Gigi Ugulava: “With this wage, a person can buy at least a third of what he was able to buy one and two years ago.”
Verdict: FactCheck concludes that Gigi Ugulava’s statement is FALSE.
Resume:
The nominal average monthly salary in the fourth quarter of 2021 was the highest as compared to the previous periods and reached GEL 1,464. However, salary changes adjusted to price level growth (real wage) is a far more important indicator in regard of the statement.
In the fourth quarter of 2021, the real wage was 5.1% less as compared to the average monthly salary of the fourth quarter of 2019 whilst it was 1.5% less as compared to the average monthly salary of the fourth quarter of 2020. Therefore, wages have really lost their purchasing power as compared to the other quarters, although Gigi Ugulava’s claim that a person can buy at least a third of what he was able to buy one and two years ago is not true. Furthermore, if we assume that the nominal wage had not increased since the first quarter of 2019, the real wage adjusted to inflation would have decreased 1.2 times instead of showing a threefold drop (if the nominal wage had been kept at one level, inflation should have been 200% for a threefold decrease in real wages, obviously neither was the case).
At the same time, double-digit inflation has been a severe problem for the population recently. Higher inflation vis-à-vis certain quarters resulted in a decrease of real wages and, therefore, spirit of Gigi Ugulava’s statement is somehow an adequate reflection of the difficult situation. However, as mentioned previously, his claim is unrealistically dramatic as compared to the situation on the ground. Therefore, FactCheck concludes that Gigi Ugulava’s statement is FALSE.
Analysis
Gigi Ugulava, one of the prominent opposition figures, made the following statement about wages: “A person can buy at least a third of what he was able to buy one or two years ago.”
Information about wages is published by the National Statistics Office of Georgia. Table 1 shows the statistics of nominal and real wages in 2019-2021 by quarters. In the fourth quarter of 2021, the nominal average monthly salary was GEL 1,464 which was a record high figure as compared to all of the previous periods. However, wage changes adjusted to price level growth (real wage) is an important indicator here because a potentially nominal or a net wage may be growing but the amount of goods and services which can be purchased by that salary may be decreasing as a result of inflation. In other words, it is possible that real wages may be shrinking in terms of their purchasing power.
In the fourth quarter of 2021, the real wage (in the prices of the first quarter of 2019) was GEL 1,198 which was 5.1% less as compared to the average monthly salary of the fourth quarter of 2019 and 1.5% less as compared to the average monthly salary of the fourth quarter of 2020. A decrease in the real purchasing power of wages is indeed noticeable as compared to previous periods, although Gigi Ugulava’s claim that a person can buy at least a third what he was able to buy one or two years ago is not true. Moreover, the real average monthly wage grew slightly in the fourth quarter of 2021 as compared to other quarters.
Table 1: Real and Nominal Average Monthly Wages in 2019-2021 (First Quarter of 2019=100), by Quarters, GEL
Source: National Statistics Office of Georgia
Of additional note is that the average wage, taken separately, is not an ideal indicator in order to have an understanding about the salaries earned by employed people because it significantly deviates from the average figure and can be higher or lower. In other words, most wage earners receive less than the average salary. Naturally, it is possible that nominal wages for some employed people decreased but a focus on the average wage is still relevant for making a macroeconomic analysis, particularly given the reporting of the National Statistics Office of Georgia that average monthly nominal wages have been growing in every field. If we assume that the nominal wage had not increased since the first quarter of 2019, the real wage adjusted to inflation would have decreased 1.2 times instead of showing a threefold drop (if the nominal wage had been kept at one level, inflation should have been 200% for a threefold decrease in real wages) and in this case, too, Gigi Ugulava’s statement would have been a vast exaggeration.
At the same time, double-digit inflation has indeed been a serious problem for the population; particularly, when the price growth is higher for certain groups of goods and services which are vital for the population as compared to the already high average inflation rate. Higher inflation vis-à-vis certain quarters resulted in a decrease in real wages and, therefore, the spirit of Gigi Ugulava’s statement is somehow an adequate reflection of the difficult situation. However, as mentioned previously, his claim is unrealistically dramatic as compared to the situation on the ground. Therefore, FactCheck concludes that Gigi Ugulava’s statement is FALSE.
