Presentation is loading. Please wait.

Presentation is loading. Please wait.

Russia: The Consequences of a Perfectly Flexible Labour Market Professor Simon Clarke Centre for Comparative Labour Studies University of Warwick.

Similar presentations


Presentation on theme: "Russia: The Consequences of a Perfectly Flexible Labour Market Professor Simon Clarke Centre for Comparative Labour Studies University of Warwick."— Presentation transcript:

1 Russia: The Consequences of a Perfectly Flexible Labour Market Professor Simon Clarke Centre for Comparative Labour Studies University of Warwick

2 Orthodox structural adjustment Collapse of soviet system and incorporation of Russia into world market economy demanded massive structural adjustment Standard structural adjustment package: liberalisation of prices and wages; financial stabilisation; fiscal responsibility Burden of adjustment initially placed on the labour market

3 Structural adjustment and the labour market Wage differentials promote flow of labour from low to high value-added companies, industrial branches and regions Presupposes labour market flexibility Market determination of wages Dismantling of barriers to mobility

4 A Flexible Labour Market Liberalisation of wages in October 1991 led to a doubling of wage inequality (Gini 0.24 to 0.48) and of labour turnover (hiring rate over 20%). Russia conforms better to the OECDs recommendations than any OECD country (Layard and Richter 1995: 40). Massive employment restructuring with low rates of unemployment (ILO unemployment less than 10%). Vindication of a flexible labour market?

5 Labour market flexibility and economic regeneration Employment restructuring did not lead to economic regeneration Longest and deepest recession in recorded world history Post-1998 recovery not result of market- stimulated restructuring but of massive devaluation and recovery of oil price. Why did a flexible labour market not achieve the desired results?

6 Wages and the labour market Increased wage differentials bore very little relation to labour market pressures: –Branch and regional differentials bore very little relation to rates of unemployment or changes in employment. –Wage determination is firm-specific: Largest component of differentials is within occupations within local labour markets. Employers pay what they can afford, and if they cant afford to pay, they dont pay.

7 Market and Institutional Determinants of Wages This is not a Russian peculiarity. Industrial relations specialists have long shown that employers do not pay market- clearing wages: motivational role of wages. It is foreign-owned companies, not paternalistic red directors, who pay the highest wages and have the best employment practices.

8 Labour market flexibility and unemployment Low unemployment is not a result of the creation of high value-added jobs stimulated by a flexible labour market. Job creation dominated by new private employers in trade, catering and services, predominantly with low-wages, poor employment practices, high turnover

9 Labour market barriers to restructuring Wage flexibility has been a barrier to restructuring not an instrument of restructuring. Low pay/no pay perpetuates inefficiency, removes incentives to renovation: cut wages rather than raise labour productivity. Little renovation in traditional enterprises: emphasis on energy-saving, not labour-saving. Ageing of industrial plant: 1999: about two-thirds installed before the start of perestroika. Even dynamic sectors (oil and gas, metallurgy) have seen a sharp fall in labour productivity.

10 Labour market exits and womens employment Low unemployment because of proliferation of low-wage jobs and labour market exits Soviet Union supposedly characterised by the over-employment of women It is not women, but the young and the old who have fallen out of the labour market, and prime-age men who have died

11 Conclusion: The Labour Market and Structural Adjustment Flexible labour markets are a very inefficient tool of restructuring Excessive wage flexibility sustains backward employers, encourages churning and removes incentives to innovate. The labour market reflects restructuring, it is a very weak instrument in facilitating it.

12 References Simon Clarke (ed) Structural Adjustment without Mass Unemployment? Edward Elgar, Simon Clarke: The Formation of a Labour Market in Russia, Edward Elgar, Simon Clarke: Market and Institutional Determinants of Wage Differentiation in Russia, Industrial and Labor Relations Review, 2003


Download ppt "Russia: The Consequences of a Perfectly Flexible Labour Market Professor Simon Clarke Centre for Comparative Labour Studies University of Warwick."

Similar presentations


Ads by Google