LABOR IN RUSSIA

LABOR IN RUSSIA

Labor force: 75.25 million (2014 est.); country comparison to the world: 8. Labor force - by occupation: agriculture: 9.7 percent; industry: 27.8 percent; services: 62.5 percent (2012). Unemployment rate: 5.1 percent (2014 est.); 5.5 percent (2013 est.); country comparison to the world: 46. [Source: CIA World Factbook =]

Work week: 46.9 hours, compared to 40.3 hours in France and 55.1 hours in South Korea. [Source: Roper Starch Worldwide, based on interviews in the early 2000s]

A lack of skilled labor is regarded by some as one of Russia’s biggest economic problems. Russia’s labor force generally is considered well-educated and skilled, although its strengths increasingly are mismatched to the needs of the national economy. In 2005 Russia’s active labor force was estimated at 74.2 million individuals. In 2004 the government estimated that the number of individuals of working age, 89 million in 2002, would decrease by some 10 million by 2016. Because the indigenous labor force is shrinking by as much as 1 million workers per year, the government considers long-term expansion of the immigrant labor force necessary to sustain economic growth. However, that strategy has encountered substantial resistance in Russian society. In the early 2000s, non-Russian ethnic groups gained control of some sectors. For example, Azeris controlled wholesale fruit and vegetable sales in Moscow and other cities. [Source: Library of Congress, October 2006 **]

In 2005 some 68.3 percent of workers were employed in services, 21.4 percent in industry, and 10.3 percent in agriculture. In 1994 some 37 percent of labor force worked in services, 27.7 percent in industry, 14.9 percent in agriculture, 10.9 percent in construction, and 7.6 percent in transport and communications. More than 16 percent of labor force worked for th government. [Source: ** Library of Congress, July 1996 *]

In 2005, the official unemployment rate was 7.6 percent, although because of incomplete registration and substantial underemployment the actual figure was believed to be considerably higher. Unemployment, which is highest among women and young people, is distributed unevenly throughout the country: in 2003 some 1.3 percent of the work force in Moscow was unemployed, while the republics of Kalmykia and Tyva, heavily dependent on failing industries, reported unemployment rates of more than 21 percent. **

The average wage in Russia was less that $200 a month in the mid 2000s. In 2006 the minimum wage, which at its 2004 level of $20 per month was estimated to cover only 22 percent of basic living costs, was raised to $40 per month. In 2006 average wages rose by 23 percent, less than the average increase in the early 2000s, but the average wages of civil service workers increased by one-third. **

Labor Force in Russia

Literacy and education levels among the Russian population are relatively high, largely because the Soviet system placed great emphasis on education. Some 92 percent of the Russian people have completed at least secondary school, and 11 percent have completed some form of higher education (university and above). In 1995 about 57 percent of the Russian population was of working age, which the government defined as between the ages of sixteen and fifty-five for women and between the ages of sixteen and sixty for men, and 20 percent had passed working age. Women make up more than half the work force. [Source: Library of Congress, 1996 *]

Although size, age, and education would seem to place the Russian labor force in a good position to participate in developing a modern, industrialized economy, it is not clear that the skills that Russian workers attained during the Soviet period are those required for a market economy. Even among the highly skilled labor force, the Soviet economy (and the national education system as a whole) skewed training toward the sciences, mathematics, and engineering and gave little attention to education in management and entrepreneurship. This pattern of work training and general education has continued in the 1990s; according to experts, its continued presence indicates that the economy may not be able to depend on younger workers to expand the fund of service-sector skills needed for a modern market economy. In any case, as the Russian economy progresses toward a market structure, middle-aged and older workers will increasingly find themselves playing a marginal role.*

The living standards of Russia's workers have been eroded by two factors. First, the severe depression of the country's extended economic transition has left a large share of the work force either unemployed, underemployed, or receiving reduced wages.Second, labor lacks an effective organization to protect its interests. Neither trade unions from the Soviet era nor new, independent organizations have provided effective, united representation. As of mid-1996, negative conditions had not yielded the large-scale unrest that many experts had predicted in the working class.*

Labor in the Soviet Era

In the Soviet era, everyone had a job. Workers got paid whether they worked or not. Nobody had to worry about being thrown out of work. Factories often provided summer camps, cultural center, sports facilities, rehabilitation spas and in some case soccer teams for their workers. The average worker was paid about US$500 a month, received up to four weeks of paid vacation and could retire between the ages of 53 and 60 with 75 percent of his or her pay.

In the 1970s lathe workers had it pretty good. Their salaries were 25 percent higher than physicians and their rent and utilities only used up seven percent of their monthly earnings. Productive workers were given cars, free Black Sea holidays and bonuses that could be applied towards an apartment.

Promotions were determined more by party allegiance than hard work. Jobs were sometimes given out the basis of one’s working class heritage. Applications for jobs asked for the applicant's "social origin," the political affiliations of his or her mother-in-law as well as "political posture during the critical period 1968-69." The easiest way to get ahead in life, no matter what your background, was joining the Communist party.

Poor Work Habits in the Soviet Era

Work life in the Soviet Union seemed to characterized by lethargy. Except perhaps in wartime or under the gun of achieving Five-Year-Plan goals there was never a sense of urgency or making the most of one's time. There were no incentives. Workers seemed to move in slow motion and people did as little as possible, ascribing to the motto "Your pretend to pay us and we pretend to work."

Morale was low. A government economist said, "We have a situation where people come to work—rather than actually work. It's a marvelous society where you don't have to work to get paid."

Stealing, loafing , absenteeism and drinking on the job were common and no matter how outrageous or irresponsible the behavior, getting fired was almost impossible. People routinely called in sick to get away for long weekends or to visit the hairdresser. Stores were often packed during hours when people were supposed to be working and state equipment like tractors and backhoes were "borrowed" to do work on a new house or dacha.‡

Thefts at factories were common and some workers supplemented their incomes by selling items that they stole. It was not unusual for a factory to send home several dozen workers because they were too drunk to work.

Work and Poverty in Post-Soviet Russia

In the post-Soviet era, social mobility is unlimited in theory, but in the mid-1990s economic factors play an important role in restricting upward movement for most Russians. Those without an established source of wealth generally were unable to purchase land, real estate, or enterprises, or to take advantage of other financial opportunities to increase their income and status. Because individuals under such limitations also lack opportunities to pursue higher education, they tend to remain at or below the socioeconomic level of their parents. In many cases, the younger generation has less earning power than the one that preceded it. [Source: Library of Congress, July 1996 *]

In 1995 official government estimates placed 39 million people, or 26 percent of the population, below the poverty line. Living standards, which dropped drastically in 1992, recovered somewhat in 1993 and 1994 before falling again in 1995 as the government tightened its social support spending policy. Other factors, such as inflation, changes in the minimum wage and minimum pension, and income from nonwage sources such as business activity and property, also influence annual income in a given period. Raised in mid-1994, then not again until April 1995, the minimum wage has provided little protection against intermittent periods of high inflation. Official income statistics are skewed because many Russians underreport their incomes to avoid taxes and because such statistics ignore important nonincome sources of well-being such as property.*

Unemployment in Post-Soviet Russia

Unemployment rate: 5.1 percent (2014 est.); 5.5 percent (2013 est.); country comparison to the world: 46. [Source: CIA World Factbook =]

In the Soviet era, unemployment was virtually non existent. In 1998, after the ruble collapse, unemployment was officially at 12 percent, but in relatively it was closer to 25 percent. In 1995, the official unemployment rate was 1 percent and the true rate was about 5 percent. The unemployment rate around this time was much lower than it should have been because many workers showed up at their jobs even though they didn't get paid.

The growth of unemployment in the 1990s was the bane of many of the Central and East European countries in the transition from centrally planned to market economies. Russia's unemployment rate has been hard to measure accurately because many firms unofficially furlough workers but leave them on company rolls. This practice is a vestige of the paternalistic Soviet era, when the presence of workers in an enterprise often had no relation to that enterprise's actual production. Many of these furloughed workers find gainful employment in the private sector, where wages often go unreported. Such a system results in a haphazard, inefficient allocation of the labor force. [Source: Library of Congress, July 1996 *]

Western and Russian analysts have relied on International Labour Organisation measurements, which indicate that at the end of 1995, Russian unemployment had reached 8.2 percent. The Russian journal Ekonomika i zhizn' estimated the figure at 8.6 percent, or 6.3 million people, for the first quarter of 1996. Although the last figure still is below the unemployment rates of Poland and some other countries in transition, the full extent of unemployment has been masked by extended subsidies that delayed the shutdown of large Russian enterprises. In 1995 nearly half of plant directors surveyed said that they had more workers than they needed.*

Unemployment varies considerably according to region. Moscow's unemployment rate, the lowest in Russia, was 0.6 percent in March 1996. The Republic of Ingushetia, which also has had the highest immigration rate because of its proximity to Chechnya, reported a rate of 23.5 percent in December 1995. In March 1996, Ivanovo, a textile center east of Moscow, had a rate of 13 percent, and the Republic of Udmurtia, a center of the struggling military-industrial complex, reported 9.4 percent. At that time, women constituted 62 percent of Russia's officially unemployed, and 37 percent of the total were people below the age of thirty.*

The Federal Employment Service (Federal'naya sluzhba zanyatosti--FSZ), the agency in charge of issuing unemployment benefits and placing unemployed workers, had only 3.7 percent of the working population registered for benefits in March 1996; many jobless workers do not register because benefits are so small (averaging $22 per month in 1995) and because, after the guaranteed employment of the Soviet era, joblessness entails a significant stigma for many Russians. However, as the average term of unemployment grew from six to eight months between 1994 and 1995, more workers participated in FSZ programs. In 1995 the service placed an estimated 1.7 million workers in new jobs. That year, 9.8 million workers left positions and 8.7 million were hired, and the majority of those who left did so voluntarily--many because wages were not paid--rather than because of dismissal. Shortages exist in some types of skilled labor, and some companies actively recruit workers.*

Growth of the Service Sector in Russia

About 62.5 percent of the labor force is engaged in services. (2012). [Source: CIA World Factbook =]

Russia’s services sector has expanded rapidly in the post-Soviet era, contributing 57.5 percent of gross domestic product (GDP) in 2005. Financial services have expanded especially fast during that period. Between 2002 and 2006, total bank deposits increased sixfold. Banking remains highly concentrated and dominated by the state-run Sberbank, although by 2005 Sberbank’s share of total savings had decreased from the 2003 level of 70 percent to 55 percent. Bank reform has not yet expanded the basic services offered. A deposit insurance system came into full operation in 2005. In 2006 protectionist laws continued to restrict severely the activity of foreign banks in Russia. [Source: Library of Congress, October 2006 **]

In 1994 the construction, industry, and agriculture sectors employed 53.5 percent of the work force, and the services sector employed 37 percent, a distribution typical of developing economies. By contrast, 67 percent of the United States labor force is in the services sector, and 22 percent is in agriculture, industry, and construction, a configuration typical of modern industrialized market economies. The Russian pattern reflects the emphasis that Soviet economic planners placed on the nonservice sectors. [Source: Library of Congress, July 1996 *]

Although stock trading grew rapidly in the late 1990s, in the years following the financial crisis of 1998 stock sales were not an important source of investment funds for Russian enterprises. However, between 2004 and early 2006 stock capitalization increased from 50 percent to 80 percent of GDP as the market grew rapidly. The insurance industry also grew rapidly in the 1990s, but in the early 2000s it occupied a substantially less significant position than in Western economies, and foreign participation has been limited by restrictive laws. In 2005 about 1,000 insurance companies were operating, but the 50 largest held 70 percent of policy value. **

In the post-Soviet era, retail services have prospered, expanding annually in value by 9.5 percent between 2000 and 2002. However, although many retail companies are established in the major cities, most of Russia lacks adequate retail outlets. Even Moscow, the center of retail activity, has much less activity than comparable capitals. Outside Moscow and St. Petersburg, outdoor markets are the predominant type of retail outlet. In 2005 retail sales totaled $245 billion, about 32 percent of GDP.**

The tourism industry has grown significantly since the mid-1990s, although activity is concentrated in large cities where Western-owned hotels predominate. Less expensive accommodations have developed slowly. In 2002 a government tourism development plan aimed at easing tourist access and increasing promotion and investment in the industry. In 2004 about 23 million tourists visited Russia, and tourism contributed an estimated 9 percent of GDP. However, beginning in 2004 the introduction of a visa regime by new European Union member countries in Eastern Europe reduced tourist visits from those countries. (About 1 million tourists had come from Poland in 2003.) The tourist market in China expanded to about 1 million in 2005 and was expected to increase further, and domestic tourist travel increased steadily in the early 2000s. An estimated 5 million people work in the tourism industry. **

Delayed Wages in the 1990s

In the 1990s delayed and unpaid wages were the norm for many Russian workers. Russia at that time was locked in a cycle of unpaid taxes and wages. Because the government couldn't collect taxes or unpaid bills it didn't have the money to pay workers still employed by the state. Struggling companies had similar problems. From time to time members of specific professions and trade unions line up in front of the offices of major government ministries, and shout and waved signs, demanding their wages. One week it was defense workers. Another week miners. Another, teachers or pensioners. A rise in oil prices and oil tax revenues finally allowed the government to pay salaries in a timely fashion.

By 1995 delays in wage payment had become a chronic problem even in profitable Russian enterprises. In many cases, enterprises simply passed along the burden of late payments of state subsidies and customer debts. At the end of 1995, the Government owed a total of $112 billion of subsidies, of which about 27 percent were more than three months overdue. Most of its debt was to the military and energy sectors. [Source: Library of Congress, July 1996 *]

Through 1995 an average of 19 percent of wages were paid late, and in January 1996 a total of $2.1 billion was overdue in agriculture, construction, industry, and transportation. The State Committee for Statistics (Goskomstat) began keeping separate statistics for wages formally paid and those actually delivered. The payment record of privatized enterprises was worse than that of state enterprises, and in many cases workers were paid in merchandise rather than in cash. In early 1996, the average rates of overdue payment were 62 percent in ferrous metallurgy, 86 percent in oil extraction, and 22 percent in food processing. *

In his presidential campaign, Yeltsin promised to abolish state-sector wage arrears and to encourage improvement in the private sector. By squeezing the national budget, Yeltsin achieved temporary results in the state sector, but his promise had no effect on other enterprises. Officials proposed several programs to raise average wages and streamline the inefficient system by which wages are delivered, but no meaningful reform had been achieved by mid-1996. In July 1996, coal strikes in the Far East, southwestern Russia, southern Siberia, and the Urals threatened a nationwide shutdown in response to continued payment failures in that industry. *

Labor Unions in Post-Soviet Russia

Trade unions were powerful in the Soviet Union but they were not trade unions like those in the West. They were wings of the Communist Party not organizations that looked out for he interest of their workers. The came under the umbrella of the All-Union Central Council of the Trade Unions. The world's largest labor union, the Agro-Industrial Complex Worker's Union of the former Soviet Union, had 15.2 million members in 1993.

Today, labor lacks an effective organization to protect its interests. Neither trade unions from the Soviet era nor new, independent organizations have provided effective, united representation. As of mid-1996, negative conditions had not yielded the large-scale unrest that many experts had predicted in the working class. [Source: Glenn E. Curtis, Library of Congress, July 1996 *]

The older trade unions, many of whose leaders had been hand-picked by plant managers in the Soviet era, generally discouraged strong actions against employers in the early and mid-1990s. Unions formed after 1985 suffered from Russia's total lack of labor legislation, which allowed the government and enterprise officials to ignore union claims on behalf of the workers. Experts pointed to the lack of pressure from a united labor movement as a key reason the Yeltsin government failed to address the problem of overdue wages. *

In late 1996 and early 1997, labor groups showed some signs of ending their remarkably passive reaction to the chronic wage arrears in many of Russia's industries. (In March 1997, the total wage debt was estimated at $8.5 billion.) Through most of 1996, with a few notable exceptions such as the coal workers, labor in Russia followed the Soviet pattern of expecting the government rather than enterprise managers to remedy their plight. *

Strikes in Post-Soviet Russia

Although the nationwide labor shutdowns called by unions in November 1996 and March 1997 had failed to attract wide support, the number of local shutdowns increased noticeably in the first half of 1997. Miners, doctors, and teachers blockaded roads and railroads and occupied administrative buildings to protest continued wage arrears. Teacher strikes affected nineteen of Russia's eighty-nine subnational jurisdictions, and only fifteen jurisdictions did not owe money to their teachers. [Source: Glenn E. Curtis, Library of Congress, July 1996 *]

In the second half of 1996, strike activity intensified somewhat. According to government statistics, 356,000 workers at more than 3,700 enterprises participated in strikes in the first nine months of 1996, with the largest number of strikes in educational institutions and coal mines. (Doctors, miners, nurses, and teachers were the workers hardest hit by wage arrears.)

In November 1996 and March 1997, nationwide strikes and demonstrations called by the Federation of Independent Trade Unions of Russia (Federatsiya nezavisimikh profsoyuzov Rossii--FNPR), the largest such organization in the country, failed to galvanize widespread support. In the March action, an estimated 2 million workers struck or demonstrated, but more than 80 percent of those were teachers, and the FNPR had predicted substantially heavier participation. Observers attributed the low turnout to apathy, lack of trust in the FNPR, and the expectation that Yeltsin's recent government reorganization would improve the situation.*

Describing a miner's strike in Moscow, Daniel Yergin wrote in the Washington Post, They "are camped outside the Russian White House, stripped bare to their waist, pounding their red and white hard hats on the ground in unison to protest that they have not been paid for months."

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated May 2016

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