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. Last Updated: 07/27/2016

Don't Believe in Fairy Tales

Workers at the AvtoVAZ factory staged a strike last week demanding higher salaries of 25,000 rubles ($980) per month. That is a very nice sum for the average resident of Tolyatti, where the plant is based -- a city of about 700,000 people located almost 1,000 kilometers southeast of Moscow. Workers on the factory's assembly line earn just over 10,000 rubles per month, which is somewhat lower than the current national average across all sectors of nearly 13,000 rubles per month.

On one hand, the 25,000 ruble salary that the AvtoVAZ workers are demanding is not all that surprising given the fact that Russia's oil revenues have pushed average salaries higher over the past several years. On the other hand, the auto factory's workers did not choose the best time for presenting their demands. The plant is not doing well financially because sales of its economy-line Lada and Zhiguli cars are in decline. Foreign-brand automobiles of the same class cost only slightly more, yet they are considered to be far superior in quality.

For this reason, the situation with the AvtoVAZ factory workers is more problematic than that of the autoworkers at the Ford plant outside St. Petersburg. Workers at Ford also staged a strike about six months ago, demanding a similarly enchanting figure -- $1180 per month. The big difference between AvtoVAZ and Ford is that buyers are lining up to purchase the popular Ford models made in Russia but are far less enthusiastic about the Ladas and Zhigulis produced by AvtoVAZ.

Ford union leaders like to compare the salaries of their autoworkers with those in Brazil. It's a good thing the AvtoVAZ workers did not use U.S. autoworkers as a point of reference. It would have come as a shock to learn about factory wages at General Motors, for example. There, the local management agreed to unprecedented concessions in the midst of a major downsizing at the company. GM issued one-time payments of $140,000 to each worker with 10 years or more on the payroll and $70,000 to those with fewer than 10 years. Various medical insurance benefits were also included in the deal, whereas AvtoVAZ offers no insurance benefits to its workers. The average salary among GM factory workers is $56,000, not including overtime. And the highest hourly wage at GM for factory workers is now $27 per hour, and when you add the expenses of various insurance programs, pension benefits and other perks, the total cost at GM to support the highest-paid factory worker jumps to the equivalent of $73 per hour.

The salaries of Russian autoworkers are much closer to those of their East European counterparts. Romanian assembly-line workers at factories producing foreign automobiles earn an average of $400 per month. In Slovakia, the average salary is $620, and in the Czech Republic, it is $890.

Yet those salaries seem like a small fortune compared with what autoworkers earn in China, which has muscled its way into the global retail automobile market, including Russia. Despite the fact that the Chinese yuan is devalued against the dollar by 25 to 40 percent, it is still shocking how low the salaries are in China. The typical assembly-line worker in China's auto industry earns the equivalent of $1,000 to $3,000 per year. Technicians and office workers take home anywhere from $1,200 to $5,000 annually. Middle managers' yearly salaries total $3,000 to $4,000, while top managers slave away for about $10,000 yearly. Salaries of $30,000 per year or higher are extremely rare.

Russian autoworkers' struggle for higher salaries seems like a hopeless endeavor. In fact, Ford's factory workers failed to obtain the pay hikes that they sought, despite the company's amazing success in Russia. This means that it will be even more unlikely that companies like AvtoVAZ, which are having difficulty remaining competitive on domestic and global markets, will be able to fulfill the increasing demands of their workers.

The autoworkers, however, are probably much more optimistic about their ability to receive higher wages, especially when government propaganda trumpets how much Russian wages and pensions have increased. And this campaign has intensified as a result of upcoming State Duma and presidential elections.

What is lost in all of this populism is that labor productivity has severely lagged behind the growth in salaries. For example, salaries rose by 15.5 percent in 2007, while labor productivity rose by only 7.8 percent during the same year. This is happening at the same time that the nation is experiencing a serious demographic crisis, which means that the number of Russians entering the work force is dropping dramatically. If the growth in salaries continues to outpace the growth in labor productivity, the country's work force will become significantly less competitive on the international market.

On the eve of elections, however, it is quite unpopular to remind voters about the need to work more efficiently and increase productivity. Instead, leaders are actively promoting a socialist or welfare-state mindset, according to which Russians believe that wealth will magically appear by itself, or more accurately, will be "bestowed from above" by a wise and caring government.

My hunch is that AvtoVAZ workers did not get the $1,000 figure for their desired monthly salary from their colleagues at the Ford plant, but from United Russia's official election campaign documents, which predict that monthly salaries will average 25,000 rubles within two years. The other pro-Kremlin "party of power" -- A Just Russia -- apparently can't wait that long: Party leader Sergei Mironov promises these wonderful salaries are just around the corner.

These political fairy tales only raise workers' hopes. This leads to higher labor demands and strikes. And when the strikes fail to achieve their ends, this inevitably results in greater dissatisfaction with the government. And this may lead to even more strikes.

Georgy Bovt is a Moscow-based political analyst.