From inclusion to exclusion: barriers to the 'formal' post-Soviet Russian labour market.

• Author: Round, John
• Position: Report

Abstract

Since the collapse of the Soviet Union everyday life for many Russian middle-aged men has become extremely uncertain. This article explores the difficulties such men face in St. Petersburg in their attempts to negotiate the new economies that have sprung up since the dismantling of the command economy system. The research is based on qualitative research conducted in 2003 amongst middle-aged men operating within the city's informal economies. The article demonstrates that such men are often forced to operate in informal economies, which provide for a very low standard of living, due to the barriers they face when trying to enter the 'formal' economy. The paper then goes on to examine how the government conceptualizes such actions and, in turn, how it denies many of this group access to welfare benefits. To conclude the article analyses the social outcomes of this marginalization and argues that there is little prospect of everyday life significantly improving for this sector of society in the foreseeable future.

Introduction: The paradox of low employment in post-Soviet Russia

With continuing high levels of economic growth, stable inflation rates and growing inward investment, a consensus is forming amongst economists that Russia's 'transition' to the market economy is proving successful (see, for example, Aslund, 2004, or World Bank, 2004). The presidency of Vladimir Putin has brought stability across national and international stages, after the volatility of the Yeltsin era, improving Russia's prestige both at home and abroad. Furthermore, countless press stories detailing the growth, and spending power, of Russia's 'emerging' middle class further fuel the image of increasing prosperity. Many economists positively highlight that while the initial reform process was chaotic, unemployment levels have, however, remained fairly constant since the collapse of the Soviet Union. The expected mass redundancies not materializing despite the transformations that state controlled enterprises have undergone. For many, this low unemployment is seen as a sign of economic development, and labor market flexibility, as workers exercise their choice to move from one job to another. However, despite the lack of visible unemployment, economic marginalization has become deeply entrenched within post-Soviet Russian society. According to government figures approximately thirty million people, equaling twenty percent of the population, can be considered, as they receive incomes below the state set subsistence minimum, to be 'in poverty'.

There are numerous reasons why the apparent paradox between low unemployment and high levels of poverty exists. Firstly, many workers, especially in the state sector, receive wages below the subsistence minimum. This is also true for senior citizens, with the average pension well below the figure needed for an adequate standard of living. The second reason is the social restratification, triggered by the collapse of the Soviet Union, which Russia is undergoing. Increasing social uncertainty has seen death, alcohol abuse, drug usage and divorce rates soar, leading to an increasing atomization of Russian society. Rising numbers of one-parent families, social orphans and the decreasing health of the population embeds the increasing marginalization. The third reason, upon which this paper concentrates, is the 'hidden' unemployed. The majority of this group is denied access not only to the formal economy but also to the state structures, which, in a market economy, the marginalized normally turn to, for assistance. The discussion is based on repeat, qualitative, interviews with forty middle-aged men (between 40-60 years old), undertaken between June and September 2003, who operate in St. Petersburg's informal economies. The analysis is also informed by approximately forty-five interviews with government officials, at both federal and regional levels, academics and NGO workers. (1)

Such a discussion is important for a number of reasons. Firstly, it challenges the notion that Russia is developing into, or is close to, a 'normal' market economy with appropriate forms of state regulated social support networks. Secondly, it highlights that Russia's economic growth is simply not 'trickling-down' for the benefit of all. As Lokshin and Yemtsov (2004) note there is the danger that social marginalization will become so deeply entrenched that even sustained economic growth will not be able to reach those that most need its benefits. Finally, and perhaps most importantly, Russia is enduring, since the collapse of the Soviet Union, what can only be described as a demographic crisis. Russia's population, despite high levels of in-migration has fallen by over four million, and male life expectancy has plunged from sixty-three to just over fifty-eight, over the last decade. Most relevant to this article is the fact that the crisis has hit the middle-aged male group disproportionately. As Standing (1998) and Round (2003) point out traditional explanations for this crisis, such as poverty, environmental degradation or the decline of the health care system, do not satisfactorily explain its causes. As Round (ibid.) argues a more plausible cause is the social stresses that many in this group have experienced since the collapse of the Soviet Union.

From the inclusive nature of Soviet work, to be discussed further below, workers were pitched into the 'free' market with few of the skills needed to succeed. As this paper goes on to discuss this group face many problems in their struggle to maintain their survival, combining to produce an extremely uncertain everyday. It is these stresses, which lead to the self-harming behavior, primarily alcohol abuse, which underpins the demographic crisis. However, amongst the Russian 'elite', and in some cases within the international community, there is a discourse that the 'poor' are so 'because they don't want to work hard'. (2) By examining the 'difficult everyday' the article dismisses this fallacy as, rather than a lack of 'hard work', it is the exclusionary nature of Russia's post-Soviet labor market that places them into 'poverty'. To facilitate this discussion the paper will first, briefly, examine the inclusive nature of the post-Stalin Soviet labor market before turning to discuss the upheavals that were caused by the collapse of the command economy. The everyday experiences of the interviewees operating within the informal economies will then be explored, with particular emphasis placed on the barriers to the formal economy and the problems encountered when trying to set up a small enterprise. The final sections will discuss how the state makes registering for state benefits extremely difficult, thus keeping unemployment figures artificially low, and the social outcomes of the uncertainties that these processes combine to create.

The inclusive post-Stalin Soviet labor market

The Soviet Union's socialist system was all embracing, permeating every sphere of political and social life. In post-Stalin Russia the majority of people actively 'belonged' and were ascribed social identity, either through the work place or, if not employed, via 'socially acceptable' classifications (such as veteran, mother of many children, pensioner, disabled, see Mikhalev, 1996). Although characterized by its negative aspects, such as continual shortages of basic goods or the lack of political freedom, there was a considerable element of stability in post-Stalin society. Work was widely available, with numerous opportunities for operating in informal economies, and social transfers, pensions for example, were paid on time and provided an adequate standard of living.

Poverty, which would have signified that the socialist system was failing its people, officially did not exist in the Soviet Union. However, as Braithwaite (1997) points out, from the early 1970s the government euphemized that 'under provisioning', was evident within some sectors of society. She estimates that, by the late Soviet period, up to eleven percent of the population could be considered to be 'in poverty' (ibid.).

'Anti parasite' laws forbade people not to work in the Soviet era, also ensuring that employment was guaranteed and that the state did not have to create welfare systems for the unemployed (Agapova, 1993). The state further divested social responsibility to the employers' enterprise, who provided housing, health care, recreation and holiday facilities, child care provision etc, affording an important share of households' real consumption (Foley and Klugman, 1997). (3) Schwartz (2003) in his extremely interesting examination of the restructuring of employment in post-Soviet enterprises describes the 'ideal' of the Soviet worker remaining with the same firm for life. However, as he notes, there was still considerable labor turnover in the late Soviet period. Gregory and Stewart (1994) estimate that the figure averaged approximately twenty percent of the workforce per year. Discussing the problem of workers who changed jobs too often, the so-called 'rolling stones', they note that the state introduced incentives, such as increased holiday provision, linked to the number of years worked. However, due to the labor shortages in big cities, partially caused by state attempts to control urbanization, these schemes had little impact. With the career of the enterprise manager dependant of the fulfillment of their five-year plan targets the competition to attract labor was fierce. Thus employees were often enticed by a range of incentives to leave their current position.

The 'anti-parasite laws', and the high demand for labor, led to great inefficiencies and low productivity within enterprises. Both Kiblitskaya (2000) and Ashwin (1998) discuss how the shortage of skilled labor empowered individuals, allowing them to transgress company rules on absenteeism and drunkenness, in the knowledge their employer...