Economics and management of national economy

Wage growth in Russia: opportunities and consequences

Economic Annals-XXI

Economic Annals-ХХI: Volume 191, Issue 7-8(1), Pages: 43-53

Citation information:
Kabanov, V. (2021). Wage growth in Russia: opportunities and consequences. Economic Annals-XXI, 191(7-8(1)), 43-53. doi: https://doi.org/10.21003/ea.V191-04

View Full-TextDownload PDF

Vadim Kabanov
D.Sc. (Economics), Professor,
National Research University Moscow State University of Civil Engineering
26 Yaroslavskoye Hw., Moscow, 129337, Russian Federation
kabanovvn@yandex.ru
ORCID ID: https://orcid.org/0000-0003-2191-0671

Wage growth in Russia: opportunities and consequences

Abstract. The paper assesses the potential for increasing the minimum wage and the average wage in the Russian economy, the wages paid to employees, the profit of enterprises and the capital investments of enterprises. Based on the study of the research results published in periodicals, the socio-economic consequences of increasing the minimum wage and increasing the average salary of employees in the state and non-state sectors of the economy are systematized. When comparing the wages and profits of employees, it is possible to measure the potential for wage growth. The author attributes this dimension to the increment of knowledge. The results of the study show the possibilities of state authorities to improve the tax system in terms of a differentiated approach to the taxation of profits aimed at direct investment or personal enrichment. Change in the income tax should both stimulate the investment activity of business owners, and limit the desire for personal enrichment. The Russian economy has potential to increase the average wage twofold.

Keywords: Wages; Value Added; Profit; Capital Investments; Public Sector; Employees; Business Owners

JEL Classifications: E24; J38; J48; О15

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The author completed the work independently

Data Availability Statement: The initial values are publicly available on the Rosstat website: https://rosstat.gov.ru

DOI: https://doi.org/10.21003/ea.V191-04

References

  1. Aganbegyan, A. G., Porfiryev, B. N., & Shirov, A. A. (2021). On overcoming the current crisis and ways to develop the Russian economy. Report to the Free Economic Society of Russia.
    https://veorus.ru/доп-материалы/Доклад_ВЭО_России.pdf (in Russ.)
  2. Arestis, P. (2020). UK and other advanced economies productivity and income inequality. International review of applied economics, 35(3-4), 355-370.
    https://doi.org/10.1080/02692171.2020.1749243
  3. Blumkin, T., Pinhas, H., & Zultan, R. (2020). Wage Subsidies and Fair Wages. European economic review, 127, 103497.
    https://doi.org/10.1016/j.euroecorev.2020.103497
  4. Bossler, M. Oberfichtner, M., & Schnabel, C. (2020). Employment Adjustments Following Rises and Reductions in Minimum Wages: New Insights From a Survey Experiment, Labour-England, 34(3), 323-346.
    https://doi.org/10.1111/labr.12168
  5. Brancaccio, E., Garbellini, N., & Giammetti, R. (2018). Structural labour market reforms, GDP growth and the functional distribution of income. Structural change and economic dynamics, 44, 34-45.
    https://doi.org/10.1016/j.strueco.2017.09.001
  6. Brummund, P., & Strain, M. R. (2020). Does Employment Respond Differently to Minimum Wage Increases in the Presence of Inflation Indexing? Journal of human resources, 55(3), 999-1024.
    https://doi.org/10.3368/jhr.55.2.1216.8404R2
  7. Bukina, I. S., & Orekhovsky, P. A. (2018). Features of the Russian model of economic growth. Finance: theory and practice, 22(6), 6-24.
    https://doi.org/10.26794/2587-5671-2018-22-6-6-24 (in Russ.)
  8. Caiani, A., Russo, A., & Gallegati, M. (2019). Does inequality hamper innovation and growth? An AB-SFC analysis. Journal of evolutional economics, 29(1), 177-228.
    https://doi.org/10.1007/s00191-018-0554-8
  9. Caliendo, M., Fedorets, A., Preuss, M., Schröder, C., & Wittbrodt, L. (2018). The short-run employment effects of the German minimum wage reform. Labour Economics, 53, 46-62.
    https://doi.org/10.1016/j.labeco.2018.07.002
  10. Campos-Vazquez, R. M., & Esquivel, G. (2020). The effect of doubling the minimum wage and decreasing taxes on inflation in Mexico. Economics letters, 189, 109051.
    https://doi.org/10.1016/j.econlet.2020.109051
  11. Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect f minimum wages on low-wage jobs. Quarterly journal of economics, 134(3), 1405-1454.
    https://doi.org/10.1093/qje/qjz014
  12. Efimova, E. A. (2011). Setting of Minimal Wages: Foreign Experience and Russian Practice. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2, 24-35.
    https://doi.org/10.20542/0131-2227-2011-2-24-35 (in Russ.)
  13. Hammar, O., & Waldenström, D. (2020). Global earnings inequality, 1970-2018. Economics journal, 130(632), 2526-2545.
    https://doi.org/10.1093/ej/ueaa109
  14. Harasztosi, P., & Lindner, A. (2019). Who Pays for the Minimum Wage? American economic revive, 109(8), 2693-2727.
    https://doi.org/10.1257/aer.20171445
  15. Holtemöller, O., & Pohle, F. (2020) Employment effects of introducing a minimum wage: The case of Germany. Economic modeling, 89(20), 108-121.
    https://doi.org/10.1016/j.econmod.2019.10.006
  16. Ilyashenko, V. V., & Kuklina, L. N. (2018). Interrelation of Income, Inflation and Aggregate Demand in the Russian Economy. Economy of region, 4, 1477-1487.
    https://www.economyofregion.com/archive/2018/71/3129 (in Russ.)
  17. Ivanova, M. A. (2016). Analysis of the nature of the causal relationship between inflation and wages in Russia. Forecasting problems, 5, 119-132.
    https://ecfor.ru/publication/10-inflyatsiya-zarabotnaya-plata-prichinno-sledstvennaya-svyaz (in Russ.)
  18. Jackson, T. (2019). The Post-growth Challenge: Secular Stagnation, Inequality and the Limits to Growth. Ecological economics, 156, 236-246.
    https://doi.org/10.1016/j.ecolecon.2018.10.010
  19. Jung, Y. C., McFarlane, A., & Das, A. (2020). The effect of minimum wages on consumption in Canada. Economic and labour relations review, 32(1), 65-89.
    https://doi.org/10.1177/1035304620949950
  20. Kabanov, V. N. (2012). Economic dimensions in management (using the break-even point accounting model as an example). Business. Education. Law, 2, 28-38 (in Russ.).
  21. Kapeliushnikov, R. I. (2009). Productivity and Labor Compensation in Russia: How to Cope with Statistical Illusions. Voprosy Ekonomiki, 4, 59-79.
    https://doi.org/10.32609/0042-8736-2009-4-59-79 (in Russ.)
  22. Kapeliushnikov, R. I. (2014) Kapeliushnikov R. Labor Productivity versus Labor Compensation:Some Simple Arithmetic. Voprosy Ekonomiki, 3, 36-61.
    https://doi.org/10.32609/0042-8736-2014-3-36-61 (in Russ.)
  23. Kohler, K., Guschanski, A., & Stockhammer, E. (2019). The impact of financialisation on the wage share: a theoretical clarification and empirical test. Cambridge journal economics, 43(4), 937-974.
    https://doi.org/10.1093/cje/bez021
  24. Korovkin, A. G., Podorvanova, Ju. A., & Dolgova, I. N. (2003). The relationship between nominal wages and unemployment: regional features. Forecasting problems, 6, 78-93 (in Russ.).
  25. Kozlova, O. A., & Arzyakova, O. N. (2007). Wages in system of effective employment of the population of region. Economy of region, 4(appendix), 133-142.
    https://www.economyofregion.com/archive/2007/24/611 (in Russ.)
  26. Kuklin, A. A., & Leontieva, A. G. (2010). National policy in reference to labor remuneration and its influence on poverty dynamics in a region. Economy of region, 1, 27-33.
    https://www.economyofregion.com/archive/2010/15/417 (in Russ.)
  27. Lvov, D. S. (1999). Economic Science and Development of Russia. Economic Science and Development of Russia. Bulletin of the Russian Academy of Sciences, 8, 722-742 (in Russ.).
  28. Lvov, D. S. (2003). Prospects for long-term socio-economic development of Russia. Bulletin of the Russian Academy of Sciences, 8, 675-688 (in Russ.).
  29. Malkina, M. Yu. (2016). Institutional Framework of Income Inequality in Modern Economy. Journal of Institutional Research, 8(1), 100-120.
    https://doi.org/10.17835/2076-6297.2016.8.1.100-120 (in Russ.)
  30. Marjit, S., Ganguly, S., & Acharyya, R. (2020). Minimum wage, trade and unemployment in general equilibrium. International journal of economic theory.
    https://doi.org/10.1111/ijet.12264
  31. Mayneris, F., Poncet, S., & Zhang, T. (2018). Improving or disappearing: Firm-level adjustments to minimum wages in China. Journal of development economics, 135, 20-42.
    https://doi.org/10.1016/j.jdeveco.2018.06.010
  32. Mokre, P., & Rehm, M. (2020). Inter-industry wage inequality: persistent differences and turbulent equalization. Cambridge journal of economics, 44(4), 919-942.
    https://doi.org/10.1093/cje/bez064
  33. Monras, J. (2019). Minimum Wages and Spatial Equilibrium: Theory and Evidence. Journal of labor economics, 37(3), 853-904.
    https://doi.org/10.1086/702650
  34. Pol, E. (2020). Is the RBA Economic Logic Faulty? Economic papers, 39(3), 259-269.
    https://doi.org/10.1111/1759-3441.12289
  35. Rzhanitsyna, L. S. (2000). The main directions of improving wages in Russia. Forecasting problems, 5, 94-103 (in Russ.).
  36. Selwyn, B. (2019). Poverty chains and global capitalism. Competition & Change, 23(1), 7-9.
    https://doi.org/10.1177/1024529418809067
  37. Suvorov, A.V., Boldov, O. N., Ivanov, V. N., Suhorukova, G. M., & Budanova, A. I. (2020). Directions of social policy that ensure the restoration of economic growth in Russia. Forecasting problems, 4, 3-15 (in Russ.).
  38. Taylor, L., & Ömer, Ö. (2020). Where do profits and jobs come from? Employment and distribution in the US economy. Review of social economy, 78(1), 98-117.
    https://doi.org/10.1080/00346764.2019.1672883
  39. Tridico, P., & Pariboni, R. (2018). Inequality, financialization, and economic decline. Journal of post Keynesian economics, 41(2), 236-259.
    https://doi.org/10.1080/01603477.2017.1338966
  40. Wisman, J. D. (2020) Marx, the Predisposition to Reject Markets and Private Property, and Attractive Alternatives to Capitalism. Forum for social economics, 49(3), 281-298.
    https://doi.org/10.1080/07360932.2018.1468798

Received 4.03.2021
Received in revised form 19.04.2021
Accepted 31.04.2021
Available online 10.08.2021

View Full-TextDownload PDF
In, , , , , , ,

More Papers