Productivity and Labor Compensation in Russia: How to Cope with Statistical Illusions

Abstract

The paper provides a thorough critique of conventional wisdom that in the Russian economy of the 2000s labor compensation has been increasing much faster than productivity. It reveals a number of wrong implicit assumptions that lead to this statistical illusion. The most important of them are: 1) substitution of producer real wage for consumer real wage; 2) using data on wages instead of data on total labor compensation. Relying upon both official statistics and findings of business surveys the paper concludes that in fact 2004—2007 were a period of sharp decrease rather than of sharp increase in real unit labor cost.