Wages in Belarus will grow only due to lay offs

July 25, 2016 22:35

In 2016, wage growth in Belarus comes along with record high layoffs. During the previous recession, companies made efforts to preserve workers in anticipation of economic recovery. Amid increased competition on the Russian market and the need to reduce costs, layoffs will persist and wage growth will be ensured due to laid off workers.

According to the National Statistics Committee, in May 2016, monthly wage in Belarus totalled BYR 7.2 million (USD 369.3). Wage growth continued for the third month in a row. Compared with February 2016, dollar wage increased by 21% due to the strengthening of the national currency against the US Dollar and growth in nominal wages. Wage growth came along with record high layoffs. More than 55 300 people were laid off, including 19 429 in May. In April, layoffs were the highest over the past few years - over 20,000 people. The bulk of layoffs were attributed to industry, construction and trade.

In previous crisis years, salaries were growing while companies attempted to preserve workers. In 2009, less than 5000 people were laid off on a net basis, while salaries increased from USD 348 to USD 384. In 2012, 44000 workers were laid off, and wages grew from USD 342 to USD 552. In the past, economic crisis was due to structural economic problems and devaluation of the national currency addressed the problem with debt burden on industrial giants at the cost of successfully operating enterprises and households, whose savings in the national currency depreciated. Amid further economic growth expectations, wages grew too, which suggested demand for labour resources to perform more work.

The situation in 2016 significantly differs from previous years. After the recession in 2015, growth is not expected until 2018, which reduces the level of optimism among business leaders. The problem with the debt burden on enterprises has not been resolved, a significant amount of non-performing foreign currency loans must either be refinanced by the state, or the companies have to file for bankruptcy, which could have a negative impact, on both, suppliers and the banks. Limited state funds would not allow stimulating domestic demand. Moreover, budget sequestration is anticipated and policy landing is likely to reduce in compliance with the agreed terms for the EFSR loan. Amid increased competition on the Russian market and the need to cut costs in order to support competitiveness of Belarusian produces, enterprises are unlikely to be able to preserve current employment levels. That said, further significant layoffs at enterprises are inevitable. Unemployment benefits may be somewhat increased and more funding directed on vocational training and retraining of workers. Wages of remaining workers will be increased at the expense of laid-off workers, while the overall payroll will not increase.

Amid negative trends in the Belarusian economy, companies have been forced to carry out mass layoffs. In order to preserve the competitiveness of Belarusian produces, enterprises will raise wages only at the cost of laid-off workers.