January 15, 2021 21:15

Labor Market Transformations: Is Russia Threatened by Wage Polarization?

Labor Market Transformations: Is Russia Threatened by Wage Polarization?

According to the forecast of the Ministry of Economic Development, wage growth will continue at a rate close to labor productivity. Structural changes can influence this trend, both upwards or downwards. Speakers at Gaidar Forum discussed the present and the future of the labor market in the discussion "Are We at Risk of Wage Polarization?"

Among the participants in the session were Polina Kryuchkova, Deputy Minister of Economic Development of the Russian Federation, Vladimir Gimpelson, Director of the Center for Labor Studies of the National Research University Higher School of Economics, Tatiana Maleva, Director of the Social Analysis and Forecasting Institute of the Russian Academy of National Economy and Public Administration. The event was moderated by Oleg Fomichev, Director for Strategic Planning and Development, Complexprom JSC.

Over the last decade, wages differentiation tended to decrease both globally and in Russia. However, in most countries the level and dynamics of wages were directly affected by the drop in the GDP due to the epidemiological crisis, changes in the structure of the labor market, the spread of technology, the robotization of production, and the development of new forms of employment.

Polina Kryuchkova noted that Russia has recently seen a steady growth in real wages ahead of the GDP and labour productivity growth. "In our view, there were three main factors that contributed to this outpacing development. The first is demography, the balance of supply and demand in the labor market. The relatively unfavourable demographic situation, with the working-age population shrinking, naturally causes reduction in the labour force. To some extent the reduction has been compensated for by migrants, but only partially. The second factor is the May decrees and the changes in wages in the public sector. This affected not only the budget sector, but other sectors of the economy as well. The third factor is legalization, because when we see wage figures, we of course see legal wages. In addition, apart from the overall growth trend, we have seen a slow decline in the wage differential."

All of these trends were consistent before the coronavirus pandemic. With the onset of the pandemic, according to Kryuchkova, there was a short-term fall in wages in Russia, which was less dramatic in terms of its speed and magnitude in comparison with the previous crises. "There are only two explanations. The first is the fundamentally different structural nature of the current crisis. Industries that suffered less in the previous crises were affected, and vice versa. The second reason is a significant change in policies to support the unemployed," added the deputy minister.

According to Tatiana Maleva, small businesses suffered the worst in 2020, while medium and large businesses went through the pandemic without significant changes. In the short term, we should not expect social tension and falling incomes, but "in the medium and long term, no one is immune from it," the expert said.

Vladimir Gimpelson said that the historically low level of unemployment in Russia is determined by the fact that unemployment benefits in Russia are extremely low: "Think of an economy where there are no unemployment benefits. Will there be unemployment in it? No. People who lose their jobs will immediately take up something else. Our unemployment support system is different in that we have very low benefits. If people just cannot sit at home and do nothing, they will go back into employment, and that will provide us with sustained high employment."

A characteristic feature of the recent decades is a strong structural shift in favor of the service sector, the expert added. "Totally different employment than at industrial plants. It is much less sustainable, more vulnerable, more differentiated, poorly regulated and largely invisible to statistics. Another structural shift is coming to the fore, that is de-corporatization, an increase in the share of those employed outside organizations and other legal entities. If you look at our 71-72 million employees in Russia, about 44 million of them work in organizations and 38 million people are not employed within any legal entities. And when Rosstat tells us on a monthly basis what kind of employment we have, it's like looking at the side of the street where the streetlights are. But the most important thing happens on the side where there are no streetlights. Rosstat does not see it," Gimpelson explained.


Photographer: Mikhail Tereshchenko / TASS

The Gaidar Forum “Russia and the World After the Pandemic” will be held on January 14 and 15 at the Presidential Academy. The Forum will traditionally open the annual business agenda of Russia. In 2021, this large-scale event will be held in a hybrid format, both online and offline.

This time, the main discussion track will be social and economic transformations that have occurred in the country and the world as a result of the COVID-19 pandemic. The expert discussions will be focused on the national and global development goals and the search for practical solutions to the most urgent challenges of today. The Forum’s participants include ministers from the Russian Government, members of the Federal Assembly, governors of the Russian regions, largest world experts, representatives of foreign states.

The general partners of the Gaidar Forum are Gazprom PJSC and Gazprombank JSC.

The strategic partners are Russian Railways OJSC, Johnson&Johnson, ACIG Group, Novartis.

The partner of the forum is MasterCard, Russian Direct Investment Fund (RDIF)

The discussion partners are Magnit, Pepsi, Huawei, Coca-Cola, AstraZeneca, Takeda, EY.

General media partners: TASS, Business FM, RIA Novosti, RBC. Strategic media partners: Interfax, Rossiyskaya Gazeta, Kommersant Publishing House, RIA FederalPress, Invest-Foresight magazine. Main media partners: Anews, News.ru, lenta.ru. International media partners: Russia Today.

Media partners: PRO Business TV channel, AEI PRIME, Polit.ru, Strategy magazine, Public Administration magazine, Ekonomika i Zhizn newspaper, Econs portal, Finam, Bankovskoye Obozreniye magazine, Parlamentskaya Gazeta, Snob media project, Echo of Moscow radio station, Nauchno-Obrazovatelnaya Politika Telegram channel.