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Russian reforms questioned over ‘jobless millions’

Economists who cite the apparent absence of mass unemployment as a key achievement of economic reforms in Russia are being advised to think again.

Economists who cite the apparent absence of mass unemployment as a key achievement of economic reforms in Russia are being advised to think again. Many Russians currently ranked as employed are either not being paid, or earn a pittance, a study has found.

When similar reforms were applied in Eastern Europe and developing countries in other regions in the early 1990s, the initial outcome was mass unemployment. Poland's unemployment increased from zero in 1990 to 14 per cent in 1992.

But in Russia, the figure hovered in single digits – between two and six per cent. Delighted, advocates of reforms said Russia had succeeded in producing a highly flexible labour market without the usual job cuts.

Key to this 'success', they concluded, was Russia's low unemployment benefits, which forced people to move from one job to another rather than leaving employment altogether. Unemployment benefits vary from $9 to $40 per month.

Now, in a comprehensive study, The Restructuring of Employment and Formation of a Labour Market in Russia, researchers Simon Clarke, Veronika Kabalina, Irina Kozina and Inna Donova challenge the reformers' conclusions.

They show that official statistics in fact hide the reality of unemployment in Russia. The figures exclude millions who receive no or very low salaries, including those who choose to go on unpaid leave rather than become unemployed, in the hope of eventually receiving a salary and pension.

"In 1995 at any one time about 58 million people were employed and working, including part-time and casual employees, although only around 20 million of them had received their most recent wages on time and in full," says Clarke of Britain's University of Warwick.

"The 27 per cent of the population living in the countryside are by far the worse off, with even the average wage below the subsistence minimum, very substantial wage delays, no alternative employment and a growing rural population as people leave the towns in search of food," adds Clarke.

According to him, many unwaged Russians survive on handouts from friends and relatives, subsistence agriculture, casual labour, petty trading or petty crime.

As with many other European countries, among the first casualties of economic reforms was the coal mining sector – many mines were shut down because they were thought to be economically unviable. Others were privatised.

Alexander Naumov, Mayor of Kiselevsk, in the mining region of Kuzbass, east of Moscow, said: "One of our main problems is growth of unemployment among miners, because of mine closures and the low rate of job creation."

In Prokopievsk, another mining town in Kuzbass, 15,000 miners lost their jobs during the restructuring period, 45 per cent of them under 25 years old. "And it is much more difficult for an unemployed miner to find a new job than, say, a turner, electrician or driver," adds Naumov.

While the outlying provinces suffered myriad problems, Moscow briefly enjoyed the privileges of a capital city and the financial centre of the new Russia. Here a fledgling middle class, mainly specialists with higher education, started to grow. The concentration of banks, government offices and trade and financial companies created perhaps the only place in Russia where jobs were being created in new sectors.

The picture changed dramatically on August 17, 1998, when the rouble plummeted overnight after Russia refused to pay for its internal debts and permitted banks not to fulfil their obligations to foreign partners. Many imported goods, especially food, were suddenly costlier. Newly-created jobs in advertising, sales and banking were no longer needed as ordinary Russians had no money to buy things. Many were made redundant, and many who kept their jobs saw their salaries halved.

Now in Moscow almost half of the new jobs promised by the state employment service offer salaries that are so low – often equivalent of $36 per month, compared to the average of $64 – that they do even not guarantee basic comforts.

Countrywide, reforms have not brought the promised dream of a prosperous society any closer. Industrial production fell more than 50 per cent, long-awaited foreign investments did not appear and Russia has been losing up to $50 billion a year in fleeing capital, according to the Central Bank.

More than 66 per cent of all Russians live in fear of unemployment and poverty, says a poll carried out by the Moscow-based Public Opinion Foundation.

Researcher Clarke emphasises that the principle of "forcing down people's wages and destroying people's jobs does not transform labour power into a flexible resource; it merely demoralises people, deprives them of the resources to take control of their lives.

"The result of wage flexibility and employment insecurity is not the creation of a flexible reserve of labour, but a stagnant pool of unemployable."

Vadim A Borisov, Coordinator of ICFTU campaigns in Russia (International Confederation of Free Trade Unions), adds: "Reforms started in the name of people, for people's benefits. Market and privatisation were just instruments for it. But by the middle of the 1990s the people – the main aim of reforms – had been replaced by reform's instruments."

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Panos London

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04/01/2001

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