State Personnel Policy: staff and loyalty shortages
Analysis of the President Lukashenko’s government staffing policy reform in 2013 shows its two features. Firstly, officials close to President Lukashenko have increased their influence and so-called Prime Minister Myasnikovich group weakened. Secondly, ruling elite’s authority is not sustainable and could change rapidly. State power’s sustainability is increasingly dependent on President Lukashenko and a small group of his closes’ health.
In Q1 2013 the most distinct feature of the personnel policy is Deputy Prime Minister Petr Prokopovich’s administrative weight sharp increase. In particular, once appointed, he was introduced to 10 different state boards and high level commissions, as a head in 7 of them. Thus, today Prokopovich formally oversees a broad variety of public policy areas: from entrepreneurial development and taxation simplification to industrial modernization and public assets privatization.
Most likely, President Lukashenko’s confidence in Prokopovich is due to the crisis of confidence within the ruling group. Empowering one person with numerous responsibilities primarily indicates there is a deficit of loyal and trusted aides. In these circumstances, President Lukashenko has to turn a blind eye to the age and health of 73-year old Prokopovich, who in 2011 had a major heart surgery and retired.
Simultaneously to Prokopovich’s strengthening positions, since 2012 Sergei Rumas from Prime Minister Myasnikovich team has been losing his positions in government decision-making. Since early 2013 Rumas, who in July 2012 was appointed Chairman of the Board at Development Bank, was consistently taken out of various inter-agency councils and commissions (state statistics, price control, Logistics, stock trading, international financial reporting standards and others). In this context, Prime Minister Myasnikovich’s appointment as Chairman of the Supervisory Board of the Development Bank in January 2013 is yet another prove of this trend.
Therefore, Belarus’ public policy is far more personalistic than clan-based. Influence groups’ size within Belarusian ruling elite are relatively small and limited to the most senior officials’ inner circle (the President or Prime Minister), which makes them relatively easily replaceable. On the contrary, confidence deficit significantly increases the burden on officials from the president’s inner circle, increasing managerial risks during crisis or in case of President’s or his current favourites’ potential health problems.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.