Wage Dynamics and Economic Growth: Russian Realities

Abstract

The article deals with the relationship between the economic growth of Russia and the dynamics of average wages. A joint analysis of wages, GDP, salary output and labor productivity in the Russian Federation for the period 2000–2019 was carried out. The type and parameters of the regression equations connecting these indicators are determined. The analysis allows us to conclude that it is advisable to increase real wages, despite the accompanying slow growth of labor productivity and a decrease in salary. The main argument in favor of this statement is the multiplicative effect that occurs when the average salary in the economy increases. The paper shows that the increase in wages, in addition to the usually taken into account direct multiplicative effect, determined by an increase in the disposable income of the population, there is an additional induced multiplicative effect. The induced effect is explained by the increase in economic activity of the population proved on the Russian statistics with the growth of wages, which leads to an increase in the number of employees, and hence the wage fund and, accordingly, personal disposable income. Thus, by increasing wages, it is possible to improve the financial situation of the employed population, attract additional labor resources to the economy, and achieve GDP growth. The article presents calculations that allow us to estimate the contribution of the direct and induced multiplicative effect to the GDP of Russia for the period of 2000–2017. Based on these calculations, it can be argued that in the Russian Federation at the beginning of the XXI century, the gross domestic product, due to the multiplicative effect of changes in average wages in the first year after such a change, increased or decreased in some years by 6–7%. Although the induced multiplicative effect, as it turned out, is relatively small, there is no reason to neglect it. At the current very low rate of GDP growth, one has to take into account every tenth of a percent of such growth, and calculations have shown that the induced effect calculated for the first year after the change in wages in the period under review reached 0,6% of GDP. The calculations also showed that due to the increase in labor activity associated with an increase in the average salary, the number of people employed in the “white” labor market in Russia in some years increased by about 1%.