Russian companies save on wages
To overcome the crisis, Russians had to pay a high price: 5 million Russians dived below the poverty line last year. They are called “the new poor”. This term applies to people whose income dropped below the official poverty level in 2014-2015 due to the economic downturn in the country.
Andrey Belousov, an assistant to the President of Russia, predicts that it will take several years to restore the income level that the population had before the crisis of 2014, Lenta.ru reports.
According to the monitoring report by HSE.ru, actual wages in Russia dropped by 34% from USD $847 in 2014 to $558 in 2015.
In April 2016, the level of real income dropped further by 7,1% as compared to the same period of the last year. Today the average monthly wage in Russia is 31,342 rubles (around $475).
The monthly wages didn’t change as compared to January 2016, however, the USD to ruble exchange rate is more favourable: You get more dollars today than in the beginning of the year. But once prices grow in Russia, they rarely drop back to the same level. This means, retailers are making more profit but savings are not passed to citizens.
The Russian government proudly announced that the country managed to overcome the acute and most difficult stage of the crisis.
- Gold and foreign currency reserves are substantial ($391 billion as of May 2016)
- The external public debt is at its minimum in 5 years time ($516 billion).
- The trade balance surplus has increased by $11,2 billion to $69 billion in 2015.
- The capital outflow from the country has dropped significantly from $152,9 billion to $58,1 billion.
However, the new poor do not care about these numbers. According to the Ministry of Labor, incomes of 19 million Russians were below the poverty line in 2015.
If we consider the total population of Russia as 143 million, it’s 13.2% of residents that live in poverty.
The Russian Ministry of Economic Development and Trade published a scenario showing that the worst times are ahead. The share of poor people in Russia will reach its maximum in 2018 and compose 13,9% out of the total population.
In critical times employers tend to spend all the profit on development of the company rather than offer increase in wages to the workers. On one hand, this will promote economic growth in Russia. But on the other hand, it will lead to a decline in real income of the working populations. Only after the economy recovers, the income level is expected to grow.
Again, it is the Russian people will have to suffer to let the country survive. Why is it always people that have to incur losses?
Many economists in Russia believe that considerable reforms are needed to change the development model in the country.
Ruslan Dzarasov, the head of the department of political economy at Plekhanov Russian University of Economics, stated that at the moment Russian economy is mostly oriented towards the export of raw materials. The manufacturing industry along with science and education are diminished. Unfortunately, the government prefers to maintain the old model, where the main burden of the crisis is carried by the population. If this doesn’t change, the welfare of average Russians will continue to deteriorate, the expert states.