The Increase in Wages in Russia: The Multiplier Effect

Abstract

The article is an attempt to evaluate the impact of the increase in average wages under conditions of excess of growth rate of wage on rate of growth of productivity. It is shown that in modern Russian economy there was such relationship of these rates. A brief overview of the long-term discussion about the admissibility or inadmissibility of wage increases in these conditions is given. The increase of the wage fund with a little change in the number of employees treats as an analogue of the transfer. The method of analysis of macroeconomic indicators arising from such increase is proposed, which is based on the concept of multiplicative growth of gross national product. The consequences of the increase in wages of employees in the public sector and in commercial structures are considered separately. Take into account the factors that increase the personal consumption of employees and caused by rising costs of labor reduce the profit of the entrepreneurs. The impact of the decrease in profits on the reduction of personal consumption of entrepreneurs and investments from their own funds is taken into account. Тhe calculations showed that in modern Russia the negative consequences of wage increases in the form of inflationary pressures and falling business profits are temporary. According to our calculations, the threat of inflation due to the growth of wages, both in the budget and in the commercial sphere, remains a little more than a year, and to the initial loss of profits of entrepreneurs were compensated by the growth of production volumes, it will take about two years. The result of the analysis is the following conclusion: the increase in the average wage in Russia has not only an important social value, but also is the measure conducive to the growth of the national economy.