Salary arrears up by a third

Russia has a fast-increasing problem with late salary payments — up a third in April. The government is concerned, telling loyal media outlets not to report official government statistics. From an economic standpoint, the amount of unpaid wages is not enough to pose a real threat.

• Wage arrears reached 2.88 billion rubles ($40 million), the highest since Dec. 2019, according to Rosstat. The level jumped 35% from last month (+750 million rubles), and has almost doubled year-on-year. A total of 19,000 staff at large enterprises are owed wages by their employers.
• In absolute terms, the figures remain very low. Compared to an overall wage bill of at least 3 trillion rubles ($42 billion) a month, the sum is microscopic — under 0.1% of total wages and a similarly low share of all workers affected. That’s 1,000 times less than during the 1990s crisis and at least 10 times less than in 2014. But the figures are less important than the structure and the trend.
• The main reason is a standard lack of funds. Of note, there has been a 62-fold increase in arrears due to late receipt of government funds, now accounting for 788 million rubles ($11 million) of the total bill. In other words, almost a third of all arrears are due from state contracts. Amid a government deficit that had exceeded the annual plan by the end of Q1 (discussed above) and the advance payment of expenses, the sharp increase in arrears from budget spending points to cashflow gaps.
• Any rise in wage arrears is politically sensitive in Russia. Unpaid salaries triggered mass protests in the 1990s, as the Kremlin remembers well. According to Meduza, state media was urged to “ignore as much as possible” the Rosstat report. Leading news agencies such as TASS, RIA Novosti and Interfax, followed the order. But other major newspapers, such as Komsomolskaya Pravda and Kommersant, published articles, only for the material to later disappear from their websites, The Bell observed.

Why the world should care

In isolation, the level of wage arrears is not a macroeconomic concern. But the sudden increase in delays related to state contracts is not the only thing to note. The attempts to suppress information about the problem is also significant. The authorities are not cracking down on alleged fake news here, but on official figures from the state statistical agency. This suggests that the Kremlin believes the political sensitivity of wage arrears is greater than the sums of money involved.