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. Last Updated: 07/27/2016

Equal Pay for Equal Labor

While politicians make use of the summer recess to prepare for the election campaign fracas in the fall, an altogether different battle is shaping up in provincial cities that has much more significance for ordinary citizens.

This summer has seen a marked increase in the number of labor conflicts. Workers staged strikes for higher wages at the Mikhailovcement plant in the Ryazan region and at the AvtoVAZ factory in Tolyatti. In St. Petersburg, Heineken brewery employees and postal workers clashed with their employers. Workers also demanded higher salaries at dozens of smaller enterprises around the country, but their protests were not given as much coverage in the news or, in some cases, by the trade unions. We can't yet speak in terms of a hot summer of labor unrest, but at the very least we are seeing clear signs of growing social tensions.

While we hear so much from optimistic government official sources about the growth of salaries in dollar terms, a significant percentage of workers and members of the middle class are experiencing a decrease in their purchasing power. Salaries at many manufacturing enterprises in the provinces do not exceed 6,000 rubles ($235) per month, and a salary of 10,000 to 12,000 rubles per month is considered quite good, even for those employees who have jobs that are dangerous or harmful to their health.

There are two types of companies in Russia today -- those financed by transnational capital and those owned and funded by domestic sources. The work is roughly the same in both categories, but the rules of the game -- and, more important, the salaries -- differ significantly. Employees of domestic companies have definitely taken note of this difference, and they are demanding equal pay for equal labor.

As a rule, labor productivity is higher at enterprises with foreign capital, but the lower productivity at older Russian factories does not prevent their owners from reaping huge profits nonetheless. The economy and profits are growing, in general, but the fruits of that growth have not been evenly distributed.

There is still a lot of potential for salaries to grow even more. As a rule, a manufacturer's salary expenses is responsible for 10 to 12 percent of the retail price of the products it produces. Thus, even if salaries were doubled, it would result in price increases of no more than that same 10 to 12 percent -- that is, if companies simply pass the additional expense on to consumers without increasing labor productivity. This is what most likely will happen, but it is not a problem of the workers.

When the ruble sharply fell following the 1998 default, salaries also plummeted. For the most part, people came to terms with their significantly lower salaries, however, because they understood that this was a necessary price to pay to restore a battered economy that was on the verge of collapse. Another factor that helped people accept lower salaries was that in the late '90s, workers were finally being paid regularly in both the public and private sectors. Moreover, the state started to pay back its pension arrears. On the whole, Russians perceived these developments as a sign of progress and, as a result, the nation avoided any serious demonstrations or protests.

By the early 2000s, the emerging middle class and residents of the largest cities not only gained back everything they had lost in the 1998 crash, but their standard of living actually increased. It is a completely different matter, however, for provincial industrial workers. Although their labor is a huge contributing factor driving the nation's economic growth, industrial workers haven't seen improvements in their standard of living. Thus, it is not surprising that this situation now has led to discontent and protest in small and mid-size cities.

Economists see the increase in wages as a necessary step and as a natural consequence of the economy's growth. Moreover, increased incomes fuel greater demand and consumption of domestic production; after all, those in the lower economic strata typically buy less expensive goods, which are produced on the domestic market, as opposed to the middle class and elite who prefer expensive imports.

Raising the salaries of industrial workers to 22,000 to 25,000 rubles per month is entirely realistic. But it is unlikely that workers will be given such raises on a silver platter from their employers. Trade unions will have to fight tooth and nail for every ruble. And there is no guarantee they will be successful.

Boris Kagarlitsky is the director of the Institute of Globalization Studies.