Tag: real wages

Migrant Worker Blues

OLYMPUS DIGITAL CAMERACentral Asian migrant workers queuing outside the Russian Interior Ministry’s work permit application center on Red Textile Worker Street in St. Petersburg. Photo by the Russian Reader

Should Everyone Disappear into the Shadows? What the Fee Increase for Migrant Worker Permits Entails
Yekaterina Ivashchenko
Fergana News
November 29, 2018

The license [in Russian, patent] system for foreign nationals seeking permission to work in Russia was introduced in 2015. The cost of a work permit has varied from one region to the next. In Moscow, for example, it initially cost 4,000 rubles a month. In 2016, the price rose by 5% to 4,200 rubles, and in 2018, it rose by 7% to 4,500 rubles.

It is absolutely necessary to have a work permit. Without it, a migrant worker faces up to 7,000 rubles in fines, expulsion from Russia, and a ban on entering the country for a period of three to ten years. Employers who hire employees without work permits are punishable by fines, and their operations can be suspended for up to ninety days.

Something important happened on November 21, 2018. The Moscow City Duma approved a law bill increasing the cost of a work permit in Moscow. In 2019, it will rise by 500 rubles (11%) and cost 5,000 rubles a month (approx. $75).

The next day, November 22, Moscow Mayor Sergei Sobyanin said the city’s revenues from legal migrant workers had been growing and would exceed 16 billion rubles ($241 million) by year’s end.

“By paying such a high price for permits, migrant workers have come to occupy a fair position vis-à-vis Russian nationals [rossiyane] working in Moscow, because in the past they paid nothing at all, and, of course, it was profitable to employ them, but the situation has changed today,” said the mayor.

On January 1, 2019, the cost of a license for migrant workers seeking employment in Moscow Region will increase by 450 rubles. The Moscow Region work permit, which cost 4,300 rubles ($64.60) in 2018, will cost 4,750 rubles ($71.50) per month in 2019.

Taras Yefimov, chair of the Moscow Regional Duma’s budget, finance and tax committee, said the measure would enrich the region’s coffers by around one billion rubles [approx. $15 million]. In 2018, Moscow Region made six billion rubles [approx. $90.5 million] on migrant work permits.

St. Petersburg has decided to raise the price of the work permit from 3,500 to 3,800 rubles a month. City officials noted the decision was made because foreign nationals had begun earning considerably more money.

Filling out the forms for extending a work permit. Photo courtesy of Fmskam.ru and Fergana News

Wages Are Not Growing
Svetlana Salamova, director of Migranto.ru, a website for migrant workers looking for jobs and employers seeking to hire migrant workers, has not seen the real growth in the wages of migrant workers that officials have cited.

“The wages of foreign nationals who are employed on the basis of work permits has remained at the level of 29,000 rubles to 35,000 rubles [$435–$525] a month. Maybe the Moscow authorities are focused on high-profile specialists who make 168,000 rubles a month officially?” Salamova sarcastically wondered.

Salamova has noticed wage increases only among Kyrgyz nationals. After Kyrgyzstan joined the EAEU (Eurasian Economic Union), employers offered them 40,000 to 45,000 rubles a month.

“But they work without permits. (EAEU nationals can work in Russia without permits as long as they have an employment contract — Fergana News.) Besides, many Kyrgyzstanis agree to low wages of 19,000 to 20,000 rubles a month. They work part time in several places at once, and so ultimately they make a decent amount of money,” explained Salamova.

Salamova did not discount the possibility that fees for work permits have been raised in light of the fact that employers must index wages for inflation as of the new year. Perhaps the authorities decided to increase the cost of permits for foreign national because they took into account this indexation of wages on the Moscow job market.

Immigration center in Moscow. Photo courtesy of Mos.ru and Fergana News

But what do migrant workers themselves have to say about it?

“Since 2015, the fee for the work permit has increased three times, but I have not even once received a raise. We spend little as it is: 4,500 rubles for the permit, plus the fee for residence registration; 6,000 rubles on rent, 5,000 on groceries, 2,000 on transportation. I sometimes buy clothes and medicines, and there are unforeseen expenses, like when my phone stops working. So, I have only 10,000 rubles left over from my monthly salary of 35,000 rubles. The latest 500-ruble increase will definitely affect my expenses. 6,000 rubles a year is a lot of money: an average family in Tajikistan could live for a month on that amount. It means my relatives back home will have to get by one month of the year without receiving a remittance from me,” said Magomed, who comes from Khujand, Tajikistan’s second-largest city.

Pushed into the Gray Economy
In June 2017, Mayor Sobyanin said the problem of illegal migrant workers in Moscow had been solved and had ceased to be a source of concern for Muscovites. Most migrant workers were employed legally and duly paid their taxes.

Experts believe the increase in the price of the work permit could lead to a rise in the number of foreign workers who decide not to pay taxes.

“The cost of the work permit will increase by 11%. An extra 6,000 rubles a year might not seem like a huge amount of money. But for migrant workers, who earn this money literally with their blood, living far from their families, and undergoing numerous hardships and risks, this is not a small amount at all: the overall cost of a permit for a year will be 60,000 rubles or $900. Some migrant workers will thus decide to go off the books. Consequently, Moscow’s budget is unlikely to get a huge boost, but the city will be supporting a policy of pushing migrant workers into the gray economy with all the attendant social consequences,” says Professor Sergey Abashin.

“It is odd that Moscow MPs say we will start earning more. Every migrant worker pays around 12,000 rubles to get a work permit in the first place. Then every month he pays for the work permit and his residence registration, he pays the rent, and he buys groceries. He even has to pay bribes to the police. People are taking money from us at every turn. What will we have left to send home?” said Muhammad, who is originally from Samarkand.

Batyrzhon Shermuhammad, a lawyer and founder of the website Migrant, also sees no signs of a wage increase.

“If you look at the want ads, you will see that the wages of migrant workers who are employed on the basis of work permits range from 25,000 rubles to 35,000 rubles a month. We monitor the job market, and no one mentions anything about a salary of 40,000 rubles a month. On the contrary, the economic crisis in Russia has been deepening. There is inflation, and the dollar/ruble exchange rate has been rising, which affects the remittances sent by migrant workers,” Shermuhammad said.

The latest increase in the cost of the work permit will force migrant workers to retreat into the shadows, he argues.

“One could understand the increase if the economic situation had improved, but the trends are negative: the prices in shops have increased, and the dollar has become more expensive vis-à-vis the ruble. People have no money, and so they have been having problems with residence registrations. Also, by law you cannot be late paying for your work permit even by a day. If a migrant worker is paid his wages late, he cannot pay the fee for his work permit, and he has no way of shelling out approximately 12,000 rubles to have a new work permit drawn up. While introduction of the work permit system brought migrant workers out of the shadows, the subsequent tightening of immigration laws and the increase in their expenses has been leaving migrant workers with fewer chances to stay legal, even if they would want to,” Shermuhammad said.

Migrant workers from Kyrgyzstan. Photo courtesy of Kloop.kg and Fergana News

“Even though I make good money, a 6,000-ruble increase in the price of the work permit is a serious expense, and I have huge expenses aside from the permit. My mother, sister, and I pay 33,000 rubles a month for a place to live. That is 11,000 rubles per person, plus utilities. In addition, I have to pay the fees for my studies twice a year: that is another 100,000 rubles each time. We don’t spend a lot on food, no more than 10,000 rubles per person a month. I also spend money on transportation, clothes, and gifts, and I spend 5,000 to 7,000 rubles a month for English lessons. Lately, we have not been sending a lot of money home, $200 to $300 per month at most. Mom and I used to be able to save money, but in the last six months our expenses have skyrocketed, and after the new year they will increase even more due to the work permit. Basically, the increase in the work permit fee means I won’t be able to pay for English lessons for a month,” said Ilkhom, who hails from Tashkent.

“For migrant workers, 500 rubles is a mobile phone connection for a month,” said human rights active Karimjon Yorov. “It is the cost of a week’s worth of subway trips. It is two lunches, finally. For families with children, it means being able to buy school supplies or pay for school lunches. In short, 500 rubles is a lot of money.”

Yorov argues that raising the cost of the work permit will make migrant workers not want to pay for it, meaning that revenues to Moscow’s coffers will actually decrease.

“Migrant workers will prefer to work without a permit and cross the border every three months. Currently, a trip to the border and back (i.e., exit and re-entry) costs 8,000 rubles in total, while the cost of a work permit for three months is 13,500 rubles, meaning they save 5,500 rubles by exiting Russia and re-entering it. This comes to 22,000 rubles, plus 12,000 rubles for the initial paperwork. The total is 34,000 rubles, which is the same as the cost of round-trip plane ticket to Uzbekistan. When you do the maths, it makes more financial sense for migrant workers to be off the books. The authorities themselves are forcing migrant workers underground, especially now that the laws on immigration registration have been tightened. Whether you get a work permit or not, if you do not live at the address where you are registered, you will be deported. Migrant workers will emerge from the underground only when the law on immigration registration has been abolished,” Yorov concluded.

Thanks to Sergey Abashin for the heads-up. Translated by the Russian Reader

Falling

200 ruble note-1

200 ruble note-2A year ago, Russian Central Bank chief Elvira Nabiullina triumphantly introduced the new Crimea-themed two hundred ruble banknote into circulation. Since the economy is shaped more by flows of goods, resources, people, services, knowledge, and money, and the actions of ordinary people, decision makers, and the snake oil salesmen known as capitalists, and less by puerile revanchist neo-imperalist symbolism, the new banknote, pegged at €2.90 by Deutsche Welle only a year ago, is now worth a mere €2.65. I am keeping my specimen as a souvenir of the current bad times until better days arrive. Image by the Russian Reader

Fall in Real Incomes of Russians Accelerated Sharply in September
Economists Say Government’s Forecast No Longer Realistic
Tatyana Lomskaya
Vedomosti
October 17, 2018

Real incomes of Russians have declined for a second month in a row, Rosstat has reported. Their decline accelerated in September to 1.5% in annual terms after falling by 0.9% in August. Prior to that, they had grown for seven months, from the start of the year, by 1.7%. (This figure excludes the one-time 5,000-ruble payments made to pensioners in January 2017.) Real wages accelerated their growth in September, from 7.2% to 6.8% in the previous month.

Incomes of ordinary Russian had been falling for four years in a row, from 2014 to 2017, resuming growth only this year. In the first half of the year, they increased by 2.6%, mainly due to wage increases, notes Igor Polyakov from the Center for Macroeconomic Analysis and Short-Term Forecasting (TsMAKP). Business income increased only by 0.7%, while social transfers (excluding the one-time payment to pensioners) increased by 1.2%, which was significantly weaker than all incomes generally. Other sources of income decreased. There was a slight increase in incomes derived from property, but incomes received from securities and deposits decreased, as did, apparently, incomes from unreported activity, says Mr. Polyakov. He argues it is unlikely circumstances have changed considerably in recent months.

But the anxiety of Russians caused by the volatility of financial markets has increased, says Mr. Polyakov. People have taken to withdrawing cash from foreign currency accounts and transferring it to safe deposit boxes, as well as spending it abroad on holiday. Rosstat cannot register these expenditures and thus reduces its assessment of miscellaneous income. In August, the public’s net demand for US dollars grew by comparison with July from $0.8 billion to $1.7 billion, an increase of nearly 53%, the Central Bank reported.

Retail growth slowed in September to 2.2% in annual terms from 2.8% a month earlier. It is likely the public preferred buying foreign currency while curtailing consumption, argues Mr. Polyakov.

The drop in incomes combined with the serious increase in wages [sic] remains a mystery, writes Dmitry Polevoy, chief economist at the Russian Direct Investment Fund. The growth in real incomes in the first half of 2018 was mainly due to the presidential election campaign, notes Vladimir Tikhomirov, chief economist at BCS Global Markets. Salaries in the public sector and pensions increased rapidly. [That is, the Kremlin bribed Russians directly dependent on its largesse to get out the vote for President-for-Life Vladimir Putin—TRR.] After the election, growth stalled. And, after a palpable devaluation of the ruble in April and accelerating inflation, a dip in incomes was anticipated, argues Mr. Tikhomirov. In September, prices for imported goods rose. In addition, the seasonal discount on fruits and vegetables ended, and the July increase in utilities rates made itself felt, explains Mr. Tikhomirov.

By the end of the year, the incomes of Russians will gradually decline a little, while overall incomes will grow less than 1% on the year, predicts Mr. Tikhomirov. Real incomes might grow by 2% on the year, counters Mr. Polyakov. In any case, this is noticeably lower than official forecasts. The Russian Economic Development Ministry anticipated a 3.4% growth in real incomes in 2018.

Real incomes of ordinary Russians fell by 1.7% in 2017, although the government had forecast a 1.3% increase, the Federal Audit Chamber noted in its opinion on the draft federal budget for 2019–2021. When the forecast was corrected, incomes had decline dsteadily from the beginning of the year, and there were no preconditions for rapid growth by year’s end, the auditors write.

Income growth depends on whether private enterprise will increase wages, argues Mr. Polyakov, but thos wages will be subject to the planned rise in the VAT to 20% in 2019.

President Putin has set a goal of halving poverty by 2024. (The official poverty rate last year was 13.2% of the populace.) The Economic Development Ministry’s forecast significantly increased the growth rate of real wages and anticipated higher growth rates for real incomes, which has raised doubts at the Audit Chamber. There is no wage increase for public sector employees planned in 2019, while the growth of wages in the private sector will depend on growths in productivity.

Rank-and-file Russians have been forced into debt, write analysts from RANEPA and the Gaidar Institute in their opinion on the draft budget. By mid 2018, Russians owed banks 13.7 trillion rubles (approx. 181 billion euros), an increase of 19% from the previous year, they write, and an amount that significantly outpaces the increase in nominal incomes. It is an alarming trend that means an increase in the amounts of money ordinary Russians spend servicing loans, experts warn.

Translated by the Russian Reader