Why we will remain poor


Почему мы останемся бедными

While the state is the main employer, it will not raise salaries — it’s his expenses

The phrase that “low incomes are a major obstacle for economic growth” has become a kind of mantra. According to Rosstat, in the past month, the average per capita income in Russia was 23 534 rubles. In nominal terms it increased by 336 roubles, or 2.9%.
Show more… In the latest release published by the Agency States that “real disposable income (less compulsory payments adjusted for index of consumer prices in January 2018… has not changed compared to January 2017”.
Touching disclaimer

However, the optimistic statement by statisticians is accompanied by touching in its sincerity clause. They say that the correlation of current income January income January last year does not account for “one-time payments to retirees in January 2017 in the amount of 5 thousand rubles”. To calculate the dynamics of income five-thousand alms-giving pensioners enough knowledge of mathematics in the volume of Junior high school. Income, naturally, declined seven percent.

Speaking about the revenue growth in Russia, it is necessary to speak about growth of salaries. Why? Because official income in addition to salaries and social transfers, the Russians have not.

Accumulated as 94% of the adult population of Russia does not exceed $10 000. A large part of this state — illiquid. First and foremost, it is the only apartment used for residences.

To extract from it some kind of additional income is unrealistic. While the share of social payments in structure of incomes of Russians is 19.2%. It’s even more than it was in the late Soviet Union: in 1985, the share of social benefits in total incomes was slightly over 18%. By the way, in 2007 this figure was 11.6%. But Rosstat fixes a record low share of incomes from entrepreneurial activities in the total income of the population was 7.8% (a record high this figure was in 1993 to 18.6%). But the share of salaries in income structure of the population remained stable at the level of 63-65% (according to Rosstat, including the “grey” salary).
A strange contradiction

With salaries generally interesting story. From may 1, 2018, the minimum wage should increase to a living wage. Now, the minimum wage is 9489 rubles, which corresponds to 85% of the subsistence minimum for the second quarter of 2017. That is, the minimum wage in the country is below the subsistence minimum. Thus, the authorities recognize that the minimum wage in the country to live.

Why, then, to set this figure? Well, will tell you that the minimum wage in our environment indicates a socio-economic, and fiscal. It is from this calculated the minimum amount of taxes that you must pay the employer officially trudoustroitsya employee. By the way, why not raise the minimum wage to a level higher than a living wage? Well, at least because the level of taxation of the wage Fund in this case will increase so that a number of businesses will be easier to close the business than to hire employees formally. In any case, even the Russian unskilled worker receives more than the minimum wage. At least unofficially.

But then there is a strange contradiction. Be careful.

Low income citizens — the main obstacle for economic growth, says the chief. The main income of our citizens is salary. Let’s increase wages? If you raise salaries, companies will not be able to pay them, and will be forced to close. This will stop economic growth.

Don’t you think that this argument is something very wrong?

Russian economist Maxim Mironov once made a very interesting observation. He noted that Russia’s nominal GDP per capita (according to Rosstat, in 2016) is $9930. This is 5.8 times less than the similar indicator in the USA. Why not assume, Mironov said that the Russian minimum wage needs to be less American in the same 6 times. In fact, the minimum wage in Russia is 12 times lower than in the States.

The minimum wage in fact is a very curious economic phenomenon. A connoisseur of human rationality, as Nobel laureate Gary Becker, were a consistent opponent of regulation of the minimum wage. Said Becker? If we raise the minimum wage, then businesses will be unprofitable to hire low-skilled workers applying for the minimum salary. In the end, instead of small salary, they would not receive any.

Something wrong

But some of the work must be paid the minimum wage? What do you think?

The idea is that the minimum wage must be paid where the employee requires a minimum set of skills and where there are minimum requirements for education. Where it is sufficient to perform a set of simple actions observing the rules. No creativity, no action beyond the instructions. Don’t even need to know the language — there are pictures that will help you to sign.

In the US there is even a special term “macjob”, meaning hard work, not requiring much qualification, for “minimum wage”. Its name “macjob” was named after a famous fast food network, the one employing minimally skilled workers who receive the same American hourly minimum wage order of magnitude better than the Russian.

And here begins the most interesting. The same system of fast food exists in Russia. Qualifications “of a member of the restaurant team”, obviously, should be the same in both countries. But the Russian “macjob” promises (and pays) its employees, twenty-five, thirty or more thousand rubles (and officially) at the level of (slightly below) average salary in a particular city.

It makes sense — unemployment is high in Russia, fast food competes with other businesses for labour, and if he ventured to offer employees “the Russian minimum wage”, then no one will scream “free cash”. No one is saying that is a lot of money.

But — attention! — the salary of an employee of fast food in Russia meets not the minimum, and the average regional salary.

There’s something wrong again. It turns out that a qualified expert in Russia can apply for a salary comparable to that earned by a person who has mastered the work on the apparatus for roasting potatoes.

So you want to say that the Russian labor market assesses all your diplomas, references, certificates on passage of courses of improvement of qualification at the same level as the skills of washing the floor in fast food?

“Thirty is a normal salary!” calmly says the Russian employer to the applicant for the job. People and for less money. What you don’t like?

One of the two. Or something wrong with the Russian labour market. Or something wrong with all of your knowledge and skills. Again: or your specialist knowledge cost nothing, or you for them is severely underpaid.
The main employer

Look at the Russian labor market more closely. If, says the Federal Antimonopoly service, the government directly or indirectly controls seven-tenths of the Russian economy, it is obvious that it can be considered a major employer. But is this the employer may not be interested in the growth of income of its own citizens? Because of the need of revenue growth constantly broadcast statesmen?

No, the revenue growth the state as an employer is not very interested. Global statistics show that the profitability of public enterprises is approximately 30% lower than the profitability of private firms, where else and incomes of employees increase?

The authorities can worry about the growth of wages only in the case when the budget is taxes on income, property and consumption citizens. But in our situation it is not so.

85% of budget revenues of the power, directly or indirectly, receive from the production and sale of oil and gas (indirectly in the sense that they have to pay customs duties and VAT import, bought with the proceeds from the sale of the same oil and gas). Pension contributions cover half of the costs of the Pension Fund and social security contributions barely provide “social.”

There is a view that rising incomes will lead to growth of the consumer market. Wealthy Russians will start to buy domestic goods, thereby giving impetus to economic growth. The idea is correct, but first of all to grow is not production and trade, in which the state had almost no interests. Why do we need them?

Over the last 25 years the Russians have proved that at the slightest increase in income they are primarily the demand for imported items and cash dollars. So, the foreign exchange reserves of the Central Bank (the true fetish of power, which does not forget 1998-th year) will flow into the pockets of ordinary citizens instead of serve as a tacit guarantee on loans to builders of bridges and stadiums.

Miracles do not happen

In addition, if a miracle happened and start to increase wages, the government will have to raise salaries to its employees — otherwise, the most competent, energetic and promising employees leave government service to private business (or the deficiency of their official income informal).

In addition to foreign exchange reserves, the authorities there are another fetish — “the revival of production.” What is the main competitive advantage of Russian producers on the world market? Correctly, relatively skilled and relatively cheap labor. What happens if the cost of this labour force will grow? Reduced profitability of government corporations and — attention! — reduced motivation of investors to establish new industries. If there are cheap labor, given the existing level of risk for business in Russia, the production is easier and cheaper to access in another country.

Therefore, the state “manufacture” needs to be objective poverty of their workers. Of course, for his “revival”.

Especially in terms of the ruble revenue of the Russian state company paid to the budget of less than private. And where the state is the sole employer, it sees a direct interest in keeping the income level of their employees at a minimum.

And that all can move up salaries (i.e. labor cost)? Only one thing — the growth of demand for labour on the part of business. In this case, the entrepreneurs begin to compete with each other for workers, using as a tool of competition higher wages and improved working conditions.

The scheme is this: the entrepreneur, to “outbid” the most qualified workers assigns them higher wages. Theoretically, in order to be able to pay more, this businessman is “nested” in innovations that improve the productivity of their employees, at the same time presenting the demand for “skills and knowledge”. The best workers move to it. Then their former employer is forced to increase the salaries of remaining employees and also to “invest” in increased productivity. In addition, he is forced to hire someone in place of retired thus reduced unemployment.

At the time Henry Ford paid workers on its Assembly line five dollars a day — a lot of money at that time. But the future of the automobile the king had no choice: in the early twentieth century, the number of people willing to stand at a conveyor belt for eight hours, exactly following the prescribed operation has been relatively small. While Ford wanted to hire the best, reasoning that in this case, its competitors will have to settle for those who remain. It was then that, by the way, there were the eight-hour day — it was found experimentally that after eight hours in the pipeline number of errors a worker begins to grow exponentially.

But if there is no competition, and to allow the authorities do not plan, then no, and cannot be the motivation for the actual increase in income. The chiefs can say anything: there, where the economy is under the control of the state authorities objectively need not rich, workers and the poor.

Dmitry Prokofiev, economist, especially for “New”


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