State Support to Labor Market in Need of Improvement

16 july 2015

The Analytical Center held a round table on the practice and effectiveness of additional measures in the area of employment aimed at easing the tension in Russia’s regional labor markets.

The Analytical Center has analyzed the way additional measures aimed at easing tensions in regional labor markets are being implemented. The Head of the Department for Social Policy of the Analytical Center Natalia Nikolaeva told the participants of the round table about the findings of the study. The expert noted that the amount of funding for the additional measures had been in decline, however, according to the Ministry of Labor, their effectiveness had not been adversely affected by that.

According to the data presented at the round table, per capital expenditures on these kinds of measures vary significantly among regions and among districts, raising the question of how justified the current budgeting scheme. This question needs expert commentary. “The additional measures helped to ease tensions in the labor market. However, there are still a number of issues that remain, whose resolution would allow us to further improve the situation in 2015-2016,” Ms. Nikolaeva said. “First of all, we need to stop constantly amending labor regulations and, secondly, we need to improve our methodologies.”

“The methodology for assessing the effectiveness of financing measures in the labor market needs improvement,” said the Head of the Employment Department at the Ministry of Labor and Social Security Mikhail Kirsanov. He also reminded those present that an almost 90% cut in the amount of funding allocated to support employment measures meant a lot of the approaches used in this area had to be revised significantly.

The experts noted that at the moment some uncertainty rules in the labor market. According to the Deputy Head of the Federal Labor and Employment Agency Maxim Parshin, there has been a significant increase in hidden unemployment, i.e. when people are forced to go on unpaid leave or work less than 40 hours a week. It is very likely that by the fall many people may find there is no longer demand for their service and join the ranks of the officially unemployed. And while during the previous crisis in 2008-2009 the unemployed got support in the form of paid community work or training in how to be self-employed, this time around the state is only supporting modern regional companies that have a clear strategy for growth, import substitution and penetration of new markets.

The Minister of Labor, Employment and Social Security of the Republic of Tatarstan Elmira Zaripova talked about what kinds of support are available to Tatar companies. The Deputy CEO for HR management and corporate development of one of the companies, KAMAZ Group, Alexander Ushenin said that thanks the support KAMAZ was getting from the Russian Government to prevent layoffs, temporary employment and forward looking professional development training were widely offered. “The way we understand it, forward looking professional development training is not just professional development or retraining, it is when you teach people additional competencies that are going to be in demand at the company in the future,” Mr. Ushenin said

Similar programs are being used by strategic companies in other regions where supporting such companies can have a multiplicative effect. Representatives of these companies also shared their views on the situation during the round table.

The worst hit by the crisis are the disabled. The head of the Department for Social and Labor Opportunities Research of the Moscow Branch of the Russian National Blind Association Konstantin Lapshin said that none of the companies run by the Association had gotten any support from the state yet. Even though, in his opinion, even in a crisis, it would not be much of a problem for the state to offer financial support to just a few thousand of its citizens for whom their job is not just a source of income but pretty much the meaning of life.

Mr. Lapshin’s position was supported by the Chair of the Commission for Social Policy, Labor Relations and Quality of Life of the Civic Chamber of Russia Vladimir Slepak. “We have got 23 million people living below the official poverty line,” he said. “But we still often see cases of late payment of wages and under-the-table pay schemes. We need to create a single information system based on social insurance numbers to combat the black market economy. Whenever there is a crisis we often hear suggestions that social programs must be cut. It is something we must never do, we already have a minimal wage that is below the cost of living so what further cuts are you talking about?” Mr. Slepak suggested creating social production clusters, for example in Crimea, which, he is sure, are going to eventually attract private investors, including western ones.

“Our understanding is that state support must aim to preserve jobs and maintain the purchasing power,” believes VAZ’s Acting HR Director Victor Vasev. He also reminded that early retirement is an instrument that can be widely used and that AVTOVAZ already uses a lot.

“Companies appreciate the fact that the crisis is inevitably going to be followed by growth and the easier they find it to support their employees now, the easier it will be for them to recruit and train new workers in the future,” confirmed the Acting Head of the Strategic Development, Information Services and Civil Society Relations Department of Samar Oblast’s Ministry of Labor, Employment and Migration Policy Yan Talbatsky. “As part of forward looking training we are willing to allocate funds to the retraining of laid off workers to teach them a new profession for which there is demand and we believe that this way we can reduce the shortage of shop floor skilled labor for which there is a huge demand in our region.”

The Head of the Committee for Labor and Employment of Saint Petersburg Dmitry Cherneiko, by contrast, is sure that money has to be funneled directly to people rather than to companies. “We offer support to workers rather than to companies,” the information officer of the Social Development and Innovations Department of the Ministry for Economic Development Yekaterina Kazmina responded. “But it is important to understand whether the retrained personnel will be in demand at this company, so we will not end up promoting inefficient employment.”

At the end of the round table, the moderator, the Deputy Head of the Analytical Center Mikhail Pryadilnikov concluded that the uncertainly currently seen in the labor market is going to begin to clear up in the fall but even now it is clear that existing employment programs need to be improved and proposals need to be prepared for the optimal ways to use treasury money to support the employed.