Table The Number of Economically Active Population (as Thos.) 2000 2001 2002 2003 2004 2005 Economically active population, total 72332 71411 72421 72835 72909 73811 men 37499 36905 36997 37206 37079 37511 n/a women 34833 34506 35423 35629 35831 36300 n/a Source: Rosstat The trend was ensured by a rise in the overall quantity of labor resources. Be tween 1999 and 2006 the market began to absorb the young generation born be tween 1983 and 1990, i.e. in the period of growing birth rates. But, according to the Rosstat’s estimates of the projected population numbers in Russia, since 2007 the number of the able bodied aged population will start declining steadily, and so will the proportion of the able bodied population since 2008.
During the period of the economic upturn (1999 2006) employment has been growing steadily. The growing demand for labor resources was met thanks to the rising labor activity and fall in unemployment, as well as the growth in working hours. For the first time ever since the start of the transitional period the number of working hours and that of the employed population were on the rise. Since mid RUSSIAN ECONOMY IN trends and outlooks 1990s the average length of labor in the national economy has grown at 4% (while between the start of reforms and mid 1990s it had fallen by 10%).
The advancement of Russia’s economy fueled the renewal of favorable em ployment trends (according to various estimates, it allowed creation of additional to 5 m. jobs). Notwithstanding the renewal of economic growth, the indicators of jobs creation remained relatively low. Thus, while the growth in GDP was steady be tween 1999 and 2006, the level of employment remained practically unchanged (Table 3).
Table The Dynamic of Main Indicators of the State of Labor Market in 2000–(Value Indicators in Comparable Prices; as % to the Prior Year) 2000 2001 2002 2003 2004 2005 The average number of employed in the economy, 64327 64710 65359 65666 66407 66939 67340* Thos.
Growth rates in the average annual number of em 100.6 101.0 100.5 101.5 100.8 100.ployed Number of unemployed, Thos. 7059 6288 6155 5683 5775 5208 Number of unemployed registered with the state 1037 1123 1500 1639 1920 1830 employment bodies (as of end year), Thos.
The average nominal calculated labor compensa 2223.4 3240.4 4360.3 5498.5 6739.5 8550.2 tions to organizations’ staff, as RUR The average real calculated labor compensations to 120.9 119.9 116.2 110.9 110.6 110.0 113.organizations’ staff (with account of CPI) GDP: 110.0 105.1 104.7 107.3 107.2 106.4 106. Total, RUR bn. 7306 8944 10831 13243 16966 21598 Per capita, RUR 49835 61267 74536 91607 117969 Note. * preliminary data.
Source: Rosstat Different sectors posted uneven growth rates in employment. Thus, the so called “formal” sector, which is formed mostly by large and medium sized enter prises, continued to cut jobs even in the conditions of economic growth. During the six year period in question (1999 2005) it got rid of 3 m. (10%) of its employees.
It was the informal sector that became a “jobs generator”. This sector com prises employees of small sized businesses, self employed, and individual entre preneurs. Post reform, it grew by 10 m. employees (from 20.9 m. up to 30.9 m.).
Such polar reactions by enterprises from the different sectors suggest that they incur different costs associated with job creation. New job opportunities ap parently continued to arise almost exclusively on the informal or semi informal ba sis, because of overregulated labor relations in the formal sector. So, by contrast to the EU 15 states, the economic upturn and growth in Russia was paired by the rise in new job opportunities, with their number in the formal sector being unlikely to match the growth in volumes of output. The number of regular jobs in the formal sector of the economy has declined vis à vis the growing number of temporary and Section Social Sphere occasional jobs in the informal sector. That entailed a growing segmentation of the labor market.
The “business card” of the national labor market became diverse “atypical” arrangements, such as part timers, compulsory administrative leaves, secondary employment and employment in the formal sector, delays with payment of salaries and “shadow” labor compensations, in kind salaries and production of goods and services by and within households. While with the start of the economic upturn these atypical forms began to decline (for instance, the level of the compulsory part time employment plunged below 1%), they still embrace a great proportion of the national workforce. Some experts1 estimate the proportion of non standard jobs in the national economy being between 25 and 30%.
Post reform, the structure of employment by kinds of activities underwent considerable changes (Table 4), for numerous transformational shocks caused growth in employment in some sectors of the economy and its fall in others.
Table The Average Number of Employees in the Economy by Kinds of Economic Activities (as %) 2000 2001 2002 2003 2004 Total in the economy 100 100 100 100 100 Of which by kinds of economic activity:
agriculture, hunting and forestry 13.9 13.1 12.5 11.8 11.2 11. fishery 0.2 0.2 0.2 0.2 0.2 0. mining 1.7 1.8 1.8 1.7 1.6 1. processing production 19.1 18.8 18.4 18.1 17.7 17. production and distribution of oil, gas and electricity 2.9 3.0 2.9 2.9 2.9 2. construction 6.7 6.7 6.8 6.9 7.1 7.wholesale and retail trade; repair of vehicles, motorcycles, home appliances and items of personal con- 13.7 14.6 15.1 15.8 16.3 16.sumption hotels and restaurants 1.5 1.5 1.6 1.7 1.7 1. transport and communication 7.8 7.9 7.8 7.9 8.0 8. finance 1.0 1.1 1.1 1.2 1.3 1.real estate – transactions, rent and provision of ser7.0 7.2 7.5 7.4 7.3 7.vices public administration and provision of military 4.8 4.7 4.8 5.0 5.2 5.security; compulsory social provision education 9.3 9.2 9.2 9.2 9.2 9. health care and provision of social services 6.8 6.7 6.7 6.8 6.8 6. provision of other communal, social and personal 3.6 3.5 3.6 3.5 3.5 3.services Source: Rosstat.
See: Gimpelson, Kapelyushnikov, “nestandartnaya zanyatost v rossiyskoy ekonomike”. M., 2006, GY VSHE Publishers RUSSIAN ECONOMY IN trends and outlooks The recent changes in the sectoral structure of employment in Russia have resulted in its becoming more “standard” and similar to the one characteristic of the developed economies. Specifically, the secondary sector of the economy has shrunk, while the tertiary one has expanded, and, as a result, the bulk of the na tional workforce shifted into the services sector. But the distinguishing feature of the Russian employment is concentration of employees (within the services sector) in the sphere of social services, while the developed economies display a greater concentration in the business services sector.
The aforementioned processes continued to progress between 1999 and 2006. The leading sectors continued to maintain a considerable contribution to the change in the sectoral structure of employment: in the industrial sector, job losses accounted for 2% against the growing share of the services sector (it was trade that posted the greatest growth rate (nearly 2%) in employment among subsectors of the tertiary sector).
In the period of the economic upturn, job opportunities arose primarily in the services sector. At this point, it should be noted that this structural change practi cally resulted from an absolute contraction in employment in the sphere of material production (over 10 m.), while the increment in employment in the services sector being relatively insignificant (some 2 3 m).
The common opinion of Russia lagging behind market economies in terms of maturity level of the services sector is no longer correct. The situation has changed dramatically. While the pre reform Russian economy, whose secondary sector covered over 40% of all employees, indeed, was overly industrialized, post reform, the share of the sector in question slid by ¼, i.e. to 30%. Meanwhile, the share of those employed in the services sector grew by nearly 15 p.p., and currently the sector employs a. 60% of all Russian employees.
At the outset of reforms, in the conditions of the intense transformational cri sis during which Russia lost nearly half of its GDP, it was a rise in unemployment that steered greatest concerns, as it was expected to be in proportion to the de cline in volumes of output. However, even in the period of the greatest decline in GDP, the level of unemployment in Russia never reached 15% the national market “adjusted” itself to the shocks primarily by means of price flexibility (non payments of wages), rather than quantitative flexibility (Table 5).
During the period of economic growth (2000 2005) unemployment in Russia was on the decline both in absolute and relative terms. The question as to whether the fall in unemployment resulted from the flow of the unemployed into the compo sition of employed or economically inactive individuals remains unanswered.
Meanwhile, the indicators of the stagnant unemployment (in which individuals are in search for a job for more than a year) continued to remain significant. The proportion of the unemployed registered by bodies of the state employment agency was on the rise but is still low, with just a negligible part of the unemployed applying to the state employment agency.
Section Social Sphere Table The Number of Unemployed 2000 2001 2002 2003 2004 2005 2006* The number of unemployed, 7059.1 6287.9 6154.7 5683.3 5775.2 5208.3 Thos.
Unemployment level (as % of the 9.8 8.8 8.5 7.8 7.9 7.1 7.2* economically active population) The number of the registered 1037 1123 1500 1639 1920 1830 unemployed (Thos.) The number of unemployed in 42.3 36.9 38.8 35.7 38.search for a job over a year (%) Load of the population not em ployed in labor activities 1.6 1.3 1.7 1.9 2.1 2.5 2. per 1 opened vacancy. persons Note. * preliminary data (as of end month) Source: Rosstat.
Like in other transitional countries, the number of the unemployed per va cancy appears great, while the proportion of the unemployed that receive unem ployment relief is fairly small (20 30%). It testifies to the fact that the outflow of the jobless thanks to their getting jobs is mostly blocked by the absence of vacancies, rather than the existence of incentives that have a negative effect on the rise of job offers. While presently the attention to the situation in the employment sphere has somewhat languished and appeared focused more on other aspects of the labor market’s functioning, unemployment still poses a pressing challenge to a number of regions.
The situation on the labor market is a derivative from the general economic situation in a region. That is why the group of territories with the worst indicators of the functioning of the labor market comprises primarily regions with relatively mod est indicators of economic development. Those are, first of all, republics in the North Caucasus with their depressive labor markets. Thus, in the 1st half 2006 the unemployment level in the Southern Federal Okrug made up 11.3% (displaying a 0.5% fall vs. the prior year) against the nationwide average rate of 7.0%. In the Re public of Adygeya, the respective indicator was 14.0%, in Dagestan – 21%, in In goushetia – 61.2%, Kabardino Balkaria – 21.1%, Kalmykia – 14.9% While in other regions in Russia the nature of unemployment is mostly structural one, in the na tional republics practically all the volume of unemployment is explained by an insuf ficient demand for workforce, which is associated with the absence of points of economic growth. The bulk of the unemployed falls on rural areas. Unemployment in the national republics is quite long – while in other Russian regions the propor tion of permanently jobless is relatively small (34%), in the republics it lasts longer, while the proportion of stagnantly unemployed being very high (over 60%).
In Russia, cross regional differences in the conditions of the labor market ap pear far greater than in other countries with similar conditions, which reflects a great level of heterogeneity of the regions. The cross regional differences are, as a rule, inertia driven, i.e. the regions that had been more successful at the outset of the transitional period, as a rule, displayed better performance ever afterwards, RUSSIAN ECONOMY IN trends and outlooks which testifies to a long standing nature of the differences. Creation of job oppor tunities and existence of vacancies is noted largely around huge urban conglomer ates with a fairly diversified industrial structure (especially with a huge and expand ing services sector, mature infrastructure and qualified workforce). By contrast, the employment prospects are extremely low and unemployment rates are high in monosectoral (highly specialized) industrial regions that suffer from idiosyncratic shocks of demand.
In the period of the economic upturn the dynamic of growth in salaries and wages was more considerable vis à vis moderate growth rates in employment, with both nominal and real salaries and wages being on the rise (Table 6). The rise in salaries and wages has recently accelerated, as the gaps in the levels of salaries have. Not only enterprises restructuring resulted in a substantial growth of labor productivity, which in turn manifested itself in a notable wage rise, but it had a fa vorable impact on the “insiders” (i.e. the staff that have kept their jobs or suc ceeded in finding new ones).
The gap in labor compensations payable to qualified and non qualified staff, which had been shrinking prior to 1998, once again found itself expanding. Accord ing to some estimates, the return from the university education has grown in the 2000s. The gender differences in the level of labor compensations continue to per sist and have even intensified. Interestingly, for women a higher educational level neutralizes the intensification of the gender differences.
The period of the 2000s saw the renewal of the debate on the minimum salary as a regulator of labor compensations. It forms the marginal low index, which re duces the differentiation of labor compensation. It accounts, as a rule, for less than 20% of the average wages and often even a. 10% of those, and, accordingly it fails to play the part of inhibitor of the staff’s incomes. This enables corporations to re tain low paid jobs, which by itself steers differentiation of labor compensations.