Window on Eurasia: Unusual Features of Russian Labor Market Have Kept Unemployment There Lower than Expected

Paul Goble

Vienna, November 4 – In the early 1990s and especially over the last year, many Russian commentators and politicians have competed among themselves in predicting extraordinary increases in unemployment, in both cases to figures comparable to those which the American and other Western economies suffered during the Great Depression.
But certain specific features of what a Russian scholar describes as “the Russian model of the labor market” – including greater flexibility in hours, forced vacations, second jobs, backlogs in pay, production at home, and lax law enforcement – have kept unemployment from rising nearly as far as most have predicted.
In the lead article in the current issue of the Russian Academy of Sciences journal “Demoscope Weekly,” Rostislav Kapelyushnikov describes this model, but at the same time, he points out that another aspect of this “Russian” model is that unemployment is unlikely to fall quickly with any recovery (demoscope.ru/weekly/2009/0395/tema01.php).
According to the Moscow demographer, “the Russian model of the labor market” was not constructed “from above” on the basis of any plan, but rather it arose “spontaneously, under the impact of decisions taken independently of one another by the government, entrepreneurs and workers.”
Among the chief characteristics of this model, Kapelyushnikov continues, are relatively stable levels of employment and hence relatively low unemployment, an arrangement that he suggests means that employment does not rise when the economy grows or decline during a recession by as much as elsewhere (demoscope.ru/weekly/2009/0395/tema02.php).
The figures he offers show that “each percentage point of a fall in output is accompanied by a reduction in employment of only 0.3 – 0.35 percent,” significantly less than in other countries, including other former Soviet republics, and less than many Russians who make apocalyptic projections apparently believe.
This relative stability in employment despite changes in the economy reflects a variety of other factors besides those listed above. Among them are relatively love mobility of workers among enterprises, a more flexible approach to work time so that hours are reduced before staff is cut, and remarkable tolerance among workers for getting paid only after significant delays.
Kapelyushnikov says that this combination of factors represents “the ‘visiting card’ of the Russian model of the labor market.” And while this model is unusual, he continues, its distinctiveness does not mean that some or all of its features are not found in part in other countries (demoscope.ru/weekly/2009/0395/tema06.php).
“However, nowhere else are their size and variety so significant, the concentration so full, and the rootedness so deep as in Russia,” the Moscow demographer continues. Some analysts say that this reflects the relative flexibility of Russian labor law, but Kapelyushnikov disputes that. Were the laws enforced strictly, the Russian model could not function.
Indeed, he suggests, “from an institutional point of view, the uniqueness of the Russian labor market consists precisely in the way in which the system of enforcement works,” a system that research has shown is “extremely ineffective.” And it is that rather than the law that allows “the Russian market” to work as it does (demoscope.ru/weekly/2009/0395/tema07.php).
Kapelyushkin’s data and conclusions are both intellectually interesting and politically important. They help to explain why unemployment in Russia has not been far higher than would otherwise be the case. And they suggest why the current economic system enjoys as much support as it does even among Russia’s hard-pressed working class.
But perhaps most intriguingly in the current political environment, they are yet another indication that any rapid move to enforce existing legislation could have some negative consequences on the sensitive issue of unemployment even though such enforcement is the only way Russia could move toward the law-based state Dmitry Medvedev says he is for.