On May Day social activity was acceptable for the authorities
On May 1st, the International Labour Day, rallies and demonstrations were held in several Belarusian cities.
Traditional May Day demonstrations allowed the authorities to assess the social protests meter and to test mobilization capabilities of the state and the opposition. May Day has demonstrated that protest activity is manageable and not threatening the authorities.
The largest May Day demonstration took place in the Minsk centre and was organized by the ‘official’ Federation of Trade Unions of Belarus. Independent media reported that about 10 thousand people took part in the demonstration (according to the FTUB - 30 thousand). The participants of the demonstration expressed support to President Lukashenko’s social policies, demanded from the Myasnkovich’s Government to protect the interests of labor collectives during the privatization of enterprises, backed the Eurasian integration and called for the removal of all restrictions in relations between Belarus and the EU.
The most important about the event was not what the protestors demanded, but the demonstration of the FTUB mobilization capabilities to organize a mass event in the capital. FTUB uses the administrative resources (transportation, food, entertainment and overall support of the city authorities), to control Belarusian workers’ important tradition of mass recreation. May Day demonstration in Belarus is primarily a celebration, rather than a political rally.
At the same time, the FTUB, which lists about 4 million members, is an important measuring instrument and a valve for social protests in the Belarusian society. Therefore, in the most critical times the FTUB leadership puts forward ‘harsh’ demands towards the government (to raise wages, to respect the worker’s rights, etc). However, these demands are mainly rhetorical, aiming at justifying President Lukashenko’s policies.
The decision of the Brest City authorities, granting a permission to the opposition Belarusian Social Democratic Party (Hramada) to hold a May Day demonstration, was rather unexpected. About 200 people took part in the demonstration, representing various opposition parties and movements. There were no detentions during the event. Most likely, the authorities allowed the demonstration to test oppositions’ mobilization capabilities in the region and the protest potential of the local population.
The May Day demonstration has empirically confirmed the independent sociologists’ assessments of the low protest potential of the population. Simultaneously, the Labour Day has allowed the authorities to shift the attention from the President to the Myasnikovich’s Government, claiming his responsibility for the social policy failures. If social problems deteriorate, the president will sacrifice the government.
Nevertheless, shifting responsibility will not solve the ruling group’s main problem – where to find the sources for long term financing of the current social model. The authorities do not seem to have a long-term strategy; they act tactically, addressing socio-economic problems as they occur.
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.