The historical reasons for low productivity include obsolete equipment and technologies, inefficient organization and low labor discipline. The new more recent causes of low productivity that emerged in the post-Soviet period include limited competition, excessive red tape, shortage of skilled labor, including skilled managers, low mobility of human resources and an underdeveloped financial system.
Сauses of low productivity in Russia date back to the Soviet period
‘As a result if you look at the data published by the Federal statistics service, productivity in the Russian economy has been falling in percentage points on the previous year from 107% in 2003 down to 101.9% in 2013. At this stage closing the productivity gap that exists today between the Russian economy and the economies of the developed countries is going to be highly problematic even beyond 2020,’ Natalia Nikolaeva told the electronic publication Thelifenews.
The consequences of low productivity are well known. These include lower worker pay than in developed countries and its low growth, a high percentage of manual labor, increased number of industrial injuries and occupation related health problems.
However, all the causes of low productivity mentioned earlier, despite being quite obvious, are in fact corollaries of deeper systematic factors. These include, first of all, lack of motivation and incentives to improve productivity at the level of both state owned and private businesses. Businesses in Russia are not interested in long term strategic results and business value appreciation, instead they focus on maximizing their profit which adversely impacts investments in modernization of production equipment and investments in human assets.
Secondly, the state has no clear strategy on improving productivity and neither does it promote any standardized approaches to improving productivity. Suffice it to say that such state programs as the ‘Economic Development and Innovative Economy’, ‘Development of Industry and Boosting Its Competitiveness’ do not even mention improving productivity by 2020 and closing the productivity gap between Russia and developed countries. Some of the measures being implemented by the Government to keep unprofitable companies in business and prevent them from laying off staff also undermine the goal of increasing productivity.