped the wages in the public administration to being among the lowest by the end of 2011 – Br 2.15 million, which is less than in the field of science (Br 2.65 million), education (Br 2.58 million) and healthcare (Br 2.6 million). It had an impact on the prestige of the public services and on the staff outflow. In January - September 2011 more than 12% of employees of the Office of the Council of Ministers have resigned.
The emerging new institutions within the Common Economic Space also affect the outflow of qualified management personnel. For instance, the Eurasian Economic Commission announced a competition for managerial positions (to be filled by July 2012), which is supervised by the Belarusian Government. The creation of the Eurasian Parliament of Russia Belarus and Kazakhstan is being discussed at the level of Russian Presidential Administration. This initiative was well received by the Belarusian House of Representatives, which expressed readiness to expand cooperation between the parliamentary delegations.
All these processes will negatively impact on the loyalty of civil servants to the Belarusian system of governance: similar to the labor migration from Belarus, officials will also “vote with their feet”. So far the government failed to invent a more effective way to counteract such trend, than pay increases. However, a number of commitments undertaken by the authorities on the economic policy, inter alia, cooperation within the Anti-Crisis Fund of the EurAsEC, will make implementation of these measures particularly difficult.
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.