We pay little: Russians' salaries make up a small share of GDP
Salaries have been actively growing in Russia in recent years. Many representatives of the expert community even called it a threat to the economy and a factor provoking inflation. However, the share of salaries and labor incomes in GDP in general, although it has increased, remains small by world standards, below average. More importantly, it is still below the peak reached more than 10 years ago. About why the Russian economy values labor so low, what is the reason for the recent increase in this assessment and whether it will continue, is in the Izvestia article.
Less than in 2014.
According to Alfa-Bank's August report on the state of the consumer sector of the economy, the share of wages in GDP has increased from 39% to 45% over the past couple of years. This is a significant increase. The fact that the incomes of the population outstrip the growth of labor productivity (and the economy as a whole) has been repeatedly stated. How much this really provoked inflation is a debatable question, since in recent years several important factors have converged at once, accelerating the price increase. Nevertheless, based on historical data, changes were almost inevitable.
Interestingly, in 2014, the share of labor in GDP was 47.2% and has steadily declined in recent years. But the 2014 figure was also small compared to the figures in many foreign countries. Data from the United Nations Economic Commission for Europe show that, on average, this expenditure item accounts for about 55% of GDP. For example, in Switzerland — 70%, in Germany — 61%, in Poland — 49%, in Hungary — 46%. The corresponding share was lower than in Russia in Turkey (36%) and Ireland (31%). However, it should be understood that in Ireland, GDP is strongly distorted upward by the tax presence of large corporations, which actually use it as an offshore company.
Outside of Europe, the figures are also higher than in Russia: in China, salaries account for 58% of GDP, in India — 52% (the latest data is for 2019). Kazakhstan can be singled out from Russia's neighbors, where the figure is 32%. By the way, this is why the superiority of the Republic of Kazakhstan over the Russian Federation in terms of GDP per capita is not very significant from the point of view of comparing the standard of living, which is still noticeably higher in Russia at the moment.
Reliance on raw materials
Experts interviewed by Izvestia point to several factors influencing Russia's relatively weak salary indicators in comparison with other countries, regardless of their level of development.
According to Anastasia Uskova, founder and CEO of the Rocket Work platform, the reason is that we still have a lot of capital-intensive and raw materials industries.
— Technology and resources create the main cost, not people. In Germany, the situation is different: the economy is built on knowledge, service, and high technology, where the key value is created by a person, not a machine tool or a deposit. Therefore, the share of labor in GDP is higher there," the expert explained.
Anton Tabakh, Chief Economist at Expert RA rating agency, also notes that the share of raw materials and other capital-intensive, but not labor-intensive, industries is high in the structure of the economy.
— Actually, the share of salaries increased when the labor-intensive service sector began to develop. This is illustrated by the situation with Kazakhstan: they have an even higher share of raw materials, which is why the percentage is so low," the expert explained.
In countries whose economies are largely focused on the use of natural resources, the share of wages in the structure of national income or gross domestic product will be lower than in countries where the manufacturing sector or the service sector prevails, says Vladimir Klimanov, Director of the IPEI Regional Policy Center at the Presidential Academy.
— The contribution of labor to the creation of added value is, of course, higher there. Therefore, it is not surprising that the share of salaries in the national income of Russia is lower than in the national income of Western European countries, — sums up Vladimir Klimanov.
Historically cheap labor
However, it is not worth reducing the difference only to the structure of the economy. In Canada, which is also mainly focused on the production of raw materials, the corresponding share is 50%. In Australia and Norway, these figures are also close to 50%, although they have decreased in recent years.
According to Anton Tabakh, labor is historically cheap in Russia. And although the situation has been changing in recent years, the trend has not completely reversed.
— In addition, many people in Russia are sitting "in the shadows", which is manifested in the widespread use of individual entrepreneurs and self-employment. This is facilitated by fairly high taxes specifically on labor: social security and progressive taxes are applied to high salaries, not income from capital," the expert notes.
Yaroslav Kabakov, Director of Strategy at Finam, a lecturer at the Higher School of Economics, added that an additional role is played by the weak bargaining power of employees, the low prevalence of collective agreements and trade unions, as well as the uneven distribution of income in favor of capital and large owners.
— Statistical features also have a significant impact: methods of accounting for wages, taxation and income of the self-employed may underestimate the real share of salaries. At the same time, developed countries have a more diversified economic structure and more pronounced labor protection institutions. This allows workers to earn most of their income from the product they produce," he explained.
At the same time, the experts surveyed believe that the situation will change for many reasons, for example, demographic. Labor resources in Russia are now limited, the employer will have to fight for them.
— Speaking about the upcoming economy of high salaries, it is difficult to disagree with the president, — Anton Tabakh noted. If you don't interfere, then it's already taking shape, and artificial intelligence can confuse the cards in the service sector.
Salaries will rise
Klimanov notes that in recent years, the share of the oil and gas sector has been declining, and wage growth has outpaced the growth of gross domestic product, which has led to an increase in the share of salaries in national income.
— Whether this trend will continue in the future depends on many factors, and besides, the structure of the national income of the economy is determined not only by this, — says Yaroslav Kabakov.
According to the expert, the prospects for the growth of the share of wages in Russia depend on several factors.
— On the one hand, government policy to raise the minimum wage, index the incomes of state employees and strengthen control over payments, as well as the development of technological industries, where the role of skilled labor is great, can boost the growth of the indicator. On the other hand, structural constraints related to the raw material model of the economy, weak productivity growth and investment risks may slow down this process, the expert argues.
Most likely, the share of wages will gradually increase, but it is unlikely that it will be possible to reach the levels of Germany or France in the coming years. This will require a long-term modernization of the economy, an increase in capital and labor productivity, as well as a redistributive policy aimed at strengthening the positions of workers.
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