The latest statistics about social and financial status of Russia’s residents is rather controversial. In 2018, average wages in Russia are higher compared to 2017. On the other hand, the real income is almost 5% lower. MK.ru found out why Russian citizens have higher salaries but cannot buy more goods, calling the growth of income in Russia “imaginary”.

Statistics on earnings of Russians

The average income in Russia has increased by 2%, according to the latest data of the Russian State Committee for Statistics. The growth in income was even higher within the period from January to July 2018 (2.6%).

Moreover, salaries in January-July 2018 grew by 8% as compared to the same period of 2017, the statistics show.

However, at the same time, the real disposable income of Russians declined by 4.7% and the real wages dropped by 7.3%.

The problem is, of course, inflation, which sees the prices of services and goods soar, while the earnings and accordingly people’s income grow at a slower rate. The cost of living continues to gallop ahead of the growth in salaries.

The average salary in July exceeded 42,000 rubles (USD $621), Rosstat infoms.

The yearly income is also 5% higher per capita and now is on the level of 32,300 rubles (USD $478).

But once the nominal income is corrected for inflation and compulsory payments are deducted (such as taxes and rates), we see that the real disposable income dropped by 4.7% and the real value of wages by 7.3%.

Salaries in Russia are still paid monthly, not weekly.

The official statistics show steady growth of monthly salaries in Russia.

Why Russians earn more but aren’t getting wealthier

The real disposable income of Russian citizens is getting lower in spite of the fact that nominal salaries are higher than before.

Gas prices went up in 2018 by 10-13% and it had a negative impact on consumers’ purchasing power. The spill of the increased costs of transportation covers the whole range of goods and services.

Currently, the rate of inflation is officially 4% and the government tries to assure citizens it’s not going to increase by the end of the year.

Nevertheless, analysts say that it can grow significantly due to the recent rapid decline of the ruble and raise of VAT.

Political instability can also affect the inflation rate.

According to Anna Bodrova from Alpari Bank, the slow growth of wages is consumed by inflation.

The rate of inflation in the consumer goods and services sector is estimated at 10-12% by the Russian Central Bank.

Bodrova stated that the real income of Russian citizens has been dropping since 2014 and it’s not changing. She believes the real income will continue to decline. The inflation is expected to speed up with the raise of VAT and weakening ruble.

Some experts warn the exchange rate between the US Dollar and Russian Ruble may reach 1:80 by the end of 2018.

“Besides, companies in Russia react rather nervously on bad political news. This, too, can slow down the growth in wages,” Alexander Kuptsikevitch from FxPro believes. The recent further economic sanctions by the USA against Russia caused ruble to plummet immediately.

The drop in the exchange rate will quickly devalue any previous growth in wages achieved in 2018.

In August 2017 1 US Dollar cost 59 RUB; today the official exchange rate is 68 RUB for 1 USD. In 12 months Russian Ruble lost 15% of its value and the experts warn it may plummet to 80 RUB for 1 US Dollar by the end of 2018.

How median are average wages?

The news of 42,000 RUB average wages is looked at with skepticism by many Russians living in regional cities and struggling to find jobs paying more than 30,000 (US $440/month). It is the wages of top 10% of earners from capitals and mining industries that pull the average numbers up, while the majority of workers don’t earn anything near the official numbers proudly announced by the officials.

If Rosstat started showing the median wages as opposed to average salaries, the picture might look very different. Median wages show the salaries that the majority of people get, while averages can be easily pulled up via a few abnormally high earners.

Graphics by the employment portal Trud.com show that the average wage by vacancies is just over 30,000 RUB per month ($440) for 11 out of the last 12 months (in April 2018 there were more highly paid vacancies on offer, apparently, after a drop in March).

The majority of the popular jobs in Russia pay under 30,000, the data shows. Employees in retail are offered around 30,000 RUB monthly ($440) in 2018, while workers on production plants only 20,000 RUB ($293), Trud’s graphs show.

In fact, if anything, in 2018 the vacancies on average offer less money than in 2017, even if we look at the values in rubles. But in US dollars it’s even less, since the exchange rate dropped from 59 RUB for 1 USD in August 2017 to 68 RUB for 1 USD in August 2018. If there were 3 out of top-10 in demand jobs in 2017 that offered over 45,000 rubles in monthly earnings, in 2018 there is none. Employers are offering less money for the same positions, while the cost of living increased and the real value of wages dropped.

The reason why the average wages are showing growth in statistics could be the fact that top managers are now earning more, because workers on the low levels insist they aren’t getting more money than before. In fact, if they used to get bonuses, now these are cut, government workers complain.

Pensioners on warning

Now that older workers in Russia will have to work for 8 and 5 years longer than they previously planned, employers don’t need to worry about the need to hire new personnel. Women’s pension age is set to be raised from 55 to 63 and men’s from 60 to 65; the legislation hasn’t been voted in yet but it’s expected to be passed within weeks once the parliament resumes after the summer break. The government has the numbers to vote it through easily.

What does it mean for the job market and potential growth in salaries? The older employees are going to hold onto their jobs and do anything required, as they are unlikely to be able to find jobs elsewhere. This will allow employers to pay less to newly hired workers and cut on bonuses to the experienced personnel.

As there are fewer positions going to become vacant due to people retiring, it means fewer vacancies and higher competition for the available jobs.

It would be fair to say that the standards of living and disposable income of Russians hasn’t been improving since 2014, when the country started the conflict with Ukraine by taking over Crimea. The current expectations of experts are hardly positive. The ability of Russian women to travel abroad is going to decline, as well as their hopes for a financial security in retirement.

It means that Russian women will keep coming to international dating sites like Elenasmodels.com in hopes to find stability elsewhere. While it’s not the major driver, the economic factors add to the urgency of search for a partner internationally.

A more detailed list of industries and earnings, according to the official statistics by GKS.ru. (Click to enlarge.)