Social tensions in the workforce have not decreased
On April 1st, workers at Vitebsk House-Building construction company refused to go to work due to wage delays.
Tensions in the workforce remain high and threaten with social unrest if wages are not paid in time. Workers confine to social protests and enterprises’ management endeavors to meet their demands in shortest time.
The social situation in the workforce in Belarus remains tense. The case in Vitebsk shows that the situation has not changed principally since 2011 crisis, when first strikes in labour collectives started in Belarus. Today and back then workers behave in the same way: if wages are delayed, they refuse going to work until the wages are paid.
Enterprises’ management behaviour is also typical. Trying to prevent unrests, directors quickly pay out wages in full or partially. In particular, Vitebsk House-Building pant management paid 50% salary to the workers and promised to pay the rest within a week. To resolve the conflict, representative of the Architecture and Construction Ministry specially visited the enterprise.
Thus, despite a 20% increase in real wages in 2012, the nature of social protests points to still low living standards of Belarusians, and to that the socio-economic situation has not principally changed since 2011. This trend is more visible in the regions: for instance, Vitebsk region was second from the bottom in the country by the average monthly wage in February 2013.
As in 2011, the local authorities take speedy actions to ‘pacify’ the labour collectives financially. However, there is no trust between workers, enterprises’ management and the local authorities, which implies that even short-term wage delays will immediately result in a surge of protests in the future. Such protests will have social, not political nature, because Belarus’ political forces do not take advantage of such strikes – neither in 2011, nor in 2013.
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.