As of one the post-soviet countries, Russia represents a cohort of transitional economies, among which are most of the Former Soviet Countries (FSU) that are now commonly called Commonwealth of Independent States (CIS) and some of the Easter and Central European countries. Despite the size territory, Russia boasts a modest labour force which is easily dwarfed by international comparisons: in year X, the country had a total active working population of [x]m people (US: [x]m, Japan: [x]m). At the same time, as Error: Reference source not found shows, participation rate for males and females is roughly the same in all age groups.
The first years after the collapse of the Soviet Union have received a particular interest in the literature on human resources since the period marked a transition between the state-led socialist and market economy in Russia. Therefore, the main features of the modern Russian economy, and more importantly, its labour market, could be explained by considering the period of economic transformation (Gorbacheva, 2011).
It is widely agreed that the period of economic transition had started in the mid-80s after former USSR General Secretary Mikhail Gorbachev initiated the two well-known reforms: "Glasnot" and "Perestroika" (open society and restructuring) (Gorbacheva, 2011). Since then, Russia has been on a path towards political and economic liberalisation that coincided with the paradigm shift within the Russian trade unions (discussed From bureaucracy towards employee representation: trade unions and major legislation).
At the same time, the post-Soviet period of transition was manifested by overwhelming privatisation, price liberalisation and diminishing role of the State (Gorbacheva, 2011). The slump in intra-federation trade has seen Russian GDP plunge by 60% in 1999 (from 1990 levels) only to recover in 2004 (Exhibit ). At the same time, the labour market has faced an enormous shock with unemployment rate peaking at 13% in 1999. This had created a great sense of insecurity among less-educated working population, especially in the 1995-1999 period when above 80% "were concerned about getting basic necessities" (Linz & Semykina, 2010, p. 382).
Exhibit
- Russian economy in transition
Source: World Bank, IMF
One of the reasons behind the elevated unemployment levels was that many private and state enterprises became increasingly faced with falling sales while huge inflation kept costs of raw materials high. That was further exuberated by uncertainty both on an enterprise and state level. At the same time, Acquisti et al. (1999) argues that the consequences could have been much worse, and Russia had coped relatively well with the adjustment. The author argues that despite the major shock, most firms had restrained from firing employees, and instead coped with the adjustment through "price rather than quantity changes" (p. 614). Consequently, this was manifested through increase in wage arrears (Acquisti, Lehmann, & Wadsworth, 1999). More importantly, the non-payment of wages in Russia has emerged on an enormous scale (Earle & Peter , 2002). Earle et al. (2002), have suggested that the total stock of wage arrears in private enteprises, local and federal government has reached a staggering $8bn by 1998 [1] .
Acquisti et al. (1999) suggested that in the transition period, a systematic non-payment of salaries to employees had become a "dominant form of insecurity for many Russian workers" (p. 614). For example in some sectors (e.g. manufacturing, construction and agriculture) 1 in 3 people received full salaries in 1996. At the same time, Earle et al. (2002) suggested that wage arrears are most likely to occur in large and well-established firms, as opposed to Western economies where similar non-payment took instances in small and growing companies.
The key reasons behind the systematic non-payment of wages were demonitisation of the Russian economy, irresponsible policy of adjustment and inability of independent and former official state unions to influency the debate on wage arrears (1998) (see From bureaucracy towards employee representation: trade unions and major legislation). More importantly, the post-Soviet legacy has created a bizzare relationship between the state, commercial banks and enteprises. Clarke (1998) suggested that the State's need for tax revenues, which at a time was partly driven by the strict conditions of the IMF loan, has forced the companies to give priorities to tax payments over wages. At the same time, companies failed to secure loans from the banks due to insolvent balance sheets; therefore banks channeled borrowing to the Governement to take advantage of high interest rates, and leaving unfunded enteprises behind.
Another interesting aspect of the transitional period was and remains high employment among pensioners in Russia which is higher than in some of the Eastern European countries, as well as Western Europe (Kolev & Pascal, 2002). Kolev et al. (2002) estimated that despite employment disadvantage (including lower salaries), around 17% of pensioners remained in employment in 1998. This was in part stimulated by the fact that very often post-retirement income exceeded old-age benefits.
Finally, there has been an extensive interest in understanding the wage gap between males and females in Russia during the transitional period and thereafter. That was due to the fact that the USSR constitution had once stipulated that men and women must be granted equal rights at work; an extensive evidence has been provided to acknowledge that this is no longer true (Arabsheibani et al. (1999), Johnes et al. (2008), Newell et al. (1996) and Semykina et al. (2007)). A the same time, while the economic adjustment had no effect on the wage gap, that which remained unchanged in 1992-2002, Kazakova (2007) concluded that the well-being of women has improved in the same period.
From bureaucracy towards employee representation: trade unions and major legislation
According to Clarke (1998), despite the absence of a formal legal system, the Soviet Union had created a strong framework which oversaw the employee-employer relations; the system was essentially based on a Party-state rule. Moreover, the regulation of the employment relations was [xx] to "political-administrative" (p. 69) structures among which were Party-affiliated trade unions.
Under Stalin's leadership during the 1930s, trade unions played various roles; inter alia they administered social insurance budget, allocated housing to employees and monitored health & safety at work (Chetvernina (2009), Clarke (2005)). Further on, in the mid-80s, unions were granted rights to supervise "the entire labour and social sphere" (Chetvernina, 2009, p. 407). Therefore trade unions represented a significant part of a Soviet bureaucratic machine; their legacy was further reinforced by participation at all levels (99%) which was "automatic and almost universal" (Clarke, 2005, p. 5). Furthermore, very often trade unions were perceived as natural extensions of enterprise management.
The 1991 collapse of the Soviet Union and the dawn of the transitional period had helped free trade unions from political influence (Clarke, 1998). However, the country became increasingly faced with two choices: the political elite and young reformers argued in favour of creation of new independent trade unions, while other stakeholders (e.g. Federation of Independent Trade Unions of Russia, FITUR) wanted to transform the Soviet-era unions to reflect the shift towards market liberalism (Chetvernina, 2009). None of them had eventually succeeded.
Traditional (i.e. former Soviet) unions accepted employee protection as a main task and manifested separation from political institutions. Some critics (e.g. Clarke (1998) and (2005), Chetvernina (2009)), however, argue that they had failed to remain completely independent due to economic turmoil that hit Russia in the wake of transition period and created new priorities, inter alia to help save enterprises from bankruptcy (see From the socialist to market economy: the story of transition). This was further exuberated by low confidence of unions' members that altogether reduced their influence in the field of industrial relations. Therefore the main role of trade unions was downplayed to political lobbying rather than representing employees. By 1993 the State took away the Social Insurance Fund from the FITUR. Moreover, by 1994, a clear division and separation of duties between the State and trade unions has been cemented after unions lost powers to initiate laws and supervise working conditions (Chetvernina, 2009). This altogether had prompted trade unions to seek a niche in the "new power structures" (p. 411) and to effectively become a "social manager". Therefore, the "liberalisation", in other words the adjustment, of traditional unions had failed.
Similarly, the "new" independent unions have failed to cement positions within the transitional State. According to Chetvernina (2009), the decision to stripe the Social Insurance Fund from FITUR had also affected independent unions which similarly to FITUR lost their insurance resources. At the same time, the decrease in mass employee protests had downplayed their importance, and many "free" unions consequantly ceased to exist.
In the mid-1990s, the State realised that market liberalisation had failed to adjust the market (Chetvernina, 2009). In other words, privatisation and price liberalisation did not create self-sufficient enterprises. Even worse, the adjustment resulted in mass unemployment and non-payment of wages (see From the socialist to market economy: the story of transition). All this was suplemented by the falling union membership (especially in the private sector), also due to the fact that many newly created enteprises did not have unions. For example, in the manufacturing industry, in the period between 1991 and 1998 the unionisation rate droped by 20% (Chetvernina, 2009). Among other explanations of the falling union membership are "direct ban on employers of trade unions" (p. 414) and the overall loss of trust in trade unions similar to one experienced at the beginning of the 1990s.
The period from 2000 to 2008 had been marked by a significant economic growth in Russia (Exhibit ), decrease in social tensions (Chetvernina, 2009), and more importantly, the improvement in perceived job security (Linz et al. (2008) and (2010)). This had helped strengthen trade unions' "positions in the social and labour spheres" (p. 416). Despite the previous losses, at the beginning of 2000 union membership stood at c60%. The growing unemployment that followed the August 1998 default and consequent economic crisis has reinforced the need among employees to get protection from the illegal actions of the employers - the number of cases of labour conflicts which were resolved with the help of trade unions has increased twofold between 1990 and 2000 (Chetvernina, 2009). At the same time, the State has itself had helped unions regain legitimacy by passing the Labour Code and obliging all enterprises to sign collective agreement. In overall, the period had been characterised by a stable environment for the Russian trade unions, inter alia high unionisation rate and significant participation of senior managers.
Going forward, the outlook for trade unions is negative. Chetvernina (2009) suggests that at present they are "clearly removed from social policy-making" (p. 430). Moreover, they key role of unions, which is the protection of the employee rights, remains undistinguished. Therefore in the medium term Russian unions will not represent a significant force in forming industrial relations. More importantly, the economic downturn (as manifested by the 2008 global financial and economic crisis) will force unions to "dance to the management tune" (p. 431) similary to what happened during perestroika and in the first years of transitional period.
Contemporary HR issues in Russia: a workplace perspective
[add into on Labour book] - what it is!]
The economic, social and political context outlined in the first part of this essay has shaped the contemporary human resource practices in Russia. As we shall see later, the recruitment practices of Russian enterprises have experienced significant challenges since the mid-1980s.
In the aftermath of Gorbachov's perestroika period (which inter alia liberalised wages and made unemployment legit) and the consequent transitional period, Russian firms have heavily relied on internal and extended internal labour markets (ILM & EILM), hence the doors towards well-paid jobs have been "virtually closed to outsiders" (Yakubovich & Kozina, 2007, p. 154). That was explained by the fact that many enterprises stood on the brink of insolvency, and their limited financial and administrative resources have favoured internal recruitment.
In attempt to smooth the transition and mitigate its impact on the labour market, the Federal Employment Service (FES) has been established in 1991 (Clarke, 2000). Since in the 1991 the mechanism of centralised job allocation collapsed, the FES was expected take a role of pulling information on jobs from all the regions. Its role, however, was not fully realised, as Clarke (2000) noted that it had "become increasingly important to have the help of personal and family connections to get a job" (p. 483).
The period following the August 1998 financial crisis has been characterised by improving economic conditions with many firms returning to profitability. At the same time, "the aging labour force, decreasing life expectancy and low birth rate" (Yakubovich & Kozina, 2007, p. 155) had put a strain on the Russian labour market, which had already suffered from the lack of qualified professionals.
According to Yakubovich et al. (2007), there is a divide of power to oversee labour force between top management and human resources. On the one hand, as Yakubovich (2007) suggests, many Russian enterprises are concentrated "in the hands of the CEO" (p. 155) who usually appoints his own team which is then replicated at all organisational levels. This in turn had created a preference for informal recruitment with HR having no say over staffing. On the other hand, the growing need for human resources had put a significant strain on management and prompted the organisations to seek outside expertise from consultants and HR experts.
Education in Soviet Union and Russia: [add text here]
Similarly to the rest of economy, Soviet education system was wholly state-owned (Gerber & Schaefer, 2004). The number of available places and admission criteria were also centrally-administered. According to Gerber et al. (2004), the engineering and science subjects were on top of the list in terms of allocation since these two subjects were perceived to "bring the most immediate tangible and technological benefits" (p. 36). This was consistent with the industrial direction of the State. Another specific feature of the Soviet education system was its specialisation (much above Western levels) (Klinov-Malul, 1978). According to Klinov-Malul (1978), that was mainly due to centralised planning and corresponding low levels of labour mobility. At the same time, the presence of a highly-centralised planning and uravnilovka (i.e. "favourable treatment of manual workers") (Katz, 1999, p. 417), the issue of renumeration becomes prominent. Katz (1999) suggested that the Soviet higher education had contributed to better wages and raised the profile of educated professionals.
[add info on collapse] + gerber article
Add stratification article here
Vocational training: the private sector cannot handle it anymore
On the one hand, vocational training was one of the key characteristics of the Soviet labour market and was planned and funded by the government (Liberman & Petrov, 1966). It was aimed at making workers "fully conscious and harmoniously developed" (p. 223). According to Liberman et al. (1966), approximately 75% of training was hosted by enterprises themselves while the rest was conducted at special vocational schools. The large proportion of the on-the-job based training was due to the fact that all enterprises in the USSR were obliged to provide training for their workers (Clarke & Metalina, 2000). At the same time, Clarke et al. (2000) suggested that since only few independent institutions provided retraining (e.g. to help workers shift into another industry), it was mainly available to existing employees.
On the other hand, the creation of a new private sector, which followed the collapse of the Soviet Union, had largely led to abandonment of training by employers in all sectors except healthcare and education (Clarke & Metalina, 2000). This was manly motivated by the lack of adequate resources (e.g. qualified training personnel) and establishments to facilitate retraining as noted above. While the Soviet Union had left Russia with enormous pool of highly-skilled labour, in science and engineering fields in particular, the new private economy required more than that; for example, Clarke et al. (2000) noted that privatisation and Westernisation of the Russian economy had created a new demand for accounting and finance professionals which were not trained in the Soviet Union. [might add part on public sector training].
Why does education in modern Russia matter? Longenecker (2001) suggested that the key reasons why many managers fail in modern Russian business environment, is the lack of skills. [add more info here]
Conclusion: [text here]
1. unions have also sought to tie either with the state or management - historical legacy prevents them from being completely independent and "free" + they don't really represent employees and their role is undistinguished
