Productivity in Russia continues to decline

10 july 2017

Analytical Center experts published a bulletin on productivity in Russia, where they conclude that it is only half of that in the European Union, in the G7 and the OECD nations. The experts are of the opinion that the productivity index has been falling consistently.

Using statistics supplied by the International Labor Organization the experts concluded that productivity in Russia in 2005-2015 was 27 % behind the global average, 81 % behind the EU average and 41 % behind the G20 average. According to the Organization of Economic Cooperation and Development, the productivity index in Russia in 2005-2015 was extremely unstable and began to decline in 2010.

This is a dangerous situation both in terms of economic growth and in terms of improving the quality of life. The only positive of the falling productivity is generally regarded to be the fact that it keeps down unemployment, but this is only temporary and can result in major negative socio-economic and political consequences further down the line.

Despite the fact that 2015 saw a decline in the productivity index in the majority of the sectors of the Russian economy, agriculture, hunting, forestry, production and distribution of electricity, natural gas and water actually saw an increase in productivity. Among the naturally monopolistic sectors the highest productivity growth was recorded by the Transportation of Oil and Petroleum Products via Pipelines.

The experts note that the management of state corporations are not paying enough attention to productivity, its level and the trends in it: many organizations are not keeping track of productivity in their reports and even when they do have the data, there are no descriptions of the methodology used to obtain it, which makes analysis impossible. On the whole, state corporations have lower productivity and less impressive productivity growth than private companies.

The Federal Statistics Service reports that there is significant variability in productivity from region to region in Russia. Thus, in 2015, Tambov and Tula oblasts had the highest productivity indexes (107 % and 106.6 % respectively), while the lowest figures were recorded in Volgograd oblast (94.7 %), Kaluga oblast (96 %), Karachaevo-Cherkessiya, Omsk oblast and Khabarovsk krai (97.6-97.7 %)

The factors negatively impacting productivity in Russia, according to the experts, include obsolete and worn-down production equipment and infrastructure, obsolete technologies, including IT, lack of skilled labor, as well as corruption, lack of transparency, excessive regulation of business and production processes by the state, outdated labor laws.