Unit economics — how GDP growth should affect wages

In startup management, there is a popular mechanics for evaluating profitability and all business processes - unit economics. This is a special economic modeling technique that helps to determine profitability by calculating it for each client and employee, because success of the entire company depends on success of each its member. That is why a set of measures was developed on behalf of the Head of State to increase incomes of the population until 2025.

It is based on the world's best practices of economic modeling, which rely on not just on abstract figures in the reports of statistical offices, but on well-being and, most importantly, tendency to increase the income of each person. In an ever-changing world, trends are becoming more important than relative and absolute figures. What is much more important is the constant steady growth of key indicators: well-being, which is closely linked to main indicators of the economy.

Illustrative example: it is considered that the west is the richest region of Kazakhstan with the highest salaries. Indeed, according to official statistics, the average salary in Mangystau region was slightly more than KZT 307 thousand in the third quarter of last year, and this is one of the highest average salaries in the country, along with the Atyrau region, while the average figure in Kazakhstan is KZT 230 thousand.

But if you look at the data for the past years, there is a completely different picture: in 2021, Mangystau is an anti-leader in growth of average wages — in Kazakhstan, real wages increased by an average of 10.1%, and in Mangystau - by 5.1%. The same figures were in 2020 — in Kazakhstan, real wages increased by an average of 6.8%, and in Mangystau - by 0.1%. In 2018, the median salary in Mangystau was KZT 142 thousand, and in Kazakhstan - only KZT 106 thousand. By 2021, the median salary in Kazakhstan was already KZT 157 thousand.

In Mangystau, the median salary for women and men is very different and amounts to KZT 155 thousand and KZT 244 thousand, respectively. At the same time, men's wages are growing at a slower pace than the national average. It turns out that despite the high average salary, the Mangystau region demonstrated the minimum growth rates in the country, which may indicate problems with development.

Kazakhstan's economy is growing. 2020 is already behind us, and we grew by 3.5% even in the difficult first two months of 2022. However, over the past two years, there has been a steady decline in growth rate of real incomes of the population — from 6.4% in 2019 to 3.1% in January-November 2021 due to high inflationary pressure, which will continue in 2022. Income from labor activity is falling in the income structure, there is a deterioration in economic activity of business entities and employment conditions. Inequality is growing and gap between the average wage and the median one is widening.

Economic growth should primarily affect the well-being of every citizen. A new generation is growing up: a high birth rate in our country is one of the main pillars of the country's future economic success. We have to help them now: schoolchildren, applicants, those who are already thinking about the future - to choose the right profession. It is also worth introducing advanced training of college students, taking into account the skills and competencies in demand. Real skills are for real work. Sought-after professions with decent wages. Do not forget about those who want to change their chosen profession — mass factories of retraining and advanced training are needed as well.

We have to teach our youth to think three steps ahead. Build a career, starting with choosing a university, not just living for the day without planning your future. We need career centers, highly qualified consultants who will help to give a correct understanding of the future career and the corresponding movement.

Do not forget about current employees — it is necessary to reconsider the counter obligations of businesses receiving state support measures, with an emphasis on increasing employee incomes and effective employment of the population. It is also necessary to reduce the wage gaps between management and operational staff: proper management is quite important, but the real economy relies upon the working hands of real sector specialists.

The small business sector is worth to be considered as well. Small and medium-sized entrepreneurship in Kazakhstan provides employment for about 40% of the population, in developed countries it is more than two-thirds of the total population. At the same time, share of small businesses is an overwhelming 99.8% - small enterprises in Kazakhstan are very reluctant to grow into medium-sized enterprises, but the issue of advantages of developing medium-sized enterprises turns into priority of the country's development, since this is the main tool for improving quality of the population incomes, which will rise along with the growth of enterprises, and hence the entire economy. It is necessary to stimulate development of medium-sized businesses, in particular, through changing the mechanism for providing financial support, as well as fiscal incentives.

The hearing state concept has proven its effectiveness, its analogue of a seeing economy, when the priority of economic development is not just GDP growth figures, but real income growth and welfare - this is what Kazakhstan needs now.

Ruslan Sultanov

Chairman of the Management Board 

Economic Research Institute JSC