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de Marin Pana , 16.4.2018

The average gross salary earning announced by the INS for February 2018 was 4,128 lei, 0.4% lower than in the previous month. Paradoxically, the net average nominal salary earning increased slightly (+ 0.1%) to 2,487 lei, due to a change in the structure of the income similar to money earnings and included in the salary earnings.

In real terms (adjusted with the inflation registered), the purchasing power of the average wage decreased by 0.2% compared to January 2018. At the same time, the real reference salary (the purchasing power of the money earned, expressed as an index related to the one registered October 1990) dropped compared to the previous month from 180.9% to 180.6%.

Net average salary maintained around EUR 533 at the average exchange rate of March 2018 (the effective month of payment), almost the same as in November 2017 (when there were no significant seasonal variations following the bonuses paid at the end of the year). Basically, wages in euro have maintained at the same level for almost half a year.

After decreasing in January to the minimum of the last few years (only + 3.5%), the purchasing power advance compared to the same month of the previous year returned to a closer value to the economic growth, much the pace recorded in 2017. The explanation does not come much from the decrease in the pace of wage nominal increases (+ 11.2%) but from the significant increase in the value of the inflation index (4.72%).

*

  • Evolution of average salary earning and purchasing power over the last 14 months
  • Month  Net average salary     Euro/RON       Net average salary     Purchasing power (%,12 months)

*

Noteworthy, the values in euro pcs express the purchasing power of wages in Romania for the EU average prices, which ensures the technical comparability in terms of living standards.

In other words, EUR 533 earned in the country equal EUR1,063 in a Western country where prices are at the EU average (closest to this situation would be Italy).

Salaries in the national economy return to the economic growth reality

The beginning of 2018 has brought the inevitable situation of the salary growth in real terms getting close to the GDP growth (recently reset at 6.9% for 2017). Exceptions are constructions for reasons related to the seasonality of this activity and the salaries getting toward the level imposed by the new legislation. Noteworthy, ancillary activities related to the production have benefited to some slightly larger extent from the wage increases.

Encouraging to some extent, the increase in the manufacturing sector in February slightly rose above the average increase at the national level and was, not by chance, the closest to the GDP growth rate (both in real terms). Following the bonuses paid at the confluence of the years, the financial intermediation and insurance sector resumed a modest rate of income growth.

It should be noted that the largest percentage increases of incomes in the public sector were in the public administration. Respectively 15.6% in nominal terms and 10.4% in real terms, following the possibility of autonomous increasing the salaries in the administrative-territorial units, but also the increases at the central level.

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  • Distribution of salary nominal increases by sectors between January 2017 and January 2018
  • Sector Salary February 2017 Salary February 2018 Change
  • Construction
  • Public administration, defence, etc.
  • Transport
  • IT&C
  • Trade
  • Manufacturing industry
  • National average
  • Hotels and restaurants
  • Financial intermediation and insurance
  • Health
  • Education

*

Contrary to the public discourse and against the trend of expectations created among some categories of state employees representing more than half a million people, health and education were seen in February 2018 as the “Cinderella” of the economic growth. Moreover, teachers and support staff have “succeeded” the poor performance of being below the national average.

Manufacturing and transport are the only areas, otherwise below the national average in terms of payment value, where increases in the purchasing power appear justified in relation to the 2017 economic result. With the mention that the manufacturing industry has not yet exceeded the critical threshold of 90% of the national average that is also much below the European practice.

These developments explain to a large extent the protests in these sectors and will be remedied as measures of adjusting the salary increases will come into effect (sooner for the health sector), but the effects will only be seen in the March data, with the effect in April.

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