Wages as a tool of promoting labor activity
Cand. Sci. (Econ.), Senior Researcher, Vologda Research Center of the Russian Academy of Sciences, Vologda, Russia firstname.lastname@example.org
1990s economic shocks resulted in significant changes of public moods in Russia. The fall of living standards caused formation of one-factor motivation model in which the main driver defining the labor behavior and degree of implementation of employees’ labor potential is the wage rate. Substantive aspects of incentive were presented indirectly in the motivation system. Accordingly, a lack of the employee’s internal interest for own work results in productivity decline and escalation of counterproductive and deviant behavior among the working population. The study analyses impact of material remuneration on the employees’ labor intensity. On the base of self-assessed labor activity index it defines the remuneration thresholds marking minimum/maximum labor input. One of the key findings is that maximum labor activity is achieved along with material remuneration amounting to 66–95% of the median wage calculated according to Rosstat data. In 2008, convergence of these indicators reached highest point, which happened due to the increasing welfare of the population leading to a significant increase of material claims and decreasing wish to demonstrate high labor activity for the average wage. Overall, the median wage in the Vologda region using the Rosstat data is about the same level with efficient labor that confirms the thesis of the stability of economic equilibrium under market conditions. Throughout the study period (except 2000 and 2003) the wage rate providing the minimal work input exceeds the cost of living for the working age population. Comparison of the results with the data of state statistics has shown that in various periods percentage of employees who are unmotivated to actively work amounts to 25–30% of the total employee force. The study reveals that despite a certain convergence between the minimum wage and median wage, existing proportions are unable to stimulate employment meeting the current staffing requirements. The analysis shows that an increase of median wages of 35 to 50 % leads to labor activity increase of about 14-19%. It is concluded that there is a need for establishing a decent state guaranty for labor remuneration aimed at decreasing the number of poorly working staff to ensure significant reduction in labor underutilization costs.