Re: Russian salaries increase to $230 per month

From Moscow, Cameron Sawyer writes: I don't know about official average salaries, but I can report from my own experience that unskilled Russian laborers on construction sites in Moscow are paid about $1,000/month net of taxes (if any).  Such laborers are often paid in cash and therefore don't show up in the official statistics.  Outside of Moscow, unskilled construction labor is paid from $300 to $1,500 depending on the region.  There are a few places where unskilled labor is more expensive than in Moscow -- booming cities in the oil patches, the port of Nororossiysk, some places in Siberia.  Beginning stevedores working the docks of Novorossiysk earn $1,500 per month net of taxes.  These salaries are quite high in comparison with other parts of the Former Soviet Union, and are high in comparison to Poland, Czech Republic, and other former Warsaw Pact states, and there are labor shortages in some sectors.  As a result, there are a few million guest workers in Russia today, including many Central Asians, Ukrainians, Turks, and Byelorussians, but including also significant numbers of Poles and Serbs.  If these guest workers are illegal, they are paid significantly less than Russians for the same work.
This year Russia's official GDP per capita, at purchasing power parity will pass $10,000 per capita (per every man, woman and child, not for every person in the labor force), and is expected to reach $18,000 by 2014, approximately the level of Spain today.  To put that into perspective:  the U.S. has official GDP per capita at PPP of $33,000, Germany $25,000, the Czech Republic $14,000, Argentina $11,800, Chile $9,100, Poland $9,000, Ukraine $4,000, China $3,900.  Like all macroeconomic statistics, these are subject to all kinds of distortions, but regarding Russia the main one is the following:  Russia, like Italy, has an unusually large shadow economy.  The effect of that is this:  those citizens of the economy who are engaged in the real, directly money-making part of the economy have a much higher standard of living than the official statistics suggest.  That includes not only business owners, but their employees.  Hence, the standard of living of everyone from workers up through professional service providers to the capitalists themselves involved in construction, or the oil business, or in the manufacturing of consumer goods, is noticeably high.  On the other hand, those citizens involved in those parts of the economy which are not directly engaged in making money -- soldiers, teachers, doctors -- have a noticeably low standard of living, even lower in some cases than the official statistics suggest.  In the case of Russia, this is even worse because the state has made a strategic decision to ruthlessly limit public spending whatever the consequences.  As a result, teachers, for example, do not earn a wage that anyone could live on, and the educational system would have collapsed some time ago if it were not for the Russian tradition of private tutoring, which gives nearly every teacher a supplemental source of income.  I know what I'm talking about:  my mother in law is a retired teacher in the Moscow public school system.  Her official salary at the time of her retirement was only about $400 per month, which in Moscow (with prices of nearly everything like New York City or London) is not a living wage.  But she earns 1000 rubles (about $33) an hour giving private lessons in her home.   She gives 12 or 15 hours of lessons per week, and thus lives in reasonable comfort, probably not much worse than the average teacher in the U.S.
For an excellent analysis of the state of the Russian economy today, please refer to the OECD study just released a couple of weeks ago:  Readers will note that the OECD believes that (a) effect of world oil price level in Russian economic growth is exaggerated; (b) the main sources of Russian economic growth are consumer spending (internal demand) and rising productivity; (c) boom in investment in the energy sector has enabled Russia to increase energy exports beyond all expectations, providing a significant impetus to growth; (d) lack of pipeline capacity and monopoly in the natural gas sector are major strategic problems for the Russian economy, as is the rising real value of the ruble.
Goldman Sachs published an interesting paper this year on the long term prospects of four economies:  Brazil, Russia, India and China.  See  The size of all of these economies relative to the G6 economies will increase out of all proportion in the next decades.  GDP per capita of populous Brazil, India and China will continue to lag significantly that of the G6 countries for the forseeable future, but Russia will surpass Germany in the total size of the economy, GDP per capita at PPP, and even GDP per capita in nominal dollar terms, to become a full-fledged member of the small club of the most highly developed nations.  Predicting the future so far ahead is obviously fraught with enormous uncertainties, but to those of us who are directly involved in the Russian economy today, this scenario is entirely plausible.

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Ronald Hilton 2004


last updated: November 20, 2004