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LABOR MARKET AND SOCIAL POLICY: REASONABLE COMPENSATION FOR LOSS OF INCOME FOLLOWING THE CURRENCY CRISIS
Kiryl Haiduk
Summary
In 2011, indexing the population's income payments, including wages and social benefits, was a real challenge for the economic authorities. Faced with the risk of a price/wage spiral, the authorities permitted a drop in real incomes in order to focus on averting significant increases in poverty among vulnerable social groups.
Trends:
• Deterioration of the demographic situation;
• Danger of labor outflow to Russia;
• Indexation of social benefits;
• Public sector salary increases.
Demography
On January 1, 2012, the Belarusian population was 9 465 400 people, which is 15 800 inhabitants less than on January 1, 2011. Only Minsk saw a population increase — from 1 864 100 to 1 885 100 people, while the number of residents in all other regions had declined. Infant mortality decreased from 4.0 to 3.9 per thousand. Birth and death rates were 11.5 and 14.3 per thousand, respectively (11.4 and 14.4 in 2010, respectively). Compared with 2010, the population declined by 3300 people. In 2011, 32 400 working-age people died (one quarter of all deaths).
In terms of age structure, a decrease in the working-age population is anticipated. In particular, by 2030, the demographic burden on the working population could increase by 30%. This is due to the fact that generations born in the post-war years (the baby boom) will reach retirement, while generations born in the early 1990s (dropping birth rates) will reach working age. The 2009 census revealed that there were 5.8 million inhabitants of working age (61.2% of the overall population). In 2011, the age dependency ratio between the older and working-
age population was 634 inhabitants per thousand of working age population.
Other unfavorable demographic factors include a decrease in the number of females of reproductive age, anticipated to start from 2013. In 2011, the Ministry of Labor and Social Protection published a forecast that the number of women (aged 15 to 40) will decrease by more than 168 0001 by 2015. Therefore, the main fertility potential is in families willing to have more than one child. In 2011, 65.8% of families restricted themselves to one child, while 28.9% of families had two children, and only about 5% had three or more children.
During the past year, the Belarusian presidential News and Analysis Centre carried out a study2 to find out what factors affected the decision to put off childbearing. Almost half the respondents referred to the family's low income, and its further reduction following the appearance of a child, while more than 26% referred to the lack of state support for families with children. Partly as a reaction to the problems voiced — which, however, had already existed for a long time — the law on social services was amended in 2011. The amendments envisage bringing the amount of monthly allowances for children up to three years old into line with the country's average salary, starting from 2012. Monthly child allowance for a first child amounts to 35% of the average monthly salary, and 40% for second and subsequent children.
Apart from encouraging childbirth, the state also provides support to migrants. In 2011, Belarus adopted the National Demographic Security Program3 for 2011 — 2015, which envisages cash payments for adaptation and residence for those who agree to move to Belarus (a lump sum payment of up to USD 1000). In general, this program envisages a stabilisation of the population at 9 450 000 inhabitants by 2015. The projected average life expectancy is 72 — 73 years old (it is currently 70.4 years old). Moreover, the program calls for the introduction of "maternity capital", similar to that offered in the Russian Federation.
In 2011, the positive migratory balance was 9900, which is 400 less than in 2010. About 95% of migrants are CIS citizens, of which about 15% are old-age pensioners. Data on officially-registered
Source: http://www.respublika.info/5317/society/article49211/. Source: http://www.zautra.by/art.php?sn_nid = 9898&sn_cat = 23. Source: http://news.tut.by/society/245993.html.
migrants from Belarus shows that the majority leave to Russia (4500 of the total). A study published in 20114 assessed temporary labor migration in 2010 at 150 000 people (mainly to Russia), and the net volume of cash transfers from abroad at about USD 850 million, or approximately 1.7% of GDP.
Unregistered migration may grow in 2012, against a backdrop of diminishing incomes and cancelled benefits for housing construction. The government has acknowledged the migration problem, however, and in early 2012, for instance, it announced plans to increase exports of construction services.5
Employment and unemployment
In 2011, the employment level in the economy was 4 632 000 workers, which is 0.7% less than in 2010. During the past year, more people were laid off than were hired: 901 100 against 836 600 workers. The main reasons behind the layoffs were mutual agreements (including for future employment) and contract expiry (which is not reflected in the official data).
Despite the 2011 currency crisis, the amount of part-time employment (a traditional way of adapting to deteriorating economic conditions) has not increased. All in all, part-time employment decreased by 36.9% in 2011 (from 154 500 to 97 500 workers, or from 4.5 to 2.8% of employees on the payroll). However, the situation was changing quite dramatically during the course of the year.
In late April, due to problems in the financial and foreign exchange markets, about 600 000 real economy workers suspended their activity.6 Minsk Entrepreneurs' and Employers' Union assessed that 1.5 million Belarusians suffered a loss of basic income in the first half of the year in the aftermath of the currency crisis.7
The officially-registered unemployment rate remained low. On January 1, 2012, it was 0.6% of the economically-active population (on January 1, 2011 — 0.7%). There were 28 200 officially-registered unemployed, which is 14.8% fewer than at the end of December
Source: http://bppf.eu/sites/default/files/bppf22011ru_pp.pdf. Source: http://news.tut.by/economics/267800.html.
Source: http://www.naviny.by/ rubrics/economic/2011/05/04/ ic_articles_113_173494/
Source: http://www.naviny.by/ rubrics/economic/2011/05/04/ ic articles 113 173494/
2010. Almost half of those registered unemployed have received basic and secondary education, while 10% possess no professional or specialised qualifications. The proportion of women among the overall registered unemployed is over 58%, which is a 10% increase as compared to 2010. Young people between 20 and 29 years old make up one third of all unemployed.
As before, the number of vacancies available is almost double the amount of registered unemployed (up to six times in Minsk). Traditionally, the labor market is focused on blue-collar positions (77.6% of all jobs). The number of vacancies has increased by 5.9% (up to 51 700). Simultaneously, there are territorial imbalances: one in three vacancies (21 600) is announced in Minsk.
A more realistic unemployment assessment was carried out in November 2011 according to ILO standards: 13 cities, including Minsk, and six village councils were screened as part of a pilot initiative. From 2012, such surveys will be carried out every three months. The 2009 census recorded unemployment at 6.1% (the official rate is 1%). Some experts assess the 2011 unemployment rate at approximately 10%.
In the private sector, consultancy companies8 assessed that labor turnover was not very high. Companies which survived the crisis preferred to keep their staff, and the latter, in turn, refused to seek other employment opportunities, regardless of reduced income payments in dollar terms at the vast majority of enterprises.
Wages
In 2011, wage dynamics were affected by the currency devaluation and subsequent economic policy aimed to partially recover pre-crisis levels of purchasing power. At the end of 2010, gross wages were as high as USD 530 (USD 470 in the public sector). In 2010, the 40% increase in real wages was a factor that contributed to the currency crisis. Therefore wages accounted for up to 44.3% of GDP in the last three months of 2010, but had decreased to 37.5% in the last three months of 2011.9
The Belarusian rouble devalued by 189%, which resulted in the average wage decreasing to USD 280 in November 2011. In fact,
Source: http://www.zautra.by/art.php?sn_nid = 8931&sn_cat = 4. Calculation made by the IPM Research Centre // [E-resource] See: http:// research.by.
core inflation in 2011 was 108.7% (118.1% in January-October). In 2011, nominal wages increased by 55.2% (with a projected maximum growth of 21.4%), amounting to an average of BYR 1 925 300. Salary growth in the public sector was 62.1%, reaching BYR 1 594 500. In December 2011, the average salary reached BYR 2 877.7 million (about USD 340). Thus, it could be concluded that nominal wage growth was lagging behind price rises. Nevertheless, the Belarusian National Statistical Committee reported a 1.3% increase in real wages in January-December 2011, as compared to January-December 2010.
Means of increasing nominal wages include raising the minimum wage and the tariff rate for category I workers. At the beginning of 2011, the minimum wage was equal to the minimum consumer budget (MCB) of BYR 460 000, but at the end of the year it had reached BYR 925 500, and on January 1, 2012, it exceeded the MCB by 13%, reaching BYR 1 million. On October 1, 2011, the tariff rate for category I workers (used to calculate salaries of public sector employees) was set at BYR 151 000, and monthly differential additional salary payments were introduced on November 1, 2011.
Inter-sectoral differentiation decreased by 3%, i.e. up to 3.2 times as compared to 2010. One of the highest-paid sectors was oil refining, while agriculture was one of the lowest. Moreover, the difference in pay between regions was 1.5 times (between Minsk city and the Brest region). In 2011, a number of laws regulating wage payments were revised in order to reduce administrative interference in wage calculation for employees of commercial organisations.
The pension system
In 2011, the number of pensioners increased by 18 000, reaching 2 486 900, 2 424 400 of which receive state pensions. 548 100 pensioners continue to work (22%) and 65.2% of working pensioners are women. The number of working pensioners among the total number of employed is 13% (excluding pensioners who formerly worked for law-enforcement bodies and ministries). About 20% of the state pension budget is spent on working pensioners.
In 2011, 134 200 people received pensions, of which nearly 17 800 people — almost one in eight — had retired early on favourable terms.
During the year, pensions were recalculated three times based on average wage growth (in June, August and November). Minimum and social pensions were increased four times (in February, May,
August and November), which was related to the increase of the minimum subsistence budget (MSB). In nominal terms, the average monthly old-age pension (including one-time financial support) increased by 46% (the projected increase was 16.9-19.4%) and reached BYR 770 100 (including BYR 973 700 in December). The minimum old-age pension went up by 63.8% (to BYR 465.5 million). In December 2011, the Belarusian National Statistical Committee recorded a downsizing of real pensions by 22.9%, as compared to December 2010.
Senior citizens are one of the most vulnerable social groups, so in 2011 the authorities sought to prevent increased poverty among pensioners, caused by rising prices. In particular, in June, the amount of additional payments to a minimum labor pension increased from 15% to 20% of the average worker's wage. Moreover, non-working pensioners, whose pensions were lower than two MSBs (BYR 686 500), received a lump sum of financial assistance equal to the difference between this amount and the size of their pension. This upgrade affected 870 000 people in Belarus, including recipients of social benefits.
In August 2011, social pensions were increased to correspond to the MSB increase (the main beneficiaries were disabled children and people disabled from childhood). Finally, all non-working pensioners received a one-time payment (of BYR 500 000) to purchase agricultural produce — the state has spent BYR 1.7 trillion on this kind of assistance.
Poverty and the social protection system
In 2011, the number of citizens earning below the MSB per capita increased from 4.7% during the first three months to 10.1% during the last three months of the year. In general, during the period under review, the poverty level increased from 5.2% in 2010 to 7.3% in 2011.10 The reasons behind the increased poverty were price rises on goods and services included in the MSB.
In 2011, social benefits were indexed. For instance, the average monthly allowance for children under three years old increased by 46.1% to BYR 390 000, rising to BYR 574 800 in December. Moreover, the average monthly payment for children over three years old also increased by 46.1% to BYR 117 000, rising to BYR 172 400 in
Source: http://news.tut.by/economics/277871.html.
December. Finally, on October 1, 2011, the lump sum payment for childbirth doubled: payment for a first child increased from 5 to 10 MSB (on December 1, this allowance amounted to BYR 5 747 900), and increased from 7 to 14 MSB for second and subsequent children (BYR 8 047 600).
Additional benefits were introduced for schoolchildren. Primary and secondary school pupils were granted free use of public transport to travel from their place of residence to their place of study and back between September 1 and June 30. From November 1, 2011, additional monthly payments to student grants (65% of the grant) were introduced for certain categories of students. For graduates and postdoctoral students, this additional monthly payment was set at 30% of their grants.
Moreover, students from other towns and full-time students receiving grants from the national and/or local budget could qualify for a monthly reimbursement for accommodation (from September 1 to June 30) if no state hostel rooms were available. In Minsk, such monthly compensation was equal to three basic units (BYR 105 000), in other regions — two basic units (BYR 70 000). In order to receive such compensation, students had to prove that the average family income per capita was lower than 200% of the maximum value of the average minimal subsistence budget per capita, as approved by the government during the past six months.
In 2011, the number of offices operating at Social Service Centres (SSC) increased by one third, from 603 on January 1, 2011 to 919 on January 1, 2012. The number of people approaching those centres for various kinds of assistance also increased. In 2011, the number of senior citizens and disabled (categories I and II) receiving home services from social service centres went up by 3300. The number of disabled citizens receiving social and domestic services at home was also on the increase (87 800 people were receiving home services by January 1, 2012).
In total, 1.6 million residents were registered with social service centres in 2011 (in every administrative region), including about 129 900 senior citizens (without families) and 564 800 senior citizens (with families, but living alone); 9500 orphans and children without parental care; 60 400 large families, more than 130 700 single-parent families, 22 500 families with disabled children, and over 8900 citizens released from prison.
In 2011, the number of disabled people increased by 4000, or 0.8%. The proportion of citizens with disabilities in the country's
overall population increased from 5.3% in 2010 to 5.4% in 2011. The absolute number of disabled people reached 508 400. Old-age pensioners were largely responsible for the increase in the number of disabled people. Among citizens with disabilities, 73 500 were category I disabled, more than 271 200 — category II, almost 138 000 — category III, and 25 700 are disabled children under the age of 18 (their number decreased by 1.6%).
In 2011, the authorities announced plans to revise the principles for granting disability status. It is anticipated that not only the loss of ability to work in a given profession, but also the overall ability to work will be assessed and taken into account. Moreover, readiness to join the UN Convention on the Rights of Persons with Disabilities was declared. If the new system is implemented, the number of citizens complying with criteria for "disability" will increase. However, this does not imply that the number of social pension recipients will be extended.
Conclusion
In 2011, one of the government's priorities was to support pensioners and other vulnerable social groups. Nevertheless, the poverty rate has increased. The economic authorities opted only for a moderate compensation for people's loss of real income, which resulted in real income (including wages) being reduced. To all appearances, full compensation would have resulted in an inflationary spiral and macroeconomic instability.
A moderate increase in revenues has been projected for 2012 and, at the same time, the government will focus its efforts on increasing the salaries of state employees (by approximately 70% on average).
