Russian households see real incomes fall due to inflation
Despite record low unemployment and a shortage of workers, wages in Russia are still increasing. According to the June report from the Accounts Chamber, the average nominal wage reached nearly 90,000 rubles by early March, a 16% increase year-on-year. By April, it climbed further to 97,600 rubles, with growth noted across almost all sectors.
However, these impressive nominal figures don`t tell the whole story. The growth rate of real wages, which accounts for inflation, has significantly slowed compared to 2024. In March, real wages grew by only 5.2% year-on-year, less than half the rate seen during the same period last year.
Analysts attribute the slower real wage growth to the high baseline set in 2024, a year of record income increases. The primary driver of the slowdown is the high inflation rate, particularly pronounced in the early months of the current year. For instance, inflation stood at 7.5% at the start of 2024 but rose to 10% a year later.
«Inflation is currently slowing down, albeit slightly,» says Georgy Ostapkovich, Scientific Director of the Center for Conjuncture Studies at the Higher School of Economics. «Theoretically, this should increase the purchasing power of the population. However, because the nominal wage growth rates are lower compared to 2024, real indicators are also decreasing. It is likely that economic agents no longer have the capacity to maintain the previous pace of employee income growth.»
He explains the difference between nominal and real wages: «Nominal wage is the amount calculated by accounting. Real wage is what`s left after accounting for inflation, taxes, and even debt obligations like loan payments. This is the money available for spending on purchases. And this real wage is noticeably slowing down, although it is still technically in a growth phase.»
Asked about the expected real wage growth for the full year, he forecasts: «I believe it will be around 3.5%, maximum 4%. If you recall, last year the growth was about 8%. So, the slowdown trend is evident…»
Regarding the impact of the July 1st increase in utility tariffs: «On average, tariffs increased by 12%, but it varies by region, up to 15% or even 25% in some places. Of course, inflation will accelerate initially, but it won`t be catastrophic. Services account for 33% of our consumer basket, and utility bills within that will rise by 12%. Nominal wage growth rates will likely hold steady, but real wages will slightly decrease.»
On whether the autumn harvest can offset food price increases: «If farmers have a good harvest, food prices will stabilize. If the yield is not very high, both producers and retailers will raise prices. Currently, the cost of potatoes and some other vegetables is gradually decreasing as domestic produce enters the market.»
On which sectors might maintain high real wage growth, Ostapkovich notes: «The manufacturing industry is showing the highest growth rates. Although, on the other hand, according to Rosstat, wages in tobacco production reach 300,000 rubles per month, higher than for oil and gas workers. Generally speaking, the higher the profitability of production, the higher the real wages will be.»
