Russia politics: Quick View - Minimum wage increased ahead of presidential election

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
Politics, News Analysis, Forecast, Political stability
Political Geography
Russia

Event

In advance of the March presidential election the government has adopted several populist measures targeted at low-income groups.

Analysis

On December 29th 2017 Vladimir Putin, the president, signed a law increasing the minimum wage from January 1st by 22%, to Rb9,489 (US$168) per month, or 85% of the official national living wage. It is due to rise to the equivalent of 100% of the official living wage in January 2019, implying another big increase at the start of next year. The rise in the minimum wage far outstrips inflation, which in December 2017 stood at 2.5% year on year, and which we forecast will average 3.9% in 2018. Speaking in September, Lyubov Eltsova, the deputy minister for labour and social welfare, said that the minimum wage increase would cost the budget Rb26.2bn (US$421m) in 2018.

Also on December 29th, Mr Putin approved the introduction of targeted payments for low-income families upon the birth of their first child. Families with an income 4.5 times below the living wage will receive a monthly payment equivalent to the regional living wage until the child reaches 18 months. According to Olga Golodets, a deputy prime minister, the law will cost the budget Rb21bn in 2018, rising to Rb55bn in 2019 and Rb68bn in 2020.

These measures have clearly been adopted with a view to the forthcoming presidential election. Mr Putin's re-election for a fourth term is assured; however, the administration is concerned that turnout might be low. Living standards have continued to decline for much of the population in 2016-17, with real disposable incomes falling in real terms. Aleksei Navalny, an opposition politician who has been barred from running in the election, has made tackling inequality a central part of his agenda. He proposed a large increase in the minimum wage, up to Rb25,000 per month.

These measures may signal the start of a shift in federal spending priorities following the presidential election. The government has raised the possibility of a budget manoeuvre that would increase spending on health and education, to be paid for by improved tax collection or even reductions in spending on the security sector.

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