IPSA

XXII World Congress of Political Science

Social Policy Responses to the Global Financial

Crisis of 2008: The Russian Experience

Tatiana Chetvernina

Liana Lakunina

Institute for Social Development Studies

HSE, Moscow

Madrid 2012: July 8 – 12

N A T I O N A L R E S E A R C H U N I V E R S I T Y

Main characteristics of the current situation

on the Russian Labour Market

___________________________________________________________

1. Demographic particularities:

– aging of the population and the deterioration in the health of the population;

– decrease in number of people of working age;

– changes in the socio-demographic characteristics of the labour force;

– growing role of internal and external labour migration in Russian labour markets, to large degree – chaotic movement of workers between regions, industries and occupations.

Natural decrease Migration increase Total increase(decrease) of

population

Forecasts for population

growth\shrink in RF

115000

120000

125000

130000

135000

140000

145000

150000

2. Labour related features:

• a significant imbalance between labour demand and supply in the

Russian economy, its regions and its sectors (i.e. the coexistence of labour

shortages and unemployment); denoting an inefficient use of the labor

force;

• qualitative (structural) mismatch in labour demand and supply within

regions, by type of activity, skill, professional qualification and other

dimensions;

• slow growth in new modern jobs and a decline in existing ones;

• hidden unemployment; a large, especially for certain economic activities,

part-time employment;

• the prevalence of informal and illegal employment, as well as unstable,

casual employment;

• rigid labour legislation and weak enforcement .

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

%

Unemployment Rate by Federal Districts

Russian Federation

Central Federal District

Moscow

North-Western Federal District

St. Petersburg

Southern Federal District

North-Caucasian Federal District

Republic Of Ingushetia

Privolzhsky Federal District

Urals federal district

Siberian Federal District

Far East Federal District

Annual hires and annual departures,

% of total number of employees

Labour conditions in 2011,

% of total employed

3. Labout productivity and incomes.

• Low level of labour productivity in the Russian economy and most of

its sectors, mostly due to low capital-labour ratios, old equipment, weak

management;

• Low average wage levels (with wide sectoral\branch, regional and

company differentiation) determine the level of income of the majority

of the population; high levels of wage flexibility

STRUCTURE OF MONEY INCOME AND SHARE OF

EXPENDITURES IN MONEY INCOME OF POPULATION, %

Reaction to the crisis of 2008-2009*

Deterioration of all main labour market indicators, but possible catastrophe didn't

happen.

Adaptation to the new conditions took the following forms:

• reduction of employment occurred in the form of a/minimization of hiring but

very little change in dismissals and b/mostly increased unemployment, with little

change in the economically inactive population (in sharp contrast to the crisis

of 90ies )

• relative increase in informal employment – indeed, this sphere absorbed most of

the surplus of labour

• wage flexibility was used to a smaller degree than in the nineties :

– delays in wage payments could not be used because of more effective state

enforcement of the law

– inflationary depreciation of earnings was modest as inflation rates remained

low, especially when compared to the nineties

– earnings were reduced due to the increasing prevalence of part-time,

casual and informal sector employment

____________________ *) see also: Strategy 2020: Expert Group *7 – analitical papers in Russianhttp://2020strategy.ru/g7; Капелюшников Р.И. Российский рынок труда: итоги прошлых лет и перспективы, 2011; Капелюшников Р.И. Мягкая подстройка. Эксперт. 2010. №24, 25.

Government measures to mitigate the social impact of the crisis

(including measures to strengthen the monitoring and enforcement

of anti-crisis laws)

____________________________________________________________

November 14, 2008 The Russian Federation’s Attorney General's Office

issued the decree "On the Attorney General’s supervision of the

measures undertaken by the Government of the Russian Federation”

aimed

• to deal with the special challenges facing working people as a result of

this crisis the government proposes

• to strengthen the enforcement of regulations requiring timely payment

of wages and pensions and all other payments to employees, including

security guarantees and other compensations in accordance with the

Labour Code and with current employment contracts

• to closely monitor the operation of all employment offices to ensure that

budget allocations are spent as and when they were supposed to be

spent, that state and municipal facilities are fully utilized and that anti-

trust and anti-corruption legislation is fully enforced.

November 28, 2008

Order\Act of Ministry of Health and Social Protection of the Russian

Federation "On the Organization of work of the counselling, telephone

hotlines and pre-dismissal counselling of employees“.

Main objective – consultations with the potentially vulnerable categories of

the working population in order to strengthen their existing low level of

knowledge and awareness of their legal rights. Under this Act

enterprises and organizations planning to dismiss workers were required

to set up formal mechanisms to inform the affected employees about all

existing Government programs and measures to promote employment,

facilitate job search and retraining and provide support payments in the

interim

December 25, 2008, the Federal Law on Amendments to the Law of

Employment:

• from January 1, 2009 those who leave their jobs voluntarily (stop working)

become eligible for the same unemployment benefits as those who lost

their jobs because of staff downsizing or firm closures. Layoffs at their

own request (respectful or disrespectful) now have no value.

• Unemployment benefits are hereby increased to 75 per cent of lost

earnings, to a Federal maximum of 4,900 rubles. (minimum-to 850 RBL).

• The full benefits is now payable over 12 months. Previously the

unemployed received 150% of the minimum payment (1274 RBL) for the

first 6 months, and the minimum payment (850 RBL) for another six

months.

• New requirements for employers to observe employees rights . Now

employers are required to report employment service offices not only on

staff downsizing but also on the introduction of part-time work or temporary

suspension of production.

• Creation of a special reserve fund to facilitate labour market adjustments.

December 31, 2008

Government Decree “On additional measures to reduce labour market

tensions in Russia’s regions”:

Subsidies to supplement regional budget allocations for active labour

market policies, including:

• Advanced\preliminary professional training and retraining programs to

deal with major labour market disruptions, whether through mass layoffs

or dramatic increases in part-time work, temporary suspensions of work

or provisions for involuntary administrative leave;

• Organization of public works, temporary employment and internship

programs both for the unemployed and for new entrants to the labour

market;

• Targeted support to citizens, including their transfer to another

place\region to occupy jobs, including those established under the federal

targeted programs and investment projects;

• Active promotion of small businesses and self-employment.

June 19, 2009

Program of anti-crisis measures of the Government of the Russian

Federation for the year 2009: the first national priority - the social

protection of the population, including the employment problem.

June 30, 2009

Government Decree on regulation of socio-labour relations of companies in

2009 - state guarantee for credits and additional terms of guarantee

support; transparency of financial and economic activities; enforcement

of legal rules when dismissing employees; the preservation of jobs for

persons with disabilities and other socially vulnerable categories of

citizens; the abolition of bonuses of top management.

Summary of Implementation of Government measures included in the

2009/2010 federal budget to mitigate the social impact of the crisis of

2008, including: increased support to the unemployed, stronger active

labour market policies and additional measures to reduce tension the

country’s regional labour markets:

• 250.1 billion rubles were allocated;

• more than 4.4 million people took part;

• approximately 2.0 million jobs were saved; and about 4.0 million new jobs were created,

including more than 306.8thousand permanent jobs;

• by 2010 the number of vacancies, reported to and publicized by, the country’s employment

offices, increased by 40 percent compared to the beginning of 2009;

• managed to contain the massive dismissal of workers (approx. 2.8 million) and retain the

personnel potential of companies;

• reduced the number of registered unemployed to 2.08 million people registered at the

employment offices in 2009 year to 2.08 million people (preliminary forecast-2.2 million);

• by October 2010 the total number of unemployed had fallen to 5.1 million people or 6.8 per

cent of the economically active population, which was virtually back to the pre-crisis level of

October 2008 - 5.0 million or 6.6%;

• number of workers to be dismissed by November 2010, decreased to 288.8th. pp (almost by

1.9 times compared to a maximum 555.4 thousand).

• by early November 2010 the number of part-time workers had fallen to 601.7 thousand, from

its peak of 1.67 million in December 2009.

Main directions of future government activities on the labour market

Priorities for State policy on employment:

• improvement of the legislation of the Russian Federation on labour, employment, labour

migration;

• legalization of employment;

• reduction of hidden unemployment;

• closer monitoring of the situation on the labour market;

• development of a forecast balance sheet of labour resources;

• improving the quality of the labour force to support the emergence of an innovation centered

economy, in part also through the development of public-private partnerships;

• development and strengthening of labour market institutions,

• more efficient use of labour resources, stimulation of economic activity and employment growth;

• development of labour force mobility and optimization of foreign labour inflows;

• facilitating the development of entrepreneurship and self-employment to increase in the

demand for labour;

• the creation of incentives for employers to employ people with disabilities, parents of children

with disabilities, parents with many children;

• implementation of additional measures to reduce tensions in regional labour markets, including

the republics of the Northern Caucasus

In general, the measures undertaken by the Government of the

Russian Federation in response to the financial crisis of 2008 succeeded

in maintaining stability in the social sphere, stabilizing the labour

market, damping down, and then reversing, the increase in

unemployment and ultimately reducing – though not eliminating -

tensions within society.

Thank you for your attention!

Should you have any questions, please do not hesitate to contact:

tchetvernina@hse.ru

llakunina@hse.ru

The presentation is based on the results of the project “Changes in Social Security Profiles of the Russian Population during the period of Instability", carried out in 2012 within the framework of the Basic Research Program at the National Research University Higher School of Economics