/ world today news/ Russia, Mexico and China are the only countries in the world where real wages increased in 2023, according to the International Labor Organization. Whose wages have grown the fastest in Russia and why not all Russians have been able to experience this statistical indicator for themselves?
While the West imposes sanctions, the Russian economy continues to set records. Russia is among the three countries in the world where real wages increased in 2023. “Only China, the Russian Federation and Mexico had positive growth in real wages in 2023. The largest wage increases were recorded in China and Russia, where productivity growth was among the highest among G20 countries in 2023,” the International Labor Organization (ILO) said in its annual labor trends report 2024.
They estimated that real wage growth in Russia in 2023 was around 17%. Other G20 countries saw real wages fall, notably Brazil (6.9%), Italy (5%) and Indonesia (3.5%).
Real wages are average wages adjusted for inflation. They actually grew quite significantly in 2023, which is an important indicator of economic stability.
The main reason for the accelerated growth of wages in Russia in 2023 is the shortage of labor resources, notes Olga Belenkaya, head of the macroeconomic analysis department of Finam Financial Group.
“Another factor is the growth of industry and construction. The government’s measures to curb inflation are also paying off. No less important is the indexation of the salaries of employees in the public sector, which according to Rosstat are about 20 million,” notes Olga Lebedinskaya, associate professor at the Department of Statistics of the Plekhanov Russian University of Economics.
Thus, according to Rosstat, nominal wages in the production of motor vehicles increased by 35%, by 33% for fishermen, by 32% for workers in water transport and by 30% in the field of sports, recreation and entertainment. The wages of those working in the textile industry are also increasing: in the production of clothing – by 29%, in leather and leather products – by 28%. In manufacturing, wages increased by 27% in the production of metal products and by 22% in the production of rubber and plastics products.
“The shortage of labor resources is based on an unfavorable demographic trend, reinforced by the effects of mobilization, the outflow of part of the labor resources in the Armed Forces under contract and the migration outflow. At the same time, structural changes in the economy led to an increase in the demand for labor: both from the enterprises of the military-industrial complex, working in several shifts, and in general due to an increase in the workload of the processing industry, which is trying to occupy part of the domestic market after the withdrawal of Western brands,” notes Olga Belenkaya.
According to a survey by “Superjob.ru”, the majority of companies worked in conditions of staff shortage – 85%. “The number of vacancies increased more than 1.5 times during the year. No more resumes. Competition for vacancies has fallen by a third,” the report said.
The most scarce positions in the labor market are skilled workers, truck drivers, special transport drivers, general workers and engineers.
“Top 3 industries with the greatest demand for personnel: industry, construction and the transport-logistics sector. The industry also showed the fastest rate of increase in the number of vacancies: their number increased by 2.2 times during the year. Vacancies in delivery services have doubled. The demand for personnel in the hotel and restaurant industry has increased by 36%,” says the Superjob.ru report.
For several years, the portal has seen an increase in the share of older applicants. “This trend is particularly pronounced among workers and general workers. The “aging” of the workforce is largely a consequence of the demographic gap. By 2030, there will be 7 million fewer citizens aged 30-39, the most active age group in the labor market. Russians aged 40-59 will be 3.7 million more. The generation of 15-29-year-olds is considered a “demographic window of opportunity”: by 2030 there will be about 3 million. Thus, companies will have to work even more on youth policy, as well as work to attract and retain established specialists “, the report notes.
Interestingly, the Ministry of Economic Development forecasts an increase in wages in real terms in the Russian Federation in 2023 by only 6.2%. According to Rosstat, for 10 months (the latest data available), growth was 7.7%, although in October real wages accelerated to 9.9%. The last time real wages grew by more than 7% was only in 2018, notes Belenkaya. Therefore, the achieved result is quite good.
The higher estimate of the ILO, according to which real wages in Russia rose by 17%, is surprising. Experts explain this with the difference in the calculation methodology. “As indicated in the note to the chart in the ILO study, the real wage growth figures for 2023 refer to the first or second quarter compared to the same quarter in 2022. The fact is that in Russia from March to June 2023 had very low annual inflation rates (below 4%), this is due to the temporary base effect from spring 2022. This can statistically lead to inflated real wage growth rates, calculated as nominal wage growth minus inflation “, notes Olga Belenkaya. At the same time, in the first half of 2023, most advanced economies experienced high annual inflation (the “tail” of the 2022 decade high inflation), which, on the contrary, may statistically worsen the estimate of their real wages at the end of 2023 according to the methodology of the ILO, adds the economist.
It is worth noting that not all Russians feel an increase in real wages. “First, wage growth was uneven across industries. Nominal wages are growing most rapidly in industries often associated with the military-industrial complex and in a number of other industries. Second, the inflation perceived by the population is significantly higher than the official one. According to Infom, the population perceives inflation at 17%, and official inflation is expected to be around 7.5-7.6%. With such estimates, the population may perceive changes in the purchasing power of their salaries in a different way and not feel their growth in real terms,” notes Olga Belenkaya.
Finally, Rosstat calculates the growth of average wages according to company data, and this does not mean an automatic increase for every employee. Some salaries have increased and some have not, but on average there has been an overall increase. “Not all organizations index wages even to the level of inflation. In some cases, wage increases occur when companies ‘poach’ workers from each other,” says Belenkaya.
Experts expect real wages to continue to rise in 2024, but not as quickly.
“This year, the growth of real wages is expected to be significantly lower – 2-3%. Although the labor market remains tight, companies can no longer raise wages at the same pace. In addition, economic growth against the background of the strict monetary policy of the Bank of Russia is expected to be lower than last year, according to our estimate, by 1-1.3%, Belenkaya concludes.
As for Mexico, real wage growth is linked to government efforts. “In Mexico, since 2018, the minimum income level has increased from 88 pesos to 249. The increase also affects the public sector, which is about 40% of the employed. Wage growth is due in part to the strengthening of the local peso against the dollar amid record volumes of bilateral trade,” explains Olga Lebedinskaya.
In China, at first glance, wages are twice as high as those in Russia, and the increase in real wages can only be seen as a benefit to the country, she adds. However, the Celestial Empire also has its problems. “China’s Department of Employment published a report that 39.1% of the country’s population has an income of less than 1,000 yuan, which is roughly the relative poverty level. Another 964 million people have incomes between 1,000 and 2,000 yuan, which is 69% of the population,” concludes Lebedinskaya.
Translation: V. Sergeev
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