Russia runs the risk of repeating the “Greek scenario” and face a full-blown economic crisis, as wages grow much faster than labor productivity, Noviye Izvestia daily reported on Tuesday.
Average monthly imputed wages in Russia grew by 16.3 percent year-on-year in July 2012, and by 15.2 percent in January-July 2012, suggesting an accelerated wage growth in the country, Maria Ivanova from the Economic Expert Group told the paper.
“This is a boon for the workforce but an alarming signal for the economy. The point is that the wage growth is not backed by any real positive shifts in the economy. In this case, I mean labor productivity growth, which is far slower and equals 6 percent per year,” she said.
“This gap existed both before the crisis and remains now.”
Western experts, including The Bank of America and the IMF, have already pointed to this problem, warning a rapid wage growth is a sign of the economy overheating, which also leads to higher inflation.
“If there are factors which separate wage growth from labor productivity, this means the economy is losing its competitive edge,” Development Center Chief Economist Valery Mironov said, adding Russia’s labor costs were huge.
Studies show Russia was the leader among developed countries and new industrialized nations in Asia in 2004-2011 both by the growth of wages in manufacturing industry, which grew fourfold in dollar terms over this period and the overall rise in labor costs, which more than doubled, Mironov said.
Russia is followed by debt-stricken Italy and Spain, which increased wages by 26 percent and 31 percent and labor costs by 22 percent and 14 percent, respectively, Mironov said.
Before the crisis, wages in Russia grew by 15-20 percent a year in dollar terms, taking into account ruble appreciation, while labor productivity edged up 5-6 percent annually.
Russia now appears to be repeating that trend that existed before the crisis.
“Now they [Greeks] are cutting wages, seeking a faster growth in labor productivity over wages. We [Russians] do not have as large debts as Greece has but I would say we are in the period of ‘early Greece,’ i.e. at the stage Greece was several years before the [debt] crisis broke out,” Mironov said.