2013: income growth via lay offs

Minsk authorities announced that in 2013 wages in Minsk will increase up to USD 750-770.

Belarus has to increase wages due to outflow of skilled workers to Russia. Currently Belarus’s economy is not able to provide wages higher than USD500. An alternative is to reduce the number of employees, which will allow increasing wages to skilled professionals by reducing excess workforce.

In November 2012 the average salary in Belarus was USD 495. In Russia in October 2012, the average salary was USD 890. In some industries, particularly in oil refining, wages differ significantly. Therefore, outflow of specialists to Russia is a matter of time. Belarus’ industrial modernization plans may face personnel shortages and skilled professionals having the necessary skills to operate new equipment.

Belarus’ economic performance demonstrated that the current level of wages is achieved artificially through legislative means, which cannot be sustained economically. Trade deficit in the last four months with negative trend proves it. In November, return on sales was minimal in 2012, 7.8%. 2011 devaluation factor has exhausted and there is a need for real depreciation of the national currency in order to avoid the repetition of 2011 situation.

As an alternative, layoffs are being considered. In public administration the announced layoffs plan is 25%. The reduction in the number of government agencies is a long overdue initiative, while the reduction of workers in industry is facing with an unofficial dismissal ban. Dismissal is prohibited by Decree No 9 at industrial enterprises undergoing modernization. Potential investors in Belarus face a requirement to maintain the number of company employees for some time.

Thus, Belarus is facing a need to reconsider its employment policies. Continuing paying high wages irrelevant of the economic performance will result in new devaltuaion. Modernization of the economy, if held, will reduce the need for the number of employees, but will increase the demand for their skills. In these circumstances, all restrictions on layoffs at industrial enterprises should be removed to retain qualified professionals and the wages of the latter should be increased at other workers’ expense.