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Government wants to narrow wage gap but does not know how

September 17, 2013, 15:29 UTC+3 Zamyatina Tamara

MOSCOW, September 16 (Itar-Tass) - The gap between the incomes of the rich and the poor in modern Russia is so appalling that the government itself has acknowledged it must do something at last to narrow it. But it remains curious how to go about this business. Experts believe, though, that the discrepancy in the wages of big bosses and their subordinates is not a reason enough for social unrest yet.

The variance of wages in different branches of the economy has angered Deputy Prime Minister Olga Golodets.

“In Russia, it is standard practice to pay the highest wages in the financial sector. But it does not exist anywhere else,” she said at a meeting of the trilateral commission for settling social-labour relations. As an example Golodets mentioned the United States, where there is a successful experience of restricting the wages of financiers, while the highest salaries are earned by general practitioners. Golodets has already issued instructions to establish a special group under the Labour and Social Protection ministry for improving the wage system.

However, according to the federal state statistics service Rosstat, the highest salaries are paid in the financial sector, where the monthly earnings average 70,896 roubles a month. Although this parameter is way above the average wage in the economy (30,026 roubles), the financial sector lags far behind the pipeline transport industry (96,077 roubles). The lowest level is in the textile industry (13,274 roubles).

According to the Labour Ministry, the wages of public sector employees in Russia in the second quarter of this year were up by 12.9 percent. Now they stand at 28,800 roubles.

Golodets also recalled that the Ministry of Labour this year initiated a number of bills for settling the wage issue. The proposal for a cap on the salaries managers of public budget-financed organizations has been approved already. A bill on restricting the golden parachutes for the top managers of public companies and state-run corporations is being discussed.

As Rosstat said at the end of August, at the end of the first half of 2013 the average monthly salary of federal public sector employees increased in nominal terms (without adjustment for inflation) by nearly 20% against the first half of 2012, to reach 70,000 roubles on the average. Although in some organizations some wages may reach 170,000 roubles. In the meantime, the average monthly wage of ordinary Russians in the reviewed period grew 13% in nominal terms to stay under 29,000 roubles.

The gap between the wages of top managers and ordinary employees is getting wider. In some cases the discrepancy is really stunning. According to the State Labour Inspection, in the Krasnodar Territory of Russia an ordinary employee of the joint stock public utility company Krasnodarteploset gets 24,000 roubles a month, while the company’s deputy CEO is paid 4.5 million - 187 times more!

The Russian government-published daily Rossiiskaya Gazeta says that the earnings of managers in both large companies and small firms may exceed the average wage of their subordinates 10-15 times, whereas in Europe and the United States the gap is far narrower - 3-3.5 times.

In the very same Krasnodar Territory the employee of a greenhouse farm makes 30,000 roubles on the average, and its director, 300,000. The rank-and-file personnel of a popular sanatorium makes 25,000 roubles, and its chief doctor, 250,000, roubles.

But all these statistics pale into insignificance when placed next to the incomes of the heads of public corporations. Last year Gazprom declared that the members of its board were paid 193,000 dollars a month. The company’s CEO, Alexey Miller, gets 25 million dollars a year (approximately 60 million roubles a month).

The daily Moskovsky Komsomolets recalls that Gazprom sponsors Germany’s soccer club FC Schalke-04 (16 million euros a year), and also the Serbian soccer club Crvena Zvezda (another 4.5 million euros a year). A the same time Gazprom is emphatically against freezing gas prices.

A leading economist at the Centre of Marcoeconomic Analysis and Short-term Forecasting, Igor Polyakov, is surprised at the initiative of Deputy Prime Minister Olga Golodets. Wages and salaries in the public sector can be controlled somehow, but the government has absolutely no leverage to exert pressures on private businesses. The co-chair of the Business Russia association, Anton Danilov-Danilyan, warns that the government’s intervention in controlling wages and salaries in the private sector would be impermissible, because it would upset the basics of a free market economy.

Of late, the Russian authorities have raised the theme of the population’s stratification along income lines ever more rarely. Apparently, this is not the most pleasant themes of all to discuss, especially if one bears in mind that federal level officials enjoy the biggest pay rises in the country. Far more often the authorities discuss the theme of war on poverty, of indexing pensions and wages in the public sector, of raising salaries in the health service and education, and not of social stratification.

The issue of social inequality has no simple solutions, says the director of the Independent Institute of Social Policies, Liliya Ovcharova. Somebody believes that it will be enough to raise the minimum wage. Then inequality will be shifted into the zone of joblessness. Because a large number of low-paid jobs will be just abolished,” the analyst warns. “Russia should raise the issue of the root causes of social stratification once again and take targeted measures to ease inequality.”

Senior lecturer Mikhail Berger, of the Higher School of Economics, told ITAR-TASS in an interview that the discrepancy in the incomes of ten percent of Russia’s wealthiest people and ten percent of the poorest people is one of the highest in the world. The expert said the wage gap inside the corporations was also very high. As for the monthly salary of 60 million roubles that Gazprom’s CEO gets, Berger believes it is ‘too much’. It is even higher than the salaries of top managers in the world’s largest corporations. In the meantime, Gazprom is not the most effective company in its industry, and Gazprom’s capitalization is one of the lowest in the gas segment of the world economy.”

At the same time Mikhail Berger believes that the gap between the salaries and wages of the managers and subordinates will not trigger social disturbances.

“Russia is an obedient country. In Russia there are no trade unions, so there is no force that may spark unrest,” he said.