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Salaries correlate with productivity, too
Iurie Gotisan, June 30, 2007
The Government has plans to increase three-fold the salaries of budgetary workers by 2009, while the minimum monthly pay is expected to grow up to 400 lei; official statistics reveal that the things go in the right direction regarding the monthly advance of medium wage on economy. Even more, the International Monetary Fund’s warnings to control the evolution or not to increase the salaries may seem strange to persons who know the level of salaries in Moldova, compared with the medium pay in the European Union (much lower!). Explanations full of technical arguments, in particular regarding the inflationist danger or growth of consumption due to surplus of demand may be launched to no purpose.
Salaries in Moldova have grown in the past years, particularly due to: a) the economic growth achieved after 2000, which allowed higher wages in budgetary and private sectors; b) perhaps the shortage of workers in some sectors (construction for example) has increased the salaries, etc. At the same time, the situation is not good if looking at different salaries paid on sectors of economy, in provinces and areas. Wages in Moldova are among lowest ones in the region (not to mention salaries in the E.U.) and they should normally grow when development differences in some sectors are reduced. The low salaries are also the main cause of massive migration, with the difference of salaries compensating decisively the material and psychological costs of departure to other countries for work.
It is well-known that workers in electricity and gas distribution, telecommunication, building, finance sectors, fields with a maximum and sure profitableness, it means entities with a major private capital, earn the highest salaries. Of course, foreign investments, which are not very strong but influent compared with investments of domestic entities, create jobs, but with a polarised distribution of salaries that few people benefit of.
In addition, when we speak about salaries we also mean the cost of labour force. For example, the medium pay per hour in the E.U. (in 15 members only) was about 25 Euros in 2006; the average pay in the other 12 countries that joined the E.U. was approximately 7 Euros, while Moldova paid 0.6 Euros per hour. Our cheap labour force should attract European companies. However, any foreign investor coming to Moldova aims first at its profit and then it is interested in the social side. These are explanations for industrial re-localisation of our ready-made clothes or footwear industries. This is a stratagem that our officials still believe and promote in mass media addressing other countries.
Even more, the state of things is dramatic, as the labour productivity in our country is low: people work much but not efficiently. When the evolution of labour productivity does not keep the step with salary rises, the cost per worker is deteriorating. At the same time, I think that it is very important what our neighbours or competitors are doing, how their labour costs develop, how they improve the quality of exported products/services, what are their investments from net revenues, how much they spend on research and development, etc. We will lose sooner or later – this is an unavoidable denouement – if others go ahead quicker than us.
Finally, the economic battle awards victory to the most competitive rivals – it means salaries depend on productivity. Raising salaries too much without an adequate productivity would depreciate the exchange rate at a moment and this fact could erode the purchase power of salaries.