2021 Wrap-Up - Are Mongolians richer today than in 2011?

2021 Wrap-Up - Are Mongolians richer today than in 2011?

As 2021 ends, I’m reflecting on all the changes I’ve seen since I moved to Mongolia in 2012. As I’ve thought beyond the KFC’s, the CU’s, the new malls, and other surface level “developments”, I’ve been thinking of larger questions. One of the bigger of these large questions is a simple one, are Mongolians making more money than they used to?

It seems that every time you see statistics about average salaries in Mongolia, it seems to always be increasing. This was reinforced recently when the Lemon Press newsletter (link in Mongolian) noted that 6% of Mongolian make more than 3 million Tugriks per month (about $1,050 USD at the current exchange rate).

Their data, sourced from the National Statistics Office (of course where else?), also showed that nearly 25% of Mongolians make more than 1.5 million Tugriks per month. Lemon Press only looked at 2020 to 2021, and given my contemplative mood I wanted to compare a larger date range.

So, let’s do just that.

Do nearly 10 years make a big difference?

Before you see the chart, think back on your own life in the past 10 years. Ask yourself, have things gotten better or worse economically for you and your family over this time? I’m hoping the answer is better, and probably for most of you, it is.

One way to see how things have changed is to group households by an income bracket, 300,000-600,000 MNT per month for example. We can compare the number of households in each of these brackets over time to see if households are making more money than they used to.

The latest data available is from 2020 and goes back to 2011. Let’s see how Mongolian households have changed their income over these 9 years.

Wow, what a difference 9 years makes. My first reaction when seeing this chart was a good kind of shock. I was impressed by how this income distribution has moved up so much. Rather than a downward sloping graph where most households are in the lower bracket, more than half of households now make more than 900,000 MNT per month.

This is notable progress and it shows that Mongolia’s economy is rewarding those with marketable skills and entrepreneurial ability. There is always a good amount of criticism towards petty capitalism or corrupt officials, but I continue to see healthy businesses providing valuable services to Mongolians.

With that good news given, I want to bring up a point of concern with this data.

What about inflation?

Ah yes, inflation. That ever-present beast that gnaws away at your hard-earned savings. Inflation is often discussed in Mongolia, but often in terms of consumer prices or savings rates. Yet my point of concern is connected to spending power.

Inflation causes prices to rise, which is of course not good if your income is stagnant. If your income is going up, then you are racing inflation to improve your living conditions. Which will rise faster, your salary or the prices in the stores and the price of apartments?

In 9 years, from 2011 to 2020, the average monthly wage in Mongolia tripled. This is an impressive statistic, but what about inflation?

Let’s see how average monthly wages fared when adjusted for inflation.

To make the chart above I took the consumer price index (CPI) inflation measure for each year and adjusted the average monthly wage for that year. The results are less impressive than the income bracket chart above.

Instead of seeing wages triple over 9 years, we see a 59% increase. Put another way, if you made 1.2 million MNT a month in 2020, that is equivalent to about 670,000 MNT per month in 2011.

This is still very positive, and there have been many positive economic signals in these years. A major signal of this was in 2015 when Mongolia changed classifications from a lower middle-income country to an upper-middle-income country.

There are still areas of concern. What’s missing from the above data are those that choose not to disclose their income. This could be a large group of people on the lower end who don’t have consistent work. It could also be those at the very high end, whose income will come from investments in areas that are not a traditional job.

These blind spots in the data will be the areas average people get the most upset about.

So with 2021 wrapped up let’s look forward to the next several years.

What’s ahead for 2022 and beyond?

I won’t be making predictions, because that is a fool’s game. But I would like to make some observations about areas I’ll be looking at in 2022 and beyond.

Mining continues to grow and contribute significantly to Mongolia’s economy. The negotiations over Oyu Tolgoi are almost guaranteed to end up favorably for Mongolia, and Rio Tinto will be happy to have the dispute over with so the real business of money making can continue with the underground expansion.

The past few years have shown a big increase in the Mongolian Stock Exchange with both valuation and volume. Yet recent IPO’s have been underwhelming. The recent CU IPO is one example. It seems clear this IPO was designed to inject money into the business so the original investor(s) could have a nice exit and recoup their initial investment. Never mind a lack of profitability and a sliding stock price.

If 2022 brings more IPO’s of this type then the Mongolian Stock Exchange will lose whatever attention it started to receive from international investors.

I’m desperately hoping that Mongolia’s economy will diversify. Venture capital has proven to be the key ingredient in the United States’ success in innovation and tech. Yet the venture capital field in Mongolia is almost non-existent. Investors want high short-term gains. 9 out of 10 venture bets fail in the US, a statistic almost guaranteed to make a Mongolian investor stay away.

Even so, I’ve been impressed with the nascent display of startups, both tech and non-tech. This shows that young people especially are hungry to see the economy improve, even if the older generation isn’t always willing to help invest.

My wish for 2022 is for companies to realize that starting in Mongolia then expanding internationally is a difficult and perhaps losing formula. The Mongolian market and international market have few similarities, and the average European consumer wants very different things from the average Mongolian consumer. I would love to see companies start with the sole intention of selling their products or services internationally.

This would allow higher salaries that can compete with the mining industry and perhaps attract highly skilled workers who would otherwise leave the country to work abroad.

Welcome to 2022

I hope you’ve enjoyed the articles on Mongolian Data Stories over the past few months. I believe strongly that these explorations in Mongolian data can improve our understanding of the country we live in. After all, with the proper understanding, we can take effective action to improve our lives.

I wish you all a happy and prosperous 2022! Thank you for reading!

If you are interested in seeing the code used to collect or analyze the data for this article, you can find it here.

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