Employment Restructuring and Industrial Relations in Russia: Lessons

for Other Transitional Economies

Simon Clarke

Department of Sociology

University of Warwick

Orthodox model of transition

• First stage– Archaic state enterprises liquidated– Transitional unemployment– High levels of social tension

• Second stage– Job creation by new private enterprises– Absorption of unemployment– Social stabilisation

What really happened?

• Very few bankruptcies

0

10

20

30

40

50

60

1992 1993 1994 1995 1996 1997 1998 1999

Percentage ofunprofitableenterprises

Percentage ofinsolvententerprises

What really happened?

• Very few bankruptcies

• Very few compulsory redundancies

Unemployed by reasons for unemployment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992 1993 1994 1995 1996 1997 1998 1999

Note that the vast majority of voluntary quitters go directly to another job. Redundancies account for less than 10% of separations.

Did not work

Other

Voluntaryredundancy

Compulsoryredundancy

What really happened?

• Very few bankruptcies

• Very few compulsory redundancies

• Low levels of unemployment

Low levels of unemployment

0

2

4

6

8

10

12

14

%

1992 1993 1994 1995 1996 1997 1998 1999

Registered and Survey Unemployment Rates

RegisteredUnemployment

Survey (ILO)Unemployment

Economic difficulties led to

• wages lagged behind prices

• non-payment of wages

• huge increase in wage inequality

Falling and unpaid wages

020406080

100120140

1991 1992 1993 1994 1995 1996 1997 1998 1999

Wage inequality has increased from Gini .24 in the soviet period to .48 since 1992. Average wage arrears of those in arrears in 1996-8 were about three months. In October 1999 41% earned less than the subsistence

minimum of $40 per month.

Real Wages (1990=100)

Real Wage Arrears (endyear, 1997=100)

Stimulated ‘exit’

0

5

10

15

20

25

30

%

1992 1993 1994 1995 1996 1997 1998 1999Large and medium enterprises in all sectors of the economy

Hires

Separations

Rather than ‘voice’Strikes and Unemployment Rate

-

100,0

200,0

300,0

400,0

500,0

600,0

700,0

800,0

янв.

91

янв.

92

янв.

93

янв.

94

янв.

95

янв.

96

янв.

97

янв.

98

янв.

99

янв.

00

Th

ou

san

d d

ays

0

2

4

6

8

10

12

14

16

Per

cen

t

ILO Unemployment Rate (12month moving average) RightAxis

Man-days lost in strikes (12month moving average) Left Axis

Why has this happened?• Labour hoarding

– workers trade employment stability for low wages• but workers have no power

• workers vote with their feet, so that

• wages inversely correlated with labour turnover

• Not hoarding but hiring• technical constraints

• economic instability

• social and political pressures

Management employment strategy

• ‘Preserve the (nucleus of the) labour collective’– ensure wages and work for core workers– lay-offs and short-time rather than redundancy– high wages condition for tight labour discipline– wage increases restricted by ability to pay– non-payment of wages rather than wage cuts– multi-tasking and intensification of labour to

maintain production

Employment & Labour Relations• Prosperous enterprises

– Relatively high wages– Tight labour discipline– Low labour turnover

• Declining enterprises– Low wages, lay-offs, short-time, non-payment– Loose labour discipline: drinking, theft– High labour turnover

Labour Market• High job-to-job transitions

– very high differentials between workplaces

• Unemployment– Current Rate 12%– Long-term unemployment 6%– Average duration 10 months

• Labour force participation has fallen 12%– mostly young and old– no gender differences

Industrial Relations• Fear of job loss

• Authoritarian management

• Very low levels of industrial conflict

• Loyal trade unions

• Individualised responses

• Individualised labour relations– bureaucratic and legal disputes procedures

Lessons• Unregulated (flexible) labour market

– allows enormous employment restructuring– avoids mass unemployment– at the cost of workers’ living standards and

working conditions– with Latin American levels of inequality

• Low wages/no wages– allow inefficient employers to survive– undercut incentives to investment/innovation