Salaries Edge Past Pre-Crisis Levels

MTMen leaving a job fair in Moscow. A report says low inflation helped real salaries pass pre-crisis levels in May.

Russians' real salaries surpassed pre-crisis levels in May, according to a Bank of Moscow report, but the gains are primarily thanks to low inflation rather than generous employers.

Salaries in May rose 1.5 percent above their September 2008 all-time high, said Kirill Tremasov, director of the bank's analytical department, while their average level in the first five months of the year was 3 percent higher than in the same period of 2008.

The figures consider so-called real salaries, which account for inflation as well as cyclical factors such as periodic bonuses and fluctuating work and salaries in certain sectors, said Igor Polyakov, an analyst at the Center for Macroeconomic Analysis and Short-Term Forecasting.

According to Polyakov's calculations, the average was 0.7 percent higher in May than at its peak in September 2008. "The figure is within the margin of error. You could say the pre-crisis level has been reached, but not surpassed."

But the average salary from January through May is 1.6 percent higher than in the same period two years ago, he said.

That would make real salaries the first of the main economic indicators to exceed pre-crisis levels, Tremasov said. When comparing the first quarter of this year with the second quarter of 2008 — the last before the effects of the crisis began to be felt in Russia — the other main indicators are lagging.

Gross domestic product is still 7.3 percent lower, industrial production is 9.4 percent behind, commercial freight shipments are down 6.9 percent, retail trade volumes have fallen 2.8 percent, capital investments are 9.6 percent weaker and construction volumes are off by 22.5 percent.

Tremasov and Polyakov were in agreement that low inflation was the main factor providing the growth in real wages.

Since May 2008, inflation has fallen to an annual 6 percent, from 15.1 percent. Even last year, nominal salaries rose, gaining 11 percent in the first five months of 2009, according to data from the State Statistics Service. But when inflation is taken into account, wages fell 2 percent over the period.

From January through May of 2010, nominal salary growth was nearly unchanged, at 11.4 percent, but wages grew 4.4 percent in real terms.

The leading industries in the first five months have been the financial sector, which saw real wages grow 17 percent, and the railroad sector, with an increase of 16.9 percent. Workers involved in raw materials extraction saw real earnings rise 11.2 percent over the period, while processing industries had salary gains of 14.2 percent.

Nominal gains in the public sector have been in the range of 4.4 percent to 6.8 percent, meaning a drop in real terms.

Some employees at Sberbank, the country's largest lender, have already seen their salaries rise above pre-crisis levels, and the employment budget has risen 15 percent this year, said Alexander Morozov, director of the state bank's financial department. Russian Railways, the country's largest employer with a staff of 1.03 million, raised salaries on average by 12.9 percent last year — to 25,316 rubles ($820) — and another 3.9 percent on May 1, a spokesperson at the state-run company said.

But not everyone was seeing rising salaries during the crisis, as an average of 410,000 people had their hours cut or were sent on unpaid vacation.

Russian Post, which employs 415,000 people, raised salaries in the midst of the crisis last year, but a spokesperson at the state-run company said this was because of the "extremely low" level of wages in the sector. The current average salary of industrial workers at AvtoVAZ, Russia's largest carmaker, is 17,591 rubles, or about 8.6 percent lower than in June 2008, a company spokesperson said.

X5 Retail Group, the country's largest food retailer, reduced the number of workers during the crisis rather than cutting salaries, a spokesperson said, adding that in March 80 percent of staff received raises of 14 percent to 15 percent. Employees at grocery chain Magnit earned an average of 13,100 rubles per month in 2008, a figure that rose to 13,700 last year, the company said.

Mobile TeleSystems, the country's biggest mobile operator, did not reduce salaries in 2009, and raises of 10 percent are planned for this year, a spokesperson said.

According to monitoring of 96 major industrial companies in Pyrnes Group's PYNDEX, 58 percent plan to raise salaries this year by an average of 10 percent, meaning a real growth of 4 percent if the official forecast for 6 percent inflation is accurate.

But in absolute terms, salaries in Russia remain low. According to sampling data from the State Statistics Service, which excludes small firms and freelance workers, every 10th person receives less than 5,000 rubles ($160) per month. The median salary is about 13,200 rubles, while the mathematical average is currently 18,287 rubles ($590).

Prime Minister Vladimir Putin and employees in the government have lower salaries than before the crisis, said Dmitry Peskov, Putin's press secretary. "Bonuses were cut, and they have still not been restored," he said.

The prime minister's earnings fell a nominal 17 percent in 2009, while the president's compensation was reduced by 20 percent. Meanwhile, the average State Duma deputy was earning 4.6 more this year than in 2010, including all bonuses and additional compensation.

See also:

IMF Report: Russia Could Consolidate Up to 12% of GDP in 3 Years

Strengthening Ruble Slowing Down Russia's Economy — Report

Russian Real Incomes Drop 11.5% in May