What will happen to salaries and pensions in the next three years
The budget for the next three years is based on optimistic forecasts: the dollar is 90 rubles, inflation is 4.5%, citizens’ incomes will soar, and the treasury deficit will decrease. Sounds positive. But how is it planned to achieve such outstanding results? Will the entire budget scenario break down if the ruble exchange rate soars or, conversely, collapses? Should the population count on wage indexation or other financial “gifts” from the authorities? Will pensions grow faster than inflation? Director of the Center for Structural Research at the Gaidar Institute Alexey Vedev and Director of the Center for Economic Policy Research (Faculty of Economics of Moscow State University) Oleg Buklemishev spoke about this and much more during the online conference.
— The draft budget is based on the forecast of the Ministry of Economic Development. It's balanced and professionally done, but it's very upbeat. These are the main budget risks. There are two scenarios for the development of the situation: basic (most likely) and conservative (supposedly bad). This is a tradition. The Ministry of Finance needs a bad scenario in order to understand how all budget obligations, especially social ones, will be fulfilled. The oil price for next year is $71.3 per barrel in the base case and $64.3 in the conservative, bad version. This is a very high price. God grant that this happens, but it’s hard to believe. The average annual dollar exchange rate is 90.1 for the next year, and in a bad scenario — 95.7–96 rubles per dollar. I'm not sure the manufacturing industry can sustain this course. Investments, modernization, all parallel imports will simply last a long time.
— I wouldn’t talk about the increase in poverty. And I don’t think that the budget is very risky. He's reliable. The document is insured against further deterioration of the situation by two things: the weakening of the ruble and inflation. Firstly, the ruble is already ahead of the targets for next year. Secondly, inflation. This is the second breadwinner of the budget. As for the document’s focus on the interests of big capital, I don’t know of budgets that are structured differently. Any budget is focused on the interests of big capital, and in any budget interest follows money, and lobbying follows money. As for social spending, it is now slightly below pre-pandemic levels. It is obvious that there has been an increase in expenses on other items. In this sense, the social orientation of the budget has not increased in any way compared to previous budgets.
— Firstly, it can be calculated both as a share of GDP and in current expenditures. There the picture is more complex. Funding for health care and compulsory health insurance is growing and spending on education is falling. In general, the picture is more structural, more complex. It is clear that if defense spending grows to 30%, then, of course, other items at least do not grow.
— The future of the social sphere depends not so much on what is currently planned in the budget. What is more important is what the inflation rate will be next year. As for social expenditures, expenditures on education, and healthcare, here you can look at the consolidated budget. It makes no sense to look at the federal one only, because it is a single budget system. So, the share of spending on “social policy” in 2019 was 11.3% of GDP, now it will be 11.6%. It turns out we are seeing growth. In 2019, 3.5% of GDP went to healthcare, now it is 3.6%. For “education” it was 3.7%, now it will be 3.6%. It turns out that we are in the same place we were before the pandemic. In this sense, nothing has changed, there is definitely no growth. But if inflation is high, it will be bad for everyone.
— The situation is quite complicated. In Russia, over the past 8 years, the real disposable income of the population has practically not grown. So, of course, any increase above inflation will be positive. Additionally, it must be said that the situation on the labor market is very difficult. We have a catastrophic labor shortage. Due to the exchange rate of the ruble, there is an outflow of immigrants. Because of this, wages in Russia will grow quite strongly. For this reason, social injustice may arise: a disproportion between salaries and pensions. Therefore, pensions need to be indexed. And not only for non-working pensioners, but also for working ones. Pensioners must be attracted — within the framework of the labor shortage.
— The minimum wage (SMW) is a rather artificial value. The labor market is stronger than any established regulatory parameters. For the most part, people receive salaries that do not include the minimum wage. Therefore, no matter how you index it, everything will be decided in real relations on the labor market. Indeed, we have recently seen quite high growth in real wages. But I want to remind you that these statistics are compiled based on data from large enterprises, which is approximately half of the workforce, even less. But what other people get is a big mystery. A recent survey conducted by one of the major job search services revealed an unexpected result. Based on his results, people today are much more dissatisfied with their salaries than they were in the past. They say that there is not enough money for almost anything. From this I conclude that those who work at large enterprises, those who actually saw an increase in wages, do not demonstrate the real state of affairs. It is possible that wages at small and medium-sized enterprises are either stagnating or decreasing. And that's the problem. As for the social sphere, I completely agree that accelerated indexation is needed so that both pensioners and other recipients of fixed incomes do not feel deprived of this celebration of life.
— The main problem is different. When the economy grows, the income of the population increases. Of course, I am for us to have a society of the rich, and not a society of the poor or different. But this is a question of replenishing the budget, a question of economic growth. When there are not enough resources, the decisions of the State Duma become unsystematic and do not solve any problems. We need indexation, low inflation and a growing economy.
— The question is absolutely fair. But the numbers we are talking about are tens to hundreds of billions of rubles. These are not such large amounts against the backdrop of the budget, which amounts to more than thirty trillion rubles. These decisions don't seem serious. They may be momentary, they may be revised or reversed next year. This is nothing for the fate of the budget.
— Since 2015, the Ministry of Economic Development has stopped what is called “stagflation,” that is, inflation due to rising tariffs. Now in Russia there is a completely strict scheme — inflation minus, that is, the indexation of tariffs for monopoly services is considered below inflation. In principle, I do not see a price race for housing and communal services, energy, and gas. Everything else is, of course, a matter of indexation of salaries and payments.
— I would like to give an example from our past. 25 years ago the country was going through a very difficult crisis after the 1998 default. Then, for some time, all indexing was suspended. It turns out that in order to help the population, the state suspended the indexation of tariffs. This had a positive effect not only on the population, but also on industry, since thanks to this decision, economic recovery occurred very quickly. Today, in conditions when we need both an influx of capital and people’s confidence in the future, a more moderate indexation of tariffs can help. I understand that monopolies must be financially stable. Here you need to choose what is more important: financial stability or high social temperature and good conditions for business development?
— I predict a stronger ruble exchange rate. The corridor from 90 to 100 rubles per dollar is a corridor of a commodity economy, not an economy of knowledge and modernization. Such a course, in my opinion, is unacceptable for the economy. It can only suit oil and gas exporters.
— I don’t see scenarios in which the ruble will strengthen significantly against the dollar and euro. Financial regulators did everything to prevent this from happening. The desire of both businesses and individuals to export foreign currency will continue. Russia will continue to export capital (I do not put a negative connotation into these words). Here, much will depend on the price of basic export goods and on how sanctions are tightened or loosened. As for the weakening of the ruble, it is bad for the economy, bad for the country, but it is very good for the budget. In this regard, no one will fight this. Most likely, we will have a weaker ruble and higher inflation than included in the government forecast. This will fill the budget even in the absence of planned oil and gas or non-oil and gas revenues. In my forecasts, the dollar may be 90 rubles for a short time. If inflation goes faster, the natural exchange rate of foreign currency cannot develop at higher levels than we had in September.
— This is a relative question. Inflation in both Europe and America is significantly higher than the agencies report. I think that real indexation will be less than inflation, but not by much. Now, let me remind you, it is around 7%.
— Security forces and workers of the military-industrial complex benefit from these conditions. As for the topic itself, if such a question arises, this already indicates a tense situation in society. People are born for happiness, for consumption, which constitutes a certain part of this happiness. They are wildly worried when some citizens' incomes are cut and others are indexed. The state’s task is to treat this problem by helping the most vulnerable categories of the population, recipients of fixed incomes, who lose out first when inflation is high.
— I think there are more advantages. I would, of course, like the budget to be more focused on economic growth, so that there would be more money for infrastructure projects, for road construction, and so on. But in the current situation, budget stability is very important. In principle, the budget is quite optimistic and not bad.
— Today, the federal budget is not a source of anxiety for the average person. It is relatively balanced. Moreover, it provides for fairly large expenses, including for areas of interest to the average person. What worries me today are the indicative budget figures for future periods, for 2025–2026, when we will see a total reduction in all expenses, including in the most sensitive areas. These are conditional figures, but they are alarming. This suggests that in 2024 we will spend, and then we will tighten our belts. The time has come when we need to think not only about tomorrow, but also the day after tomorrow. And think about it positively, without tightening your belts, but by developing your own economy and making economic growth increasingly become a reality, and not an imaginary horizon that is constantly moving away from us.