The average monthly salary tops $300

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Moscow, August 1 (RIA Novosti commentator Peter Lavelle). According to Economy Ministry data released Friday, the average monthly wage slightly surpassed 8,655 rubles ($303) in June. This increase means wages have grown one and half times over the past 18 months.

The $300-level is a new benchmark for wage growth. The average monthly income in December 2003 was $200, or the same as it was in 1999 and before the August 1998 financial crisis, which saw this figure drop to $70. Economy Ministry statistics report the increase in income was primarily the result of increases in budget-based salaries, which rose 38% year-on-year during the first five months of this year as opposed to a 31% increase in private sector salaries for the same period. Inflation whittled away part of the increase with growth in real incomes at 8% vs. 14%.

While the average salary has grown at a very robust rate, income differentials remain significant. The income gap between the top 10% and bottom 10% of the population remains at 26 times, and a quarter of the population continues to live below the poverty line.

In relation to other CIS countries, Russia compares favorably. Ukraine's average monthly salary stands at $164.75 and Belarus' at $221.5. The comparison to Eastern European countries is less impressive - Lithuania's average salary at $445.5, the Czech Republic at $710.9, Estonia at $575.4, Poland at $729.7, and Hungary at $771.4.

Strong wage growth is underpinning Russia's current consumption boom and is supported by increased budget revenue from high international commodity prices. When the ruble strengthens against the U.S. dollar, rising income makes the domestic currency more attractive to hold and lowers the velocity of money, as well as lowers inflationary pressures.

In juxtaposition, when the ruble weakens against the dollar as wages increase, as has been the case recently, demand for the dollar increases. Under these conditions, keeping inflation in check is more difficult, as witnessed by the government having to revise upward its inflation forecast.

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