distributional impact of privatization in russia
TRANSCRIPT
1
February 6, 2003
Dr. (Economics) Svetlana Glinkina,
Deputy Director, Institute for International Economic and Political Studies,
Russian Academy of Sciences, Moscow, Russia
Distributional Impact of Privatization in Russia To date, there has been little research on the effects of privatization in Russia on
employment and the distribution of income. What little exists looks at the problem on
the regional or branch level, or at case studies of particularly affected groups, but
always within the framework of a narrow privatization concept predominant in Russia
which implies simple transfer of existing state assets into private possession.1
Moreover, the role of privatization in the making of the emerging social structure in
Russia is either overvalued (all important) or, on the contrary, substantially
undervalued ( unimportant).
An assessment of the distributional effects of privatization requires at least a cursory
analysis of the specific Russian privatization model that has shaped the current
property structure and influenced substantially the distribution of incomes in society
and those of the workforce in the labor market.
In this paper a broad definition of privatization is used; it is understood as the process
of creating the environment for the emergence of private capital and for extending the
share of the private sector in aggregate assets and the national product of the country,
by all possible means, whether official or unofficial.
Privatization, conceived broadly, implies:
- the transfer of existing state-run enterprises to private ownership (privatization in
its narrow sense),
1 See, for example, Liborakina M.I. Women and Privatization. Moscow, Municipal Economy Institute Foundation, 1999; Trotskovsky Y.A., Rodionova L.V., Chertov N.A.. Characteristic Features and Consequences of Privatization in a Depressive Region (Case Study of the Altai Region). Barnaul, AGU, 1999; Brown J.D., Earle J.S. Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative? SITE Working Paper, No. 160, July 2001.
2
- the relocation of financial flows created in the state sector to the private sector
(“deliberate de-capitalization of the state sector”),
- the setting-up of new private enterprises.
The Privatization Process and Outcomes of Mass Privatization in Russia
In the course of mass privatization (1992-1994) all Russian citizens above the age of
18 were provided with free property certificates with a 10,000 ruble nominal value.
Citizens were granted the right to exchange their vouchers for shares of enterprises,
use them in buying property in the framework of small-size privatization, or invest
them into newly created privatization investment funds.
Recall that the launch of mass privatization coincided with the exposure of the
Russian population to the consequences of a shocking price liberalization and
spreading hyperinflation that led to the loss of virtually all savings. About 34% of all
voucher holders, finding themselves in a most difficult economic situation, without
any hesitation sold their vouchers. According to the time and place of sale, the
voucher price fluctuated in the range of $5-20. For this one could buy a toy-car2 or a
couple of bottles of vodka, a far cry from the lavish promises that had been made by
the program’s initiators. Even less lucky were the 25% of Russian citizens who
invested their property certificates into unregulated privatization or voucher
investment funds (which sprang up spontaneously and which were innumerable).
Almost all lost everything in a short time. Many of these voucher investment funds,
after only several weeks of existence, disappeared, and with them vanished the
anticipated profit. And many of those funds that managed to survive on the market
offered miserable dividends.
A surprisingly high 11% of the population gave away their vouchers as presents,
while about 5% of vouchers were never invested at all (symptomatic of the
population’s disbelief in “privatization games”). Some people lost their vouchers, and
others decided to keep them until better times. Statistical data suggests that only 15%
of citizens invested their vouchers into enterprises and became minority shareholders. 2 “Reasonably used, the voucher’s initial value (10,000 rubles) may have been increased 100 and even 1,000 times, which would have been more than enough to buy two Russian-made cars”, Anatoli
3
Only a few of these investors were subsequently lucky, namely those who guessed
right and chose one of those relatively few enterprises which, under the new economic
conditions, eventually turned out to be really profitable. To buy the stock of solid
companies was not an easy task even if information were available, for the directors
of high-potential firms only reluctantly admitted outsiders “from the street” as
shareholders. As a result, the overwhelming majority of citizens, after keeping an
illusionary wealth in their hands for a while and then getting little or nothing for it,
felt deeply betrayed. “The cutting of the privatization pie” seemed to benefit a very
few.
The Law on Privatization stipulated that an enterprise “work collective”—the workers
and managers in a firm, a group often termed the “insiders”—could opt to buy out
51% of shares of its company in what was called a “closed subscription.” There were
two other options available to the collective (see below), but the purchase of a
majority stake was by far the most popular. From December 1992 till June 1994 (the
starting and official end points of voucher privatization), shares of more than 12,000
enterprises, with an overall charter capital of more than 800 billion rubles (balance-
sheet value as of July 1, 1992), and with more than 13 million workers (almost 50%
of those employed in industry), were slated for voucher auctions. 35-70% of the stock
of every enterprise (no more than 80% according to Law) was placed on sale for
vouchers (including the amount reserved on “closed subscription” for members of the
work collective).3
Of the overall number of state-owned enterprises, about 41% were privatized in this
first, “mass privatization” stage. A parallel small-sized privatization program
succeeded in divesting more than 50% of available assets (with leased enterprises
bought out, by the end of 1994 the amount of privatized small enterprises amounted to
nearly 80% of the total stock of such small business units).4
Chubais, one of the architects of Russian privatization, claims (“Has the Voucher Ever Existed?” Mir Novostey, August 20, 2002). 3 Deryabina M.A. Reforming Property Relations (Privatization) in Russia (1992-1996 Experience). In: Problems of Market Transformation in Transition Countries. Vestnik nauchnoy informatsii IIEPS RAS, Moscow, No.12, 1996, p. 35. 4 Ibid., p.36.
4
The insiders in enterprises selected for mass privatization could choose between
several variants of privatization:
Variant 1 stipulated that 25% of preference shares of the “A” (nonvoting) category
would be distributed free of charge among the employees. 10% of ordinary shares –
the “B” (voting) category – would be sold to the workers at 30% discount. 5% of
ordinary shares would be sold at face value to the management, and 60% of ordinary
shares for cash to petty investors.
Variant 2 envisaged the sale of 51% of stock against privatization vouchers or for
cash under a subscription limited to workers and the management, with the remaining
49% of stock offered for sale (usually not all at once) at auctions, both against
vouchers and for cash, to petty investors.
Variant 3 could only be employed with regard to medium enterprises, with a
precondition that a management group composed of enterprise employees was
formed, which had to take responsibility for implementing the privatization plan and
preventing the enterprise from going bankrupt. This group designed a privatization
plan, which had to be approved by the work collective. Then the management group
signed a contract with the local division of the State Committee for Property
Management, by which the members of the group accepted material responsibility
secured on their personal property (by way of mortgage). The group placed a deposit
of not less than the amount of 200 minimum wages. The contract was signed for a
one-year period. With the contract expired and its conditions met, the management
group had the option of buying 20% of ordinary shares of the enterprise at face value,
with the payment deferred for two years. If the group did not manage to meet the
conditions stipulated by the contract, it would forfeit the option.
Under this complicated third variant, all the employees of a given enterprise
(including members of the management group) were entitled to buy 20% of ordinary
shares representing its own capital, provided, however, that the total sum did not
exceed $30 per employee after taking the 30% deduction from the face value.
Payment for the shares could be made over three years with the first installment not
exceeding 20% of the face value of the shares.
As noted, variant 2 proved the most popular. Variant 1 was applied in some few
larger firms where insiders could not afford the purchase price, and variant 3 was
5
hardly applied at all. Under variant 2 the bulk of the property transferred to private
ownership went to the workers and the staff of the enterprise concerned; i.e., the
insiders. In as many as 80% of privatized enterprises, the work collectives held a
controlling amount of stock. Voucher privatization thus produced a typical stock
capital structure of 60-65% of shares in insiders’ possession. Outside investors
succeeded in obtaining 18-22%, and the State retained about 17% of the stock of
privatized enterprises. Although until the August 1998 crisis in Russia the portion of
inside shareholders tended to decrease, insiders’ property was still dominant.
Moreover, from 1999 on, signs of a reinforced position of insiders emerged.
By the end of 1994, 40 million citizens of Russia had formally become shareholders.
In theory, privatization had almost instantly transformed millions of ordinary Russians
into capitalists. In practice, however, voucher distribution impacted minimally on
incomes and employment of broad population layers. In essence, “the Russian type of
a voucher variant, unique in world practice, was applied, which, under a smoke-screen
of lofty phrases about “popular privatization”, allowed, in the shortest time possible,
to unprecedentedly expropriate a significant part of common property for the benefit
of a small group of people”.5
To substantiate this assertion requires an analysis of property relations emerging in
enterprises privatized in favor of work collectives. Russian research to date does
suggest the absence of any positive impact of privatization on enterprise workers’
motivation and behavior. The highest “privatization interest” manifested by
interviewed workers was connected with expected dividends. However, almost
everywhere this interest faded gradually since in many Russian enterprises the
opportunities for shareholders to obtain any cash benefit were limited.6
New shareholders’ interest in designing the enterprise development strategy and in
decision-making turned out to be far weaker everywhere than initially presumed. In
their study dated 1996, J. Blasi and A. Shleifer concluded that Russian rank-and-file
workers were not represented in the advisory boards of privatized companies and 5 Nekipelov A.D. Essays on Post-Communist Economics. Moscow, TsISN Minnauki Rossii, 1996, p. 281.
6
behaved passively at shareholders’ meetings,7 even though they had the legal right to
participate. This was often the outcome of management’s manipulations on the eve of
these meetings and of workers’ traditional apathy and distrust in their ability to
influence the course of events. This is a realistic assessment as members of work
collectives have, indeed, insignificant chances to control their managers’ activities. I.
Gurkov and S. Maital state that more than 40% of workers in Russian privatized
enterprises claim a marked contraction of their chances to influence the decision-
making process after they became shareholders (whereas 38% of those polled hold
that privatization brought about no changes in this respect). Moreover, 46% of
ordinary shareholders think that after privatization they get less access to information
about their company’s performance than they did as ordinary workers.8 It is often
claimed that in case workers display the slightest initiative about ownership rights,
management launches all conceivable (and many inconceivable) mechanisms to block
it; and even very active workers rarely succeed in passing any decisions that
contradict those proposed by the management. Alliances between rank-and-file
workers and outside investors aimed at supporting ordinary shareholders (enterprise
workers) in their opposition to the established management are rare. The research of
A. Bim shows that these cases occur in about 12-13% of firms only.9 Similar
conclusions can be reached based on press reports.
In conflicts between the management and outsider investors, workers frequently take
the side of enterprise management as they are convinced that “their own,” even most
severe management is less radical and more tolerant to colleagues than the “alien”
external investor. The idea of concentrating the stock in the hands of managers,
though not very popular among workers, is, nevertheless, more acceptable than that of
seeing a controlling stake in the hands of outsiders—who might be more prone to
dismiss labor.
6 The 1994 economic results showed that only 1/3 of privatized enterprises declared their intention to pay dividends. 7 Blasi J., Shleifer A. Corporate Governance in Russia: An Initial Look. In: Corporate Governance in Central Europe and Russia (ed. by Frydman R., Gray Ch., Rapaczynski A.). London, 1996. 8 Gurkov I., Maital S. Perceived Control and Performance in Russian Privatized Enterprises: Western Implications. European Management Journal. No. 4, 1995. 9 Bim, A. Ownership, Control Over the Enterprises and Strategies of Shareholders. Vienna: IIASA, 1996, p. 12.
7
Therefore, it is not surprising that privatization has not yet positively influenced
enterprise workers’ motivation.10 100% of enterprise directors claimed in a poll that
only in exceptional cases are ordinary workers interested in practicing their ownership
rights. In 1993-1994 from 10-12% to 15-18% of rank-and-file workers had absolutely
no interest in possessing stock and were willing to sell their shares on financial
markets, or to the enterprise management.11 The rest did not know what to do with the
shares and did not see opportunities to influence enterprise development strategy.
Thus, in many cases the director of the firm, or a group of leading managers, has
become the controlling agent or agents in a privatized enterprise. But the real
competence of this person or group is often far from adequate to manage the size of
property in their possession.
The analysis made by A. Bim showed in 1993 that 82% and in 1994 80% of
enterprises privatized according to the 2nd variant, fell under the control of the
management. One can see the increasing control of management from the way in
which managers accumulated stock over time: In 1993, management held from 3 to
5% of the stock of 20.8% of privatized firms, from 5 to 10% of another 20.8%, from
10 to 20% of 12.5% and from 20 to 30% of 8.3% of privatized enterprises.12
Notwithstanding, in the majority of enterprises that became controlled by insiders, the
managers did not feel satisfied with their actual controlling power and often initiated
measures to obtain larger portions of equity. These efforts were successful:
On balance, by the start of 2001, the block of shares in top management’s possession
was getting close to the workers’ block (21.0% and 27.2% respectively). The Russian
Economic Barometer respondents predicted that managers on average tend to become
owners of the largest “group” package of shares within two years of privatization.13
What methods have the managers applied in concentrating property? Studies show
that in Russia in many privatized enterprises the workers were forced or pressured by
managers to sell their shares, to management, at par or at a discounted price. This
pressure was exerted either by offering the workers the chance to exchange their
10 Ibid., p. 13. 11 Ibidem. 12 Ibid., p. 5, 8. 13 Kapelyushnikov R.I. The Kingdom of Insiders. Property and Control in Russian Industry: Some Results of Polling Russian Enterprises (http://www.politcom.ru/aaa_c_econ4.php).
8
shares for low-priced consumer goods at the time of their retirement, or dismissal, or
workers were given the chance to sell managers shares in lieu of disciplinary
punishments. The heads of enterprises managed to impose conditions for “closed”
subscription shares in the second issue, which secured their privileged position. They
also concentrated property by buying shares at the first money auctions, which came
about following the voucher auctions, and in which the residual holdings of the state
were sold for cash.
To succeed in the money auctions required access to both vouchers and the money to
buy them. The task was rather easily accomplished by the enterprises’ top managers
through voucher funds, set up under their control, and thanks to their personal
savings, accumulated in the stages of initial liberalization of the Soviet economy
(1988-1991), and of spontaneous, or nomenklatura privatization, whereby managers
became owners of assets through lease and cooperative arrangements. To get hold of
property a significant part of assets was used, which, in other conditions, might have
formed the basis for paying dividends or making investments. Privatization mainly
caused, in effect, reduced investments by privatized enterprises on the stage of second
property redistribution (following mass privatization), and lower potential workers’
income. Shadow methods aimed at property concentration were widely used in order:
1) to mobilize the existing private affiliated structures, or build up new ones,
particularly to concentrate shares in accordance with the strategic line designed by
enterprises’ leadership; 2) to orient private persons, formally not associated with the
given enterprise but again in collusion with its leaders, to purchase shares at auctions
or on the secondary market, and to turn them over to the control of the managers.
To cite reliable quantitative data for the scale of above operations is not possible.
Quite informative data might be gathered if registers of shareholders could be
analyzed. An indication of corporate governance difficulties in Russia is that share
registers, as a rule, are inaccessible not only for independent researchers but also for
shareholders proper. Therefore, evidence given by A. Bim in his unique research is of
special value.14 He managed to gain access to a set of registers of Russian joint stock
companies, and he found out that in 67% of them, up to 10-12% of juridical persons,
14 Bim A. Ownership, Control Over the Enterprises and Strategies of Stockholders. Vienna: IIASA, 1996, p. 13.
9
in their capacity as outside shareholders of the company, have the same postal address
as the headquarters of the relevant enterprise. This is an indication that these persons
were likely to be “satellite structures” under the control of the enterprises’
leadership.15 In 58% of enterprises the number of outside shareholders whose family
names were the same as those of the top leaders reached 3-19%.16 This suggests
collusion.
From Where Have the Russian Oligarchs Emerged?
In Russian research literature the period following the initial property formation and
its first allocation in voucher auctions, and its subsequent redistribution and
concentration in the hands of enterprises’ and bank directorates and of favored private
investors, has sometimes been called the “stage of money privatization.” The term is
not justified for several reasons. First of all, the price of a privatization transaction
was almost never the main factor in determining a sale. Far more decisive was the
political component of the privatization process, and this component was not seldom
decided by outright corrupt means. The statement is true not only for the main
privatization transactions of the federal government, but also applies to transactions at
the regional and municipal levels. In essence, following voucher privatization (1992-
1994) there was a quasi-money, or quasi-market privatization stage; within this two
sub-stages may be identified: from 1995 to 1998, and from 1999 to the present day.
Typical forms of property redistribution or acquisitions in these years were:
- Lobbying by all participants to obtain, in desired firms, the blocks of shares that
remained in the hands of federal and regional authorities;
- voluntary or administratively forced absorption of firms into holdings or FIGs
(financial-industrial groups, often with unclear ownership);
- the “loans-for-shares” scheme;
- legalized dilution of state-owned shares, debts-into-securities conversion, sale of
receivables, trust schemes, buying up of promissory notes, manipulations with
dividends on privileged shares, etc.
15 According to T.Dolgopyatova and I.Yevseeva, in 1993 from one fourth to one third of all Russian enterprises had their satellite companies (Dolgopyatova T., Yevseeva (Boeva) I. The Survival Strategy of State-Owned and Privatized Enterprises under Transformation Conditions. Moscow, 1994, p. 28). 16 Bim A. Ownership, Control Over the Enterprises and Strategies of Stockholders. Vienna: IIASA, 1996, p.18.
10
This was all in addition to the straightforward, aggressive but legal buying up of
shares by managers on the secondary market (from workers, investment institutions,
brokers, banks).
The biggest and most valuable Russian companies in which one could verify and
locate the government’s holding were the principal objects of this “quasi-market
privatization.” The so-called loans-for-shares scheme is the most interesting to
investigate, since it had a large impact on the distribution of wealth in Russia. The
essence of the scheme was the following.
A private Russian bank lent a sum to the state budget against a collateral pledge of the
federally retained blocks of shares in a valuable company, usually a firm in the natural
resource sectors. A tender was held on the pledged shares, with the winner to be
chosen according to the size of the loan pledged. Given the nature of the firms
involved, one might have thought that the sums pledged would be very large. In
reality, the blocks of shares were pledged for very low sums. For example, a
substantial equity stake in the giant Norilsk Nickel company was given as collateral
for a loan of $179 million compared to an experts’ evaluation of $2 billion. In reality,
Government never repaid any of the money: these “tenders” and “loans” were in
effect indirect sales to a buyer known in advance, without, any bidding or competition
as such. It was in this way – by means of “arrangements” – that ownership stakes in
some of the best natural resource producing firms fell to the Russian oligarchs, for
very low prices.
Another illustration of scandal was the acquisition of shares of the YUKOS oil
company by MENATEP bank. The heads of three other banks, namely Rossiyskiy
Kredit, Alfa-bank and Inkombank, later charged the State Committee for Property
Management and MENATEP with mercenary collusion during preparations for the
auction of YUKOS’ shares. But it was MENATEP itself that designed and organized
the auction. The insulted losing bankers alleged that officials of the State Committee
for Property Management had deposited government funds into MENATEP, and this
was the money used to make a loan to government (or, in effect, to buy YUKOS).
11
“Two opinions are impossible, YUKOS will be ours”, one of MENATEP’s leading
figures reportedly said, well before the auction took place17.
Practically the same kind of rigged scheme was applied in the loans-for-shares
scheme for 51% of shares of Sibneft oil company, founded in mid-1995 by means that
bypassed the oil branch structure approved by the government.
On December 28, 1995 the commission overseeing the tender acknowledged the SBS
joint-stock bank and Oil Financial Company closed joint-stock company as winners
for Sibneft. An investigation carried out by the Russian Federation (RF) Audit
Chamber showed that, before the tender, the RF Ministry of Finance deposited $137.1
million with the SBS joint-stock bank, and it was these funds that the bank then “lent”
to the government following their winning of the tender.18 This makes a mockery of
the notion that the scheme was imposed upon a cash-short government, and lends
weight to the allegation that the whole idea was to transfer ownership of valuable
property to a well-connected few.
The key conflict in property redistribution before the 1998 financial crisis was the
clash of interests: old natural monopolies (though in new corporate clothing) and old-
line major industrial and mining structures versus new financial-industrial groupings,
whose expansionist interests overlapped in the new redistribution of property. Behind
the biggest transactions of 1995-1998, including those in the loans-for-shares scheme,
a stage of property redistribution in many Russian key companies took place, with the
outcomes being determined not by economic factors, but by the political power and 17 Pelekhova Y. Russian Oligarchs. Versiya, July 1, 2000. 18 Paragraph 3.1 of the agreement stipulated that the loan is extended till one of the following dates expires: - the date liabilities of this agreement are paid by the borrower (Ministry of Finance) using 1995 federal budget funds, i.e. January 1, 1996; or - the date determined by adding five calendar days to the date when revenues from selling shares transferred as security of the above loan, stipulated by paragraph 2 of the agreement, be deposited. In signing the loan agreement, paragraph 6 of “Mandatory Conditions of a Loan Agreement” approved by the Decree No. 889, August 31, 1995, of the RF President, was bypassed, which rules out absolutely the right of the borrower (Ministry of Finance) to redeem liabilities on the account of the federal budget, since the 1995-1996 budgets did not provide for assigning funds to redeem the loan. The Ministry of Finance was given only one working day (December 29, 1995) to find resources to pay off the loan. According to the report of the Audit Chamber, on December 29, 1995, the SBS joint-stock bank transferred $97.3 million of the loan value ($100.3 million offered as loan, minus $3.0 million as security) to the currency account of the RF Ministry of Finance No. 704000011420 with MENATEP bank, but the moneys were received by the federal budget only a month later, as during that time they were continuously transferred from account to account till January 31, 1996. MENATEP, the second auction bidder, was virtually granted a month loan of $97.3 million. In this way, MENATEP was rewarded for participating in the auction.
12
interests of enterprise managers, emerging oligarchs in the banks and representatives
of state authorities.
The financial crisis of 1998, and the ensuing 1999 change of political leadership in the
country, did not basically change the privatization process. This retained its character
in subsequent years. Still, there was a substantial re-grouping of the main players on
the privatization field, a revaluation of their role in managing economic and,
sometimes, a shift in their political power.
By the onset of 2002, property redistribution to the benefit of outside investors—
which had at least started to emerge in the 1995-1998 period—came to a near-
complete halt. A second surge of rapid growth of the share of equity held by
managers, and the actual stagnation in the increase of outside investors’ property, is
correlated with the financial crisis of 1998 and even more so with the subsequent
economic recovery. The August 1998 shock undermined the positions of many
financial institutions owned by oligarchs and limited their opportunities for further
expansion into the real sector of the economy. General economic revival of many
enterprises in 1999-2002 allowed enterprise managers to sharply promote the process
of “catching” the workers’ property.
As a result of the financial crisis, the structure of outside shareholders shifted heavily
to the benefit of non-financial outsiders, i.e. outside physical persons and other
enterprises. In 2001, 32.4% of industrial enterprises’ stock of capital was owned by
outside shareholders, whereas financial outsiders, financial institutions, banks and
investment funds among them, had only 7.3%.
“Natural persons” (a phrase in Russian law) possessed 1/5 of all shares. These were,
as a rule, not individual investors who put their savings into the stock using the
services of professional intermediaries/players on the securities market, but rather
proxies of either managers or major shareholders who got access to shares thanks to
personal agreements bypassing the organized market. As to the second category of
non-financial outsiders, i.e. “other enterprises”, they possessed little more than 10% of
shares.
13
Today, the battle for control continues; it is over in no more than 30% of enterprises.19
Somewhat surprisingly, despite a decade of give-aways and sales, state property
valued at $90 billion (equal to nearly 30% of GDP) remains in state hands. In the gas
industry alone the amount of assets still available for privatization is equal to about
8% of GDP. Privatization in the framework of the railway industry reform may also
promise 8% of GDP (and already one sees some of the oligarchs trying “to occupy
the lower floor” of the industry by buying depots, repairing facilities and other assets).
An increasing number of Russian big capital owners cast their glances at the agro-
industrial sector (7.5% GDP). The market for financial services (4% GDP) will also
be a field of new activity, since the Russian government aims at putting an end to the
exclusive right of the enormous Sberbank in offering deposit insurance. A
forthcoming pension reform will allow private financial structures to deal with the
pension moneys. The oligarchs will also attempt to participate in the privatization of
the electric energy sector (2.5% GDP).
Small Business and Privatization
As seen from the above analysis, in the course of traditional privatization, i.e., transfer
(sale) of state assets into private hands, huge fortunes have been accumulated.
Contrary to promises given by the country’s leadership at the initial period of
privatization,20 broad population layers were effectively prevented from taking an
active part in the large privatization process. They were granted better chances to take
part in business activity by the so-called “privatization from below”, i.e., evolution of
the private sector on its own basis in the framework of, as a rule, small businesses. It
should be mentioned here that certain opportunities to develop small business vecame
available in the process of mass privatization when enterprise departments became
autonomous, surplus material assets were sold, etc.
As noted, we conceive privatization not only as the transfer of government assets into
private hands and deliberate de-capitalization of the state-run sector of economy, but 19 Radygin A.D. On Some Perspectives of “Loans-for-Shares” Privatization. In: Russian Economy: Trends and Perspectives. Institute of Economy in Transition. Moscow, August 1996. 20 At the outset of mass privatization A. Chubais asserted that a 10,000 ruble voucher would be worth 150-200,000 rubles by the end of privatization process. In fact, by June 1994 its price rose to 60,000 rubles, by this time, however, more than 80,000 citizens had already sold or given away their vouchers practically for free - they were strongly induced to do so due to shocking liberalized prices and
14
as the evolution of the private sector on its own basis as well. Research shows that it
is far from easy to answer the question about the number of persons participating in
“privatization from below” and what income they get.
According to Russian legislation in force, there are two kinds of small
entrepreneurship: small businessmen, and individual businessmen without juridical
person status. In order to determine their quantity, statistical data on small businesses
and data from public polls may be used. We suggest the following initial formula to
arrive at a full calculation of the size of this sector:
N = (X1 + X2 – X3 +X4)/X5,
where
N is the number of small businessmen;
X1 – the number of registered small businesses;
X2 – the number of small businessmen registered as individual businessmen without
juridical person21;
X3 – the number of not operating registered businesses;
X4 – the number of operating “shadow” (not registered) businesses;
X5 – the average number of businesses headed by one and the same person.
At present, official statistics records only one of the above equation components, i.e.,
X1, the number of registered small businesses, which, in recent years, has fluctuated
around the 900,000 level.
How can we calculate the number of small businesses hiding behind the title of
individual businessmen (X2)? Fragmentary information from Tax Inspections, as
monopolistic owners of information on individual businessmen, suggests that their
number in Russian regions is growing and may reach the ratio of 2-4 individual
businessmen to 1 registered small business. Let us take the ratio 3:1. Further, it is
known that the status of individual businessman is actively used by small businesses depreciation of their personal savings. Moreover, inflation had by that time drastically reduced the purchasing power of the ruble. 21 A businessman without juridical person is a citizen engaged in entrepreneurship in his own name and is individually liable by all property he posses. A juridical person is a legal and organization form (with
15
to lower the tax burden and simplify accounting standards. Many businessmen have
simply re-registered their enterprises. Roughly estimated, in 50% of cases small
businesses with at least a minimum of hired workers may hide behind the status of
individual. Then X2 may be assessed at about 1.35 million enterprises.
“Dead” and “shadow” enterprises, is a special and difficult question. Let us assume
that the number of enterprises, which have not yet begun operating or are abandoned
(X3), amounts to 30% of registered enterprises and about 20% of enterprises not
registered as juridical persons. In this case their number surpasses 500,000. As to not
registered (“shadow” or informal) enterprises (X4), their portion may reach
approximately 1/8 of all small businesses, i.e., perhaps more than 250,000. One
investor may set up several enterprises; therefore, we suggest a correction of the final
figure by reducing it at least by 1.5. In these estimates exact figures are hardly to be
cited. On balance, however, it may be said that small businessmen number about 1.3
million.
Representative polls may be a more reliable instrument, they suggest up to 3% of the
economically active population are small businessmen. In this case the quantity in the
analyzed group increases markedly.22 Thus, polls suggest that small businesses are
actually much more numerous than the numbers given in enterprise statistics. If we
take the given estimates as the lower and upper bounds, we may assume that about
1.3-1.8 million people took part in this form of privatization.
From the social-demographic point of view, the overwhelming majority of small
businessmen are males, for the most part middle-aged (up to 40). As to general
background, they are noted for their higher educational level and a higher level of
accumulated human capital.
The material status of businessmen is high practically on all indicators. Their per
capita household income is 3.4 times higher than the country average, they exceed 2.4
and 3.9 times the per capita incomes of self-employed and hired workers respectively.
charter capital), whose participants act in the name of the juridical person and are liable within the limits of the charter capital. 22 Though in polls a shift in selection is observed in favor of more educated groups and the urban population, where businessmen fall more frequently.
16
The individual income gap is even larger: 5.3 times higher than the average country
level, 3.6 times than the earnings of self-employed, 5.6 times than those of hired
workers. The quantitative differentiation in accumulated personal property is not so
striking, but it does exist. Judging by obvious signs of consumption, e.g., private cars,
the level of well-being of businessmen is far higher than that of the average Russian.
Businessmen are active savers, and they appear to concentrate the bulk of their
savings in foreign currencies.
The higher status of this group of citizens manifests itself in more frequent purchases
of durables, immovable property and paid services. Businessmen are more seldom
forced to economize. They invest more in housing construction and repair, and more
often have the chance to spend holidays abroad. It is not surprising that they assess
their own material status as very high. They also claim to be “workaholics”: their
reported overall workweek exceeds the average level by 15 hours. Their overtime
work is mainly related to their main business. The principal stimulus for small
businessmen is high income; relatively important is the motive of making useful
relationships. Businessmen tend to care less for all kinds of comfort and
maximization of leisure time.23
Representatives of small business in Russia are rather heterogeneous in their social
and professional backgrounds..24 Many of them originate from the shadow economy.
Typically, they built up their first capital through speculation in foreign currency, re-
sale of clothes, cosmetics and Western electronic appliances, and then passed over to
larger, more legal businesses by founding private officially registered companies.
Businessmen drawn from former nomenklatura and the Young Communist League
(YCL) constitute a large group. Right from the outset they occupied the most stable
niches in small business, and succeeded in attracting YCL’s and Communist party’s
deposited funds to finance their businesses.
23 In this respect, in particular, the Russian middle class shows its immaturity, in Western countries, conversely, the middle class struggles for working time reduction. See Middle Class Formation. Bureau of Economic Analysis, Moscow 2000. www.beafnd.org/english/activity/library/publish.htm 24 See, for example, Radaev V.V. The Sociology of Business (1999-2000). Course of Lectures (www.ckp.ru); Chirikova A.E. The Leaders of Russian Business: Mentality, Sense, Values. Moscow, Institute for Sociology, RAS, 1997.
17
Businessmen whose parents have been connected with the military-industrial complex
form a special “clan”. Those who originate from academic circles hold another special
place in the small business community. Some of this group regard entrepreneurship
as forced degradation, as a step backward in their intellectual career; others, on the
contrary, think it is only now that they have found their proper place in life. This is the
so-called “delayed” entrepreneurship: under new social and political conditions
people can at last be engaged in “their” business.25
Owing to insufficient support by the state, as well as absence of necessary economic,
technological and social conditions, Russian small business has consistently faced
serious difficulties. As a result, the evolution of a considerable part of small private
business took a path different from that in advanced capitalist countries, on a whole
range of characteristics. For example, a certain part of the sector became marginal
because: 1) it did not succeed in forming cooperative supply arrangements with big
firms; 2) it focused on trade and speculative middleman activity (its share in
production is extremely small); 3) the amount of not registered and illegal enterprises,
accounting for a significant part of partial and shadow employment, have continued to
flourish in parallel with the development of the formal, legal sector. .
Despite obvious segmentation of small business, they have a common foundation,
several experts suggest: “…Their social positions are still uncertain, and the
environment remains often not too benevolent to them. General instability of the
situation, incomplete legislation …as a result, they actually find themselves on the
edge of social structures …”26
The New Income Structure
Can We Rely on Official Statistics?
Major changes in the Russian social-economic sphere in the 1990s, notably the
development of private business, and formation of the institute of private property,
brought about significant changes in the income structure of the Russian population.
Business and property incomes started to play a noticeable role. However, since
25 Kwiatkowski S. Intellectual Entrepreneurship and Sustainable Economic Development in European Post-Socialist Countries. Problemy teorii i praktiki upravleniya, No.3, 2002, p.25. 26 Radaev V.V. The Making of the New Russian Business. Sociological Aspect. Moscow 1993, p. 23.
18
growth of property and business incomes has not affected the bulk of population, the
principal income source of the overwhelming majority of citizens remains the wage.
Its share in total income (including the hidden wage; that paid “in envelope” to escape
taxation and government notice) fell drastically during the first decade of
transformation, from 75% to about 60%, but the share of incomes the population
receives in form of social transfers remained substantially unchanged.
Table 1 below gives a notion of income structures and sources. A higher share of
wage remuneration and a lower share of business and property revenues in the general
structure of citizens’ revenues is observed since the end of the 1990s. This is because
the RF State Statistical Committee included estimated hidden wages in the “work
remuneration” indicator, which previously was referred to “other revenues”. The
wage share in the population’s money revenues, calculated according to the new
method, increases from 38-40% to 63.5-65%. Unofficial or hidden forms of payment
are prevalent in the non-state economic sector. Fictitious wage rates, based on official
wage levels in the public sector, are often not reflected in the accounts, again, to
evade taxes. The real wages exceed the fictitious rates dozens of times, and are not
officially reported. Often, a worker may not be officially on the organization’s books
at all, and his wage is simply not entered in the bookkeeper’s accounts. Unreported
wages concealed from taxation constitute from 65 to 71% of the official wage bill in
both the state and private sectors, according to different estimates.27
Table 1
Citizens’ revenues and their sources, 1994-2001
(share of overall personal revenues, %)
1990 1994 1995
1996
1997
1998
1999
2000
2001
Growth rate of real personal per capita revenues (% per year)
12
-16
0.8
6.3
-16.3
-13.2
10.9
7.2
OVERALL REVENUES 100
100
100
100
100
100
100
100
Wages and related payments* 76.4 64.5
62.8
65.9
65.1
64.5
65.4
61.3
61.3
Social payments 14.7 13.5
13.1
14.0
15.0
13.4
13.7
14.4
15.1
Property revenues 2.5 4.5
6.5
5.4
5.8
5.5
7.3
7.1
5.6
Business revenues 3.7 16.0
16.4
13.6
13.1
15.0
12.8
16.0
16.2
27 Soptsov V. There Is No Alternative to Active Income Policy. Chelovek i trud, No.6, 2001.
19
Other revenues 2.7 1.5
1.2
1.1
1.2
1.7
0.9
1.2
1.9
CORRECTED REVENUE INDEX** 100
100
100
100
100
100
100
100
Wages and related payments* 61.2
58.6
60.5
58.9
58.7
61.1
57.7
58.6
Social payments 14.8
14.6
16.2
17.6
15.5
15.3
15.8
16.1
Property revenues 4.9
7.2
6.3
6.8
6.3
8.2
7.8
6.0
Business revenues 17.5
18.2
15.7
15.3
17.4
14.4
17.5
17.3
Other revenues** 1.6
1.3
1.3
1.4
2.0
1.0
1.3
2.0
Source: RF State Statistical Committee data. Revised data for 2000-2001 is incompatible with the data for previous periods. * Hidden wages included. ** Corrected revenue data (and, particularly, “other revenues” index) are based on calculations of RECEP experts. See calculation method in: Review of Russian Economy. 1996. III. P. 110-114. It is worth stressing that official data report the volume of accrued and not paid out
work revenues. However, the phenomenon of unpaid wages and wage arrears in
Russia is known to be large in size.
Various approaches to assess the causes of this phenomenon exist. One argues that
wage arrears are an element of economic strategy of enterprises, a consciously
pursued policy due to the large surplus of workers in many Russian enterprises, both
state-owned and privatized.28 If dismissing “surplus workers” appears too costly
because of the size of the gratuity on discharge, danger of a conflict with the work
collective, etc., then the most simple and efficient solution may be to formally keep
them on the payroll but to cease to pay them for their work. In this way, first, money
funds are economized and, second, “surplus workers” are driven to voluntarily leave
the enterprise.
It is widely assumed that a main reason for wage arrears is the opportunistic behavior
of enterprises’ heads, who often, reportedly, use the wage fund to finance personal
consumption, or to speculate for personal gain (e.g., in operations on the currency
20
market, investments into short-term state bonds, etc.).29 Workers have few means to
prevent this, and appeals to local governments—many officials of which are in
collusion with managers—are time-consuming and ineffective. In any event, it
appears that wage arrears are used to remedy distortions on the enterprises‘ labor
market. This situation emerges both in the private and state sector of economy, and
is certainly related to the specifics of the transformation strategy applied by Russian
reformers in the 1990s, the privatization pattern chosen being the essential component
of this strategy.
A special view of the problem is presented by J. Earle and K. Sabirianova.30 They
claim that the spread of arrears on local labor markets is very important. Their idea
consists in the following assumption: when the concentration of enterprises with wage
arrears, situated in a certain region, reaches a certain level, then even successfully
operating enterprises in the same region begin to cut back their staff‘s wages.
The notion is that from a certain moment on a feedback mechanism gets started: the
wider the practice of arrears, the lower the related costs; the lower the costs, the
stronger the stimuli to further expand this practice. On balance, accumulated wage
arrears convert into a self-sustaining process.
In our view, the above approaches do not so much exclude, but complement one
another.
Taking Russian privatization specificity into account in which course numerous
shadow financial transactions were held, the law infringed, the new owners (as
privatization beneficiaries) became highly interested in concealing a major part of
their income. Non-transparency of the structure of ownership, which resulted from
applying offshore and bogus schemes for its distribution, also played its role in
mystifying the income structure.
28 R.Kapelyushnikov. What does “hidden unemployment” hide? In: State and Corporate Employment Policy. T. Maleva, Ed. Carnegie Moscow Center. Moscow 1998, p. 75-111. 29 Granvill B., Shapiro J., Dynnikova O. The Lower Inflation, the Lesser Poverty. In: Social Policy in the Period of Market Transition. Ed. by A. Aslund and M. Dmitrieva. Moscow Carnegie Center, Moscow 1996. 30 John S.Earle and Klara Sabirianova. Equilibrium and Wage Arrears: A Theoretical and Empirical Analysis of Institutional Lock-In in Russia (http://pubs.carnegie.ru/books/2001/11tm/21).
21
Incomes from widespread corruption in Russia have turned into a most powerful
mechanism of income re-distribution, which, in essence, distorts the country‘s general
income structure. G. Satarov estimates that the volume of corruption in business
activities in 2001 was equal to a value of $33.5 billion USD (compare: $40 billion of
Russian federal budget revenues in 2000).31 The growth of corruption in Russia has
been directly linked with privatization. The idea is that privatization spawned corrupt
alliances between representatives of the political system and business. The most vivid
illustration one can find was in the 1996 Presidential election campaign32. Many of
those who managed to build up large amounts of capital in the 1990s then engaged in
capital flight. Even official assessments (significantly understated, to our mind)
suggest that capital „flight“ amounted to $20-25 billion a year33 in the decade of the
1990s (with 3/4 of it estimated as corrupt money). Of course, there are no official
statistics on this question, but capital flight has obviously an immediate and large
impact on property and income differentiation in Russian society.
The point is that official data on the population‘s income structure should be
recognized as only partially reflecting funds that remain in the shadow, in illegal and
semi-legal circulation. If these were identified, it might have substantially amended
the official data cited below, on the impact of various income sources on the dynamics
of citizens‘ personal revenues in 1991-2002.
Chart 1, Table 2
Proportion of income sources in real personal income growth of the population,
1991-2001 (percentage points)
31 Russians spend at least $37 billion on bribes. http://www.gazeta.ru, May 22, 2002. G.Satarov presents estimates based on the analysis of information obtained when polling former high officials of the President’s administration and the government, State Duma deputies, law enforcement bodies and businessmen. 32 See S.P.Glinkina. Shadow Economy in Russia. In: Economic Criminality. Moscow, Yurist, 2002, p.39-72. 33 Glinkina S. et al. The Problem of ”Capital Flight” from Russia and Ways to Repatriate It to the Russian Economy. Moscow, National Investment Council, 2002.
22
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Property revenues 11.8
-12.5
2.1
1.7
1.0
-1.0
0.7
-1.0
1.3
0.5
-1.1
Social transfers 4.1
-7.4
0.7
-0.9
-2.5
1.2
1.7
-3.3
-1.0
2.5
1.8
Business revenue 1.0 1.3 11.0 -1.9 -2.2 -2.9 0.1 -0.1 -2.8 4.9 1.4
Wage (hidden included) -3.8
-15.9
-13.5
6.5
-11.7
5.1
3.5
-10.7
-3.5
1.6
4.8
Personal revenue 8.4
-38.9
5.3
3.7
-11.1
1.4
4.2
-15.4
-7.5
10.7
8.1
Source: Russian Economic Review. Workshop for Economic Reforms attached to the RF Government. Russian-European Center for Economic Policy. No.2, 2002, p. 221.
Privatization and a New Labor Market Pattern
The Evolution of Employment Pattern
Under the impact of privatization34, a new pattern of employment rapidly emerged. A
new situation was established on the labor market, which influenced, in many aspects,
a specific pattern of distributive relations in modern Russia. The following
characteristics are now seen:
34 In this section, broadly conceived privatization is meant (see for a detailed comment at the beginning of the research paper), since privatization in its narrow sense has not exerted any significant impact on the Russian labor market. The transfer of state assets into private possession in itself, has not introduced any tangible automatic changes into either quantitative or qualitative parameters of the employment pattern of privatized enterprises. Though more detailed micro-level researches testify that many privatized enterprises have, for all that, restructured employment more rapidly than enterprises which remained as state-run. The same refers to the restoration of labor productivity: on the former the process was more rapid than on the latter.
23
The scale and impact of the state-owned sector has narrowed. It has definitely lost
the status of “principal employer”.
Chart 2
Source: RF State Statistical Committee data
24
Chart 3
Source: Analytical report of the Civil Society Academy (www.academy-go.ru/Site/SocBarom/Anatitica/Doklad.shtml).
The sector of major employment shifted from production to services
(broadly conceived). As seen from Chart 4 above, employment declined most
sharply in the leading branches of the real economy (such as industry,
construction, to a lesser degree in transport) and in science. Trading and
middleman activities, financial, administrative and social spheres (the latter
mainly due to the fact that a system of paid education and health care has been
introduced) have, conversely, become areas, which attracted labor resources.
The social structure of different types of employment has changed, as has the
status of workers. A clear-cut differentiation between hired workers and those
who have their own businesses has taken place.
Table 3
25
Citizens’ differentiation according to employment status
1994 1995 1997 Total number of employed in the economy,
including: - hired workers - non-hired workers,
including: - employers - self-employed - members of production cooperatives - unpaid workers of family enterprises
100
85.60 14.40
0.35 1.40 12.50
0.10
100
86.0 14.0
0.37 1.80
11.60
0.15
100
95.2 4.8
1.3 2.9 0.6
0.1
Source: Moskovskaya A., Moskovskaya V. Qualitative and Quantitative Shifts in Employment. Voprosy ekonomiki, No. 11, 1999, p. 118.
The deficient statistical apparatus does not, however, allow one to assess the number
of hired and non-hired workers. Until 1996 statistics stated with certitude the
constantly increasing proportion of non-salaried workers (6% in 1992, 11.2% in
1996). But the surprising result is that this category decreased greatly from 12.5% in
1994 to 4.8% in 1997, and fell further to 4.6% in 1998.35 The reader may, naturally,
wonder at the great shift in the above indicator recorded by official statistics. The
thing is that, first, since 1997 the criteria of identifying non-hired labor in selective
surveys of population’s employment were changed, which accounted for lower figures
for the share of self-employed. With this in mind, the evolution of hired/non-hired
labor ratio in Russian economy in the second half of the 1990s seems to be not so
volatile.
Second, A. Moskovskaya and V. Moskovskaya (1999) are right in stating the
following: numerous divisions of big and middle-sized enterprises started to convert
rapidly into independent economic agents during the first stage of reforms; however,
many of these new enterprises (production cooperatives36, in the first place) could not
35 Analytical report of the Civil Society European Academy (www.academy-go.ru/Site/SocBarom/Anatitica/Doklad.shtml). 36 Cooperatives were the first and for a time the only officially allowed form of entrepreneurship in pre-reform Russia. Each cooperative member (of no less than 3 of them as a mandatory minimum) had to make a material contribution to set up and develop production. All founders of a cooperative had to work on the enterprise founded by them. Every cooperative member had a vote in decision-making irrespective of the amount of his material contribution, which, however, determined the income share he obtained. This organization pattern was simply doomed to suffer from permanent and sharp conflicts among cooperative members. As soon as an opportunity emerged, the bulk of cooperatives changed their legal status and chose one of the two possible variants: either limited partnership, or open/closed joint-stock company, where relations among business partners are based on the amount of the founding
26
compete and ceased to exist, which could not but entail a lower number of non-hired
workers. Besides, the share of non-hired persons fell gradually as a result of property
concentration, that is, acquisitions of small enterprises by big ones.
The category of salaried workers is extremely heterogeneous in its composition, since
it includes both managers of big enterprises and non-skilled workers. Among those
who, nevertheless, ventured to start their own businesses, the majority was self-
employed and only one fourth of them converted into employers.
Chart 4
Source: Analytical report of the Civil Society Academy (www.academy-go.ru/Site/SocBarom/Anatitica/Doklad.shtml).
Unemployment - a New Phenomenon for Russia
Society has faced a previously unknown phenomenon, unemployment, although it
came to be felt with a considerable time lag, and on a considerably lesser scale than
anticipated, and accompanied by a specifically Russian characteristic: non-payments
and wage arrears.
In general, wage arrears became one of the principal methods for the Russian labor
market to adjust to the shocks of transition. The mechanism spontaneously found by
contribution shares (in financial terms) or the stock acquired; their proportion has an impact on the sphere of decision-making and determines the portion of income resulting from enterprise performance.
27
the market agents is broadly used by enterprises of various scale, branches and
property forms.
Strange as it may seem, the workers were highly tolerant to wage arrears for a long
time. The overwhelming majority of arreared workers were passively waiting for the
situation to change for the better. The most typical reaction to wage delays was
spontaneous and found its expression in falling labor discipline and lower labor
productivity. It is worth mentioning that low-productive labor preserved in Russia
turned out to become the key feature of the demand and supply market for workforce
during the transition period. Other post-socialist European countries, on the contrary,
exemplified a rather rapid removal of this category from the labor market, which
inevitably caused a more rapid growth of open unemployment.
Chart 5
General and registered unemployment rates, 1992-2000, % 37
02468
101214 %
1992 1993 1994 1995 1996 1997 1998 1999 2000
general unemploymentregistered unemployment
Source: Russian Statistical Yearbook. Moscow, Goskomstat RF, 2001.
37 In accordance with the methodological explanations given by the RF State Statistical Committee, the general unemployment rate of a certain age category is the proportion (in percent) of jobless to the economically active population of the same age category. International Labour Organization standards assume that jobless are persons of corresponding age, established for measuring the economically active population, who, during the period in question, aggregately meet the following criteria: - they have no job (economic occupation); - they look for a job, i.e. have applied to a state or commercial employment agency, published ads in
the press, addressed directly the enterprise administration (the employer), used their personal links, etc., or adopted measures to start their own businesses;
- they are willing to start working immediately. Secondary and high school students, pensioners and invalids are considered jobless if they look for a job and are ready to start working. The registered unemployment rate is the proportion (in percent) of registered unemployed to the economically active population. Able-bodied residents of the Russian Federation without a job or earning (labor income) who are registered by employment agencies of their residency with the aim to find an adequate job, are looking for a job and willing to start working, are considered jobless registered by the State Employment Service.
28
Registered unemployment is reported as of end-year by the RF Ministry of Labor and Social Development. As seen from the Chart 5, in Russia both general and registered unemployment
growth was moderate and smooth. The former increased from 5.2% in 1992 to 13.2%
in 1998, then fell to 9.8% in 2000. The latter rose from 0.8% in 1992 to the peak value
of 3.6% in 1996, then dropped to 1.4% in 2000. Only in the sixth year of market
reforms did general unemployment overpass the 10% margin and reached the level
typical for the majority of CEE countries. Several researchers (see: R.I.
Kapelyushnikov (2001), for example) point to the non-standard, on the whole,
behavior of the Russian labor market in the 1990s: despite a much deeper crisis
unemployment growth was weaker and less “explosive” than in CEE countries.
Contrary to the declared “shock therapy” aimed at developing genuine market
relations, the blow of privatization consequences was mainly mitigated by surplus
employment artificially maintained in a very large number of enterprises. To
illustrate: GDP fell by 36% in 1992-1997, but the number of hired workers,
remarkably, fell by only 17%. In the mid-1990s, 60% of surveyed industrial
enterprises had a surplus of workers, which in some cases amounted to 50% of the
total number of employed (according to the Russian Economic Barometer). Analysis
made by the Institute of Employment Problems (Russian Academy of Sciences)
concluded that a surplus workforce existed in 50% of enterprises surveyed.
According to this study, in 50% of enterprises with surplus labor this surplus was no
more than 10% of the total number of employed, in 42% of enterprises the surplus
was in the range 10-30%, and in 5.6% of enterprises, 30-50%.38
Surplus employment exists in enterprises of differing property forms (see: Table 4
below), but one can, nevertheless, detect some specific features on enterprises
privatized according to differing patterns. For example, excessive labor is less typical
for enterprises privatized according to non-standard schemes (for example, leased and
bought out). Unfortunately, in analyzing privatization effects it turns out to be always
difficult to identify the cause and the outcome. We may rightfully assume that
privatization variants with the transfer of the controlling stock to the benefit of the
work collective, have additionally stimulated the maintenance of surplus labor force.
These variants were most frequently chosen precisely by enterprises with the initially
38 On the Employment Policy. Analytical Report Prepared by the Federation of Independent Trade Unions of Russia, 2002 (www.fnpr.ru/soc-documents_3.htm).
29
existing big workforce “overhang”, whereas more dynamic and better performing
enterprises tended more to take non-standard ways.
Table 4
Share of enterprises with surplus workforce, %
Groups of enterprises 1995 1996 1997 1998 1999 Special poll (1997) Status* State-run enterprises 61 68 62 65 46 53 Non-state enterprises 58 61 60 61 48 55 Enterprises of Intermediate type
63 60 61 62 50 65
Variants of benefits offered to the work collective during privatization according to:: The 1st variant
55
66
58
75
65
54 The 2nd variant 73 68 65 58 52 69 The 3rd variant 100 100 50 60 23 100 Non-standard schemes 42 59 62 64 40 38 * Given by enterprise managers Source: Kapelyushnikov R.I. The Russian Labor Market: Adjustment without Restructuring. Moscow, GU-High School of Economics, 2001, p. 204.
According to a justified observation made by R.I.Kapelyushnikov, the causes of
surplus labor retention consist of “high costs of laying off surplus workers, the type of
expectations of the Russian management as well as its paternalistic orientation
inherited from the previous economic system and not fully destructed by new market
conditions”.39 His calculations demonstrate that the costs to enterprises associated
with severance payments within 1 to 6 months, exceed by 5 to 10 times the costs of
maintaining the same quantity of surplus workers during the same period.40 These
high costs are connected, in the first place, with severance payments and the necessity
to pay off wage arrears, which, under widespread conditions of non-payments, may be
a hard problem to tackle. Apart from purely financial costs the enterprises take into
39 Kapelyushnikov R.I. The Russian Labor Market: Adjustment without Restructuring. Moscow, GU-High School of Economics, 2001, p. 111, 222. 40 Ibidem. While a policy of maintaining as much employment as possible may have been positive in distributional terms, Russian experience indicates that the policy was not highly efficient. Therefore, it is unlikely that privatization as such was a serious obstacle to gradually do away with surplus labor.
30
account also organizational costs linked to all kinds of legal and administrative
procedures.
At the initial stage of property relation’s reform there were legislative barriers to job
reduction. For example, national privatization legislation41 guaranteed workers’ rights
and jobs: the State Privatization Program of State-Owned and Municipal Enterprises
in the Russian Federation (Article 20 paragraph 12) prohibited layoffs of more than
10% in an enterprise wholly owned by the state or municipalities, on, in the six
months prior to the date of its transformation into an open joint-stock company, and
until the moment of its official registration by state bodies. In case an enterprise
employing half or more of a locality’s population was sold through a tender,
mandatory conditions are: to retain jobs of no less than 70% of those employed in the
enterprise at the moment of its sale; and to professionally re-train any dismissed
workers or place them in a new job (Law on Insolvency [Bankruptcy]42, Art. 137).
Legislation also approved privileges for top management once sale was completed.
Workforce reductions in privatized enterprises began only in mid-1994, after mass
privatization ended43. By end-1995 the unemployed registered by state bodies,
increased almost 5 times compared to 1992, the RF State Statistical Committee
reports. The following trends in employment were evident up to the moment of the
1998 financial crisis:
- relatively high employment rate with a strong dynamics towards reduction;
41 State Privatization Program of State-Owned and Municipal Enterprises in the RF approved by the Decree of the RF President No. 2284 as of December 24, 1993. 42 Federal Law on Insolvency (Bankruptcy) No. 6-FZ as of January 8, 1998. 43 A policy of mass layoffs applied before mass privatization was completed, might have been obviously damaging for the enterprises’ directorate eager to retain the biggest possible portion of equity in its hands. To achieve the goal, they needed the work collective’s support.
31
Chart 6
Economically active and employed population (thousands)
50000
55000
60000
65000
70000
75000
80000
1992 1993 1994 1995 1996 1997 1998 1999 2000
economically activepopulationemployed population
Source: RF State Statistical Committee data
- relatively low open unemployment, but tending to become chronic;
Chart 7
Official unemployment rate, % to economically active population
0123456789
10
1992 1996 1997 1998
Source: RF Ministry of Labor and Social Development data as of end-year
32
Chart 8
Incidence of unemployment and job search periods
(based on selective surveys on employment, %)
0
10
20
30
40
50
60 %
1992 1996 1997 1998
less than 3 monthsfrom 3 to 6 monthsfrom 6 to 12 monthsmore than 1 year
Source: RF State Statistical Committee data
Chart 9
Average job search period (months)
0123456789
10
1992 1996 1997 1998
- large-scale latent (hidden) unemployment, chronic for certain categories of
workers;
Hidden unemployment grew greatly due to the increasing number of those who have a
workplace, but do not receive wages. The average period of back-wages payments
was 1.6 months in 1992; this had grown to 5.7 months in 1997.
33
Chart 10
Enterprises’ wage arrears surveyed by The Russian Economic Barometer
(as of year-end)
0
50
100
150
200
250%
1992 1996 1998
share of enterprises with wagearrears
share of wage arrears in totalarreared enterprises' monthlywages fund (%) share of arreared enterprises'workers with previous months'wage arrears
Source: Based on R. Kapelyushnikov. Wage Arrears: A Microeconomic Approach. In: T. Maleva, Ed. Payday or the Day of Reckoning: the Problem of Salary Delays. Moscow, Gendalf, 2001.
Chart 11
Employment structure with a focus on wage payments in
selected regions, 1997, %
0102030405060708090
%
1 2 3 4 5
fully and timely paymentfully but not timely paymentnot fully but timely paymentnot fully and not timely payment
1 – Moscow, 2 – Moscow region (1996), 3 – Krasnoyarsk region, 4 – Chuvash Republic, 5 – Chelyabinsk region Source: Based on H. Lehmann, J. Wadsworth, A. Acquisti. Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation. In: T. Maleva, Ed. Payday or the Day of Reckoning: the Problem of Salary Delays. Moscow, Gendalf, 2001.
34
Chart 12
Workers’ wage arrears in enterprises of different property forms and economic
branches, selected regions, 1997, %
0
20
40
60
80
100%
1 2 3 4 5
Privatized enterprisesNewly set up private companiesPublic sectorState-run production enterprises
Source: Based on H. Lehmann, J. Wadsworth, A. Acquisti. Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation. In: T. Maleva, Ed. Payday or the Day of Reckoning: the Problem of Salary Delays. Moscow, Gendalf, 2001.
- informal employment of all groups of labor resources; informal relationship is
mostly spread in the framework of additional (second) employment.
Chart 13
Informal additional employment of population categories
(% of total additionally employed, as of September 1998)
1 2 3 4 50
5
10
15
20
25%
1 2 3 4 5
1 – workers, 2 – jobless, 3 – employed in households, 4 – students, 5 – pensioners. Source: Based on “Obshestvennoe mnenie – 2000”. Moscow, VCIOM, December 2000.
35
Chart 14
Structure of enterprises of various legal forms employing hired informal workers
of various categories (1996, %)
0 10 20 30 40 50
1
2
3
4
5
6
legal form of organization
%
part-time workers
temporary workers
non-skilled workers
skilled workers
specialists, engineers,techniciansadministration
1 – state-run enterprise, 2 – cooperative, limited partnership, 3 – closed joint-stock company, 4 – open joint-stock company, 5 – private business, 6 – public institution. Source: Moskovskaya A., Moskovskaya V. Qualitative and Quantitative Shifts in Employment. Voprosy ekonomiki, No. 11, 1999, p. 122. By the end of 2001 experts estimated the unemployment rate as being from 18 to 20%
of the economically active population. This estimate includes general unemployment,
those in part-time jobs in the informal sector, estimates of the number of workers with
long-standing wage arrears, and those in workplaces where they are paid for
significantly below the subsistence minimum (which does not provide for the simple
survival of the workers)..
A simultaneous contraction of two opposite poles, formal employment and registered
unemployment, took place. In consequence, an even larger percentage of the
economically active population turned out to be in a marginal situation on the labor
market, without a definite formal status – neither employed, nor officially recognized
as unemployed. The number of employed in the economy decreased from 71 to 58
million in 1992-1998, that of registered jobless grew from 0.6 to 2.5 million (that is
36
by 1.9 million) by 1996, then fell by 0.6 million by end-1998. The distributional
impact of this huge increase in un- and underemployment was certainly negative, but
the question is whether the increased inequality can be blamed on privatization, or on
the general process of economic transformation.
Causes of Extending Shadow Employment and Its Specifics
Under these conditions, activity in the informal sector became an important
mechanism of survival for a considerable part of the population.
Secondary, or additional employment has spread widely among the Russian
population. On average, incomes from second jobs or sources amounted to half or
more of the earnings made in the principal workplace. The popularity of additional
employment peaked in 1994, then faded—–up to the crisis year of 1998. (see Table 5)
Table 5
Share of employed with a secondary job (%)
1994 1995 1996 1998 Without a secondary job 87.8 89.7 89.8 90.5 With a secondary job 12.2 10.3 10.2 9.5 With a permanent secondary job 4.7 4.5 4.4 4.5 With extra earnings 8.2 6.3 6.2 5.7
Source: Razumova T., Roshin S. Economic Analysis of Second Employment Causes. Voprosy ekonomiki, No. 9, 2001, p. 133. In 1994-1995, 11 to 13% of the working population of the country had, apart from
their principal job, secondary employment, according to the Russian Monitoring of
the Population’s Economic Situation and Health (RMES). The most widespread form
of additional employment in that period was second jobs in the main place of work
(44 to 34% of additional employment). Repair, construction and sewing services held
the second place with 23 to 19%, followed by holding jobs in different enterprises or
organizations with 9 to 19%. In industry 4.8% of workers had secondary employment
on informally arranged terms.
37
As a rule, for secondary jobs either no professional training was required, or these
requirements were rather low. For example, 42% of respondents held a legally
unspecified additional job; 31% of those with an officially registered secondary job
needed no previous training. 58 and 41% respectively of those interviewed had a
lower professional level in their secondary employment than on their first job.44 The
main source of workplaces within secondary employment has been, as a rule, the new
private sector. In the majority of cases labor force has been hired informally, a
situation profitable for both the employer and the employee. This real opportunity to
get a relatively “easy” additional earning without special professional skills has been
an important financial support for many families in the period of radical market
transformation.
In the 1990s officially registered unemployed could obtain more or less stable
incomes in the informal labor market, which ensured full-time work for 7.5 million
citizens (11.6% of overall employment)45 on a regular and irregular basis. More than
half of them (56.6%) rendered various services to the population in construction,
repair and sewing clothes; 11.8% were engaged in street trade; 8.4% owned private
enterprises (shops, cafés, stalls)46. Among officially jobless who actually work, there
are people simultaneously engaged in several places – unfortunately, we do not have
quantitative estimates of the phenomenon available.
Work based on unwritten, informal arrangements became widespread: by the mid-
1990s about 20% of workers in the private sector, in the state-run sector no more than
1%. In small businesses with less than 20 workers they were about 84% of the total
number of informal workers with more than a third of them engaged in micro-
enterprises with 2 to 5 workers. More than 50% of workplaces in the informal sector
are in trade and catering, 20% in services. Labor intensity is higher in the sphere of
unregistered employment. The average working week of those informally employed is
estimated at almost 50 hours, which is 8 hours more than that of officially employed.
60% of the former work more than 40 hours a week. Despite the fact that the working
44 Y. Varshavskaya. What Is There “In the Shadow”? Chelovek i trud, No. 11, 2001. 45 Working towards a Poverty Eradication Strategy in Russia: Analysis and Recommendations. Moscow, ILO Moscow Office, 2002 (www.ilo.ru/publication); Federal Target Program of Providing Employment of the RF Population 1998-2000 approved by the RF Government Resolution dated July 24, 1998. 46 Here and below the methods of monitoring the social-economic position of different population groups carried out by VCIOM, are applied.
38
week of those informally employed often exceeds the legally established norm, only
4% of workers reported in sociological surveys that they are remunerated for
overtime. Work in the informal sector is chiefly paid according to an individual
piecework system (affecting more than half employed against a fifth paid in this way
in the formal economic sector). Labor rights of those employed in the informal sector
are not protected. Nearly two thirds of those with unregistered employment state that
they can be fired without any legitimate reasons given; half claim to have been
materially punished in an unjustified way. Those with registered employment make
such statements more seldom (in 23 to 25% of cases). In short, a worker acting in the
informal employment sphere is quite vulnerable. Needless to say, the manpower
fluctuation among the informally employed is two times higher than among those
with registered labor relations.47
We cannot, certainly, trace a direct link between the above trends and the privatization
impact. In our view, however, the passage of a significant segment of the labor market
into the shadow economy is most obviously conditioned by the new opportunities,
which emerged namely in the framework of the private sector and privatization. The
workers’ and managers’ mentality in the majority of state-run enterprises, in contrast
to private ones, has retained a vigorous imprint of socialist “game rules”. Strong
dependence on state budget spendings, and a stricter control by tax bodies, makes this
sector of the economy more vulnerable in case of breaching legal and administrative
norms.
Incidentally, labor and social guarantees stipulated by the Labor Code are often
ignored, even in legal private business. Workers may take it for a kind of “payment”
for their substantially higher remuneration in the private sector compared to the state-
run.
In 2000 the wage proportion in per capita incomes of the population averaged 38% -
an average indicator for the public and the private sector of the economy. On
considering that wages in the public sector average only 60% of those in the private
sector, the share of wages in the money income of a family with all its members
engaged in the public sector, accounts for only 24.5%, whereas in case all members
are engaged in the private sector the figure is 41%.
47 Y.Varshavskaya. What Is There “In the Shadow”? Chelovek i trud, No. 11, 2001.
39
Even more striking is the difference between these proportions if the hidden wage is
taken into account: in 2000 wages averaged 61.3% in total per capita money income
of the population (the figure corresponds to that given in Table 1). Let us assume
(which is plausible) that the hidden wage is, in the majority of cases, obtained in the
private sector of economy. It turns out then that the wage proportion (hidden wage
included) in money income of a family with its members engaged in the private
sector, amounts already to 74%.
Thus, preliminary estimates show that the average wage in the public sector is
much lower than in the private sector of the economy. For example, in October
1999 the average wage in the public health care system made only 66% of the average
wage in non-state health care institutions (hidden wage not even considered). The
proportion in other branches of the social sphere looks as follows: 51% in education,
76% in science, 24% in culture and art. If age and health permit, workers of state-run
sectors of economy like health care, education (mostly high school education), culture
and art find professional jobs in the non-state sector48 (for more information on the
problem see also Table 8).
48 Main Directions and Priorities of State Social Policy in Improving Incomes and the Living Standard of the Population. http://www.nasledie.ru/fin/6_7-1/1.html
40
Table 6
Guarantees to labor stipulated by legislation and labor contracts in enterprises
of various property forms (percentage of workers who gave a positive answer)
Share of workers State-owned Enterprises
Privatized enterprises
Private enterprises
Regularly paid wage Paid two times a month
51.7
61.6
65.6
Regular leave not paid for or paid for lower than stipulated by legislation, including workers whose paid leave is additionally guaranteed by contract
1.6
1.1
2.3
1.4
22.6
8.4
Temporary disablement Is not paid for or paid for lower than stipulated by legislation, Including workers whose pay is additionally guaranteed by contract
8.0
5.9
8.8
6.5
37.8
16.1
Overtime Is not paid for or paid for lower than stipulated by legislation, including workers whose pay is additionally guaranteed by contract
29.6
6.6
47.3
10.1
50.1
6.1
Overall number of pollees 558 771 884
Source: T. Chetvernina, S. Lomonosova. Social Protection of Workers of the New Private Sector: Myths and Reality, Voprosy ekonomiki, No. 9, 2001, p. 105. Table 6 shows that the share of enterprises admitting breaches is in all positions
significantly higher in the private sector of economy. Here a “double” violation of the
workers’ rights can be observed: employers ignore not only norms of legislation, but
stipulations of contracts, as well. Though with fewer legal rights, workers in the
private sector are, indisputably, in a privileged financial position compared to those in
the state sector – which is a strong factor in income, property and social
differentiation in modern Russia. The transition period with its not yet fully
established game rules has, to a large degree, justified the situation. The question is
how to evade ruining the overall positive potential of the private sector proved as such
by world experience, and to make it operate in Russia in a civilized manner.
41
Privatization, Income -and-Property Differentiation
Privatization has shaken the previously well-established egalitarian foundations of
Russian life. A considerable income and property differentiation has become an
important feature of the new welfare pattern, and privatization has been a major
contributor to the new pattern . By the end of 2001, the degree of inequality (Gini
coefficient) reached 40.9%, an amazingly steep increase from the estimated 25%
figure of 1990. The trustworthiness of official statistics on the issue is doubtful once
again: for example, the indifferent reaction of the indicator to the 1998 financial crisis
and its sharp change in 1993, a year “neutral” from the point of view of development
conditions for Russian economy.49
Table 7
Overall money incomes distributed according to population quintiles (%)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Overall money incomes
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
including 20% population groups distribution:
The first group (with lowest incomes)
11.9 6.0 5.8 5.3 5.5 6.2 6.0 6.1 6.1 6.1 5.9
The second group 15.8 11.6 11.1 10.2 10.2 10.7 10.2 10.4 10.5 10.6 10.4 The third group 18.8 17.6 16.7 15.2 15.0 15.2 14.8 14.8 14.8 14.9 15.0 The fourth group 22.8 26.5 24.8 23.0 22.4 21.5 21.6 21.1 20.8 21.2 21.7 The fifth group (with highest income)
30.7 38.3 41.6 46.3 46.9 46.4 47.4 47.6 47.8 47.2 47.0
Gini coefficient 0.26 0.289 0.398 0.409 0.381 0.375 0.381 0.398 0.399 0.394 0.396
Source: Social Indicators of Population’s Income and Living Standard (as of April 20, 2002). Moscow, Department of Population’s Income and Living Standard, RF Ministry of Labor and Social Development, Issue No. 4(102), 2002. (The difference in the 2001 Gini coefficient in Table 7 and in the above text is due to the fact that the former is based on data given by the RF Ministry of Labor and Social Development, and the latter by the RF State Statistical Committee).
49 The sharp rise of the Gini coefficient in 1993 might be explained only by changes introduced by the RF State Statistical Committee into its calculation method.
42
What are the factors that influenced the dramatically increased income inequality in
society, especially with regard to the large decline in the shares of the lowest two
quintiles, and the equally large increase in the share of the richest quintile?
Among the most important was concentration of business incomes and property
revenues by a limited circle of people—a phenomenon heavily influenced by the
nature of the Russian privatization model. The second factor of importance was an
intense differentiation in wages, which, as noted, is the major source of income of the
bulk of the population.
The RSFSR Government Resolution No. 195-p, “On the Abolition of Wage Limits”,
dated December 26, 1991, as well as related changes introduced into the RF Labor
Code, without necessary regulatory measures, acted, among other things, as the
“starting mechanism” for a sharp differentiation in incomes of the population.
Resulting from a considerable reduction of state regulation of citizens’ incomes (e.g.,
outside the public sector, this role is reduced to fixing a minimum wage), large
differences in pay appear between those deriving their incomes from labor and those
engaged in business activity. Large income differences also started to appear,
between regions and sectors of activity, between enterprises of differing property
forms, etc.
Differentiation in pay scales of extreme deciles reached 34 points in 200050, that is,
more than two times higher than the income differentiation (social transfers and intra-
family income redistribution equalize, to a certain degree, the access to incomes) and
acted as a most important contributor to income inequality. It is not income and
property differentiation as such that is unfair, but its rapid increase and large scale in
Russia compared to other transition countries.. Compare: the average Gini coefficient
for the Central and East European region in 1997-1999 was 0.30 and for Russia it was
0.40. It is also worth mentioning that, for example, in 1999 in Hungary and Poland the
decile coefficients (the rich/poor income ratio) were 3.0 and 4.0 respectively, whereas
in Russia this coefficient amounted to 8.8(!)51 All this testifies to the fact that in
50 Main Directions and Priorities of State Social Policy in Improving Incomes and the Living Standard of the Population ( www.nasledie.ru/fin/6_7-1/1.html ) 51 The RF Ministry of Labor and Social Development data; A Decade of Transition. Regional Monitoring Report, 8. MONEE project. UNICEF Innocenti Research Centre, Florence, 2001, p. 28-29 (Russian version).
43
modern Russia sensible limits for the loss of social cohesion have been obviously
exceeded. Marginalized population layers, on the one hand, and the super-rich (even
by world standards), unfortunately, “draw” the social pyramid in opposite directions,
leaving a middle niche occupied by very few.. Despite rather optimistic assessments
of many experts, the middle class (in its classical Western variant) has not yet
emerged. The situation is fraught with increasing social tension.
Inter-branch differentiation in pay is extraordinary high; in 2000 it amounted to 8.5
times.52 The highest wages are concentrated in the country’s fuel and energy complex,
non-ferrous metallurgy and financial sectors, the lowest in agriculture and forestry,
light industry and in the remaining public sector branches of the economy.
Huge differences in work pay are observed regionally, which is illustrated by the table
below. At the same time, these differences in no way compensate the labor conditions
in climatically extremely differing regions of the country, which results a most
significant factor of labor force migration to the west and the south of Russia.
52 Main Directions and Priorities of State Social Policy in Improving Incomes and the Living Standard of the Population ( www.nasledie.ru/fin/6_7-1/1.html )
44
Table 8
Professionals’ wages per month in different Russian regions, 2002 (in USD) Professionals
Departmentchief in a
middle-size bank
Department chief of a Gazprom or Mezhregiongaz
structure
Department chief in a regional
energy system
Worker of a private fuel
station
Taxi driver Therapeutist in a state-run
hospital
Therapeutist in a private medical
institution
Programmer in a provider firm
Regional administration
department chief
Yekaterinburg 1000-1300 2500-2800 3200-3500 300 200-300 30-50 200-300 200-300 180-300Kaliningrad 600-700 750 700 200-300 180-200 70-90 120-200 250-350 400-450Kemerovo 500 400-500 250-500 70-150 120-200 70-120 130-200 200-300 600Kirov 350-500 400-700 300-600 150-200 200-240 50-100 130-150 180-200 250-400Krasnoyarsk 2000-2500 1000 1000 130-160 700-1000 70-100 160-180 330-700 270-400Kursk 500-800 400-600 400-500 200 300-500 25-50 200-250 150-400 300-400Nizhni Novgorod
2000-3000 2000-3000 2000-3000 100-200 150-200 50-100 150-200 150-500 150-200
Novosibirsk 600-800 - - 100-200 - 50-100 100-300 100-300 200-500Orenburg 1500 2000 3000-4500 50-80 90-130 100 150-200 115-270 400Perm 260-400 400-500 400-500 160-200 150-200 50 100 150-200 100-200Rostov 1000 1000-1500 1000-1500 100 300-450 100 300 300-500 500-700Saint-Petersburg
2000-2500 - - 120-150 100-120 80-105 200-250 400-500 150-300
Samara 500-700 300-500 250-500 150-200 150-300 50-100 200-250 150-350 300Stavropol 500-700 2500-2800 2300-2500 200 200-400 100 - 200-500 300Tomsk 500 2000 1000 65 160-225 80-100 160-300 100-300 650-1300Tula 500-800 400-500
“Tularegiongaz” 400-600
“Tulenergo” 120-170 300-400 50-170 200-250 150-200 200-350
Ulyanovsk 500-700 300-400 320-350 65-100 120-140 42-68 80-90 160-190 200-250Chelyabinsk 250-300 500-600 450-550 120-170 200-250 70-120 200-250 300-500 400-500
Source: Mikeli M. Where Wages Are Growing. Profil, No. 17, 2001.
45
A third factor responsible for the growth of inequality was, paradoxically, the
preservation and lack of change in the system of social transfers to the population. Trying
to maintain the existing system with considerably reduced financial means, compared to
the 1980s, produced a dispersion of transfers, and weakened their connection with the
factor of real need. According to the RF Ministry of Labor and Social Development data,
about a thousand different social benefits, allowances, subsidies and compensation
payments exist in the country at present. They are introduced for more than 200
categories of citizens: veterans, invalids, children, unemployed, students, etc. Almost 100
million people are recipients of different types of privileges, or nearly 70% of the Russian
population, while it is estimated that those really in need do not exceed 30% of the
population. In consequence, as of the late 1990s about 70% of property revenues, 62%
of other incomes (including business incomes), 38% of the aggregate wages fund, and a
disproportionate 27% of social transfers accrued to the 20% of most well-off citizens of
Russia. This top quintile received 47% of all incomes.53
A fourth explanation of growing property and income differentiation in Russian society is
a matter of the choices made by the population regarding how they would adapt to the
new conditions of life.
Patterns of Population’s Adaptation to the New Environment
Here, several patterns can be observed:
- an active adaptation strategy with workers interrelating with the changing
environment, which allows them to apply their personal and professional potential
and qualifications. An acceptable income level is ensured by active behavior on the
labor market: through self-employment, entrepreneurship, work in a high-wage sector
of economy, or employment in addition to the main job;
- a passive adaptation strategy, aimed at preserving an acceptable level of income. In
this case, adaptation takes place by means of providing the family with foodstuffs
from one’s plot of land54, leasing one’s property, getting social assistance from the
53 Ovcharova L. Inequality in Income Distribution, Demoscope Weekly, No. 11-12, 2001. 54 A “barter economy” – exchanging self-made production without cash - emerged in transition. From 1991 to 1995, 1.5-2 times more potatoes, vegetables, meat and milk were produced on personal plots of land than during the ten-year period of 1980-1990. In 1992 the ratio of consumed foodstuffs in barter form to those purchased was about 7%; by 1995-1997 it grew to 15-16%. As a rule, the share of self-made foodstuffs
46
state, or society. Adaptation to the new situation with the help of other family
members’ incomes (intra-family redistribution) in the framework of this pattern is
widespread. A relationship between the level of unemployment in an individual
Russian region, and business income shares in aggregate citizens’ incomes can be
traced. For example, in the Evenk Autonomous Region where the unemployment rate
was 3.2% in 2000, the business income share amounted to only 1.2%, whereas in the
North Ossetian-Alaniya Republic the unemployment rate in 2000 was 28.5%, and the
business income share amounted to more than 1/3 (34.8%) of the overall income of
citizens. A similar regularity can be observed when analyzing the whole bulk of
corresponding statistical data taken regionally.55 Real unemployment drives people
to start a private business, which helps them provide for a more or less adequate
living standard for them and their families. Thus, during market transition, private
business plays the role of an important alternative survival strategy for the most
flexible, enterprising part of the population, ready to run the risk.56
- Lowering one’s consumption to the level of disposable financial means has become
the most primitive adaptation form. The Russian Centre for Public Opinion and
Market Research (VCIOM) reported that in 1994 estimates by those interviewed as to
the incomes sufficient to satisfy minimal demands was about three times the actual
delivered outside (for sale or further processing) was insignificant, the revenues gained from sale were a marked addition to money incomes of rural population (by the end of the above period: more than 10% of its cash incomes). On balance, production of foodstuffs on personal plots of land (such as meat, milk, potatoes, eggs, vegetables) helped preserve the consumption level and, thus, in many aspects compensated for failing cash incomes. 55 The Social Situation and the Living Standard of Russian Population. Moscow, RF Goskomstat, 2001, p. 119-121; Russian Statistical Yearbook. Moscow, Goskomstat Rossii, 2001. 56 This relationship may, undoubtedly, be disrupted by other factors, such as the policy of local authorities towards small and middle-sized business. In Russian regions where most favorable (administrative, legal, credit and financial) conditions have been created to make use of the population’s business potential and, at the same time, an effective demand exists for goods and services produced by this economic sector, the proportion of business income is high, irrespective of unemployment rate. Typical cases: the city of Moscow, the Belgorod, Nizhny Novgorod, Novgorod, Ulyanovsk and Chelyabinsk regions. Here, unemployment rate is by 3 to 6 percentage points lower than the average for Russia (10.5% in 2000) and the proportion of business income equals or is even by 1 to 4 percentage points higher than the average for Russia (15.9% in 2000). Meanwhile, several Russian regions have an extremely unfavorable relationship of above indicators. For example, high unemployment rate in the Kalmyk Republic, Tyva Republic, Buryat Autonomous Region (20.1%, 22.9% and 15.6% respectively) is not “compensated” by developing business activities: business income is by 1 to 5 percentage points lower than the average Russian indicator.
47
value of the subsistence minimum. Many people began to not only consume less, but
also to “wish” to consume less.57
Sociological surveys show a relationship between a successful adaptation to the new
conditions and the type of employment: the probability of the former is higher with
workers engaged in the private sector, managers and owners of a business, i.e., groups
that emerged due to the privatization process.
Table 9
Distribution of employed according to their income, depending on their social-
economic characteristics, as of October 1998 (%)
Classification of employed, depending on:
Proportion of those with income
surpassing double subsistence minimum
Proportion of those with income lower
than double subsistence minimum
Total
- the type of enterprises Workers of private enterprises
24.6 75.4 100
Workers of state-owned enterprises
13.2 86.8 100
- the type of activity Managers 30.6 69.4 100 Workers 14.1 85.9 100 - the availability of additional employment Those who are additionally employed
26.8 73.2 100
Those who are not additionally employed
17.2 82.8 100
- the existence of one’s own business Those who own a business
40.5 59.5 100
Those who do not own a business
15.6 84.4 100
- the duration of work time Those who work no more than 8 hours a day
15.2 84.8 100
Those who work more than 8 hours a day
23.1 76.9 100
57 Popova D. Adaptation Strategy of Russian Workers to Market Reforms. Russian Economic Review. Workshop for Economic Reforms attached to the RF Government. Russian-European Center for Economic Policy. No.1, 2002, p. 105.
48
Source: D. Popova. Adaptation Strategy of Russian Workers to Market Reforms. Russian Economy Review. Workshop for Economic Reforms attached to the RF Government. Russian-European Center for Economic Policy. No. 1, 2002, p. 113. Selection value is 4,249 persons. Under the impact of the above factors, a deep stratification of Russian society occurred.58
Experts of the Institute for Social-Economic Problems of Population (Russian Academy
of Sciences) assess that today 8 to 12% of Russian citizens occupy the well-off category,
according to Russian standards. The lower-income margin of this layer is about $5,000
and the upper $10,000 per month. Those above these limits are the rich and the superrich.
Income differentiation leads to property differentiation and deep differences in the way of
life. 75% of those polled by the above Institute hold that the main attribute of richness is a
house in the country, or a cottage; 73% say a prestigious apartment; 68 and 66%
respectively mention personal guards and a prestigious car. Two thirds of the wealthy
polled hold that they necessarily need strong patrons in state administrative bodies, which
is rather remarkable and reflects precisely the shift in perception and ethos in post-
privatization Russia. Half of those polled think connections with the criminal world are
extremely important. The fact that the biggest fortunes have been and are being built in
Russia by criminal or illegal means is recognized by 84% of pollees.59
The making of a Russian middle class has been and will be a long and difficult process.
One fifth of those polled by the Bureau of Economic Analysis think that social-economic
transformation and the privatization model chosen have not helped set up conditions for
the making of the middle class in Russia.60 They think this is due mainly to the scale of
shadow economy (nearly 40% GDP), in which framework the middle layer of Russian
society is most economically active. Hopes to legalize the activities of middle class
representatives, which emerged by 1998, were shattered by the 1998 financial crisis and
the methods by which it was vanquished. One of the components of the 1998 crisis was
the crisis of confidence of savers (as potential investors) in the state and financial
58 The above stratification is considerably less equal than in other transforming countries like Slovakia, the Czech Republic or Hungary. Whereas in Russia 6.2% of incomes fall on the 20% of the poorest citizens, and 47.4% on the richest quintile, in Slovakia the figures are 12 and 31%, in the Czech Republic 10 and 37%, in Hungary 9 and 37% respectively. See: Savchenko P., Fedorova M., Shelkova E. The Living Standard and Quality of Life: Notions, Indicators, Present State in Russia. Russian Economic Journal, No. 7, 2000, p. 68. 59 Argumenty i fakty, December 13, 2000. 60 The Formation of the Middle Class in Russia. Moscow, Bureau of Economic Analysis Foundation, 2000.
49
institutions. This made it difficult for the middle layer to convert into a genuine middle
class, and compelled it to operate, as before, in an illegal environment, thus making its
place in the social and status structure more vulnerable.
In addition, labor market contraction during the 1998 crisis made more acute the problem
of involving new social groups, primarily youths with corresponding education, into
economic spheres that before the crisis were considered as most attractive. Thus, the
perspective of expanding the social layer capable of forming a stable middle class
diminished, although temporarily.
In 1990s the category of “the poor” in Russia experienced great and intense changes.
Whereas at the outset of radical economic transformation (1992-1995) the “poor” were
people from socially vulnerable population layers, publicly recognized as such
(pensioners, invalids, families with many children, one-parent families with children), by
the mid-1990s a new group of poor emerged. These are able-bodied citizens, which, for
various reasons (mainly connected with the type of their work, position on the labor
market), have low incomes and cannot secure a minimal living standard for themselves
and their families.
Chronic poverty centers have emerged in the public sector and in a series of stagnating
industries, both state-owned and private. For example, in the sectors of agriculture,
health care, education and culture, 2/3 of workers earn less than the subsistence level. On
the other pole are those who, in one way or another, are connected with the new private
sector of economy, or are employed on privatized enterprises.
The type of work and position of an individual on the labor market is, undoubtedly,
determined by age, education, professional skills and, not in the last instance, by the place
of residence or by gender.
The Financial Crisis and the New Distributional Model
The employment and income model in Russia developed under the impact of
privatization underwent a serious test during and after the financial-economic crisis of
1998. The welfare crisis of 1998-1999 after the devaluation of the ruble and the ensuing
wave of inflation affected all aspects of the citizens’ economic situation, and in particular
the relationship of the state, on the one hand, and the population, enterprises and their
workers, on the other. This was a kind of watershed separating two big stages in the
making of the new Russian welfare model. In general, the 1998 crisis affected the
welfare model in the following ways:
50
1. All principal income elements (wages, pensions and social allowances, business
incomes and property revenues) dropped, some more than others. From mid-1998 to mid-
1999, real incomes of the population decreased by almost 25%. Consumer spending fell
by 10 to 20%. The fact that consumer spending fell less than incomes was due to a
decreased share of current savings in personal incomes: in the post-crisis period the share
of savings in citizens’ incomes neared the zero level.
The position of well-off households worsened significantly. Compared to the pre-crisis
period, the share of well-off citizens’ incomes in overall incomes of the population fell
from 47% to 44% (in 1999). The number of well-off decreased by a quarter, to 20-25
million persons. The falling living standard of high-income groups was also reflected in
the worsening consumption quality connected with import reductions.
Highly remunerated employees (professionals) and small businessmen suffered most.
Polls suggest that the average monthly per capita budget of a middle-size businessman’s
household was about $900 and $340 respectively before and after the crisis. At the same
time, business incomes fell less, on average, than other income elements, such as wages,
pensions, or allowances. The cutback of real incomes both of well-off and poor layers of
the population was accompanied by significantly more intense differentiation: from 16-17
times before the crisis to 20-22 times in 1999.
2. The “poverty zone” extended by 10 to 15 million people and reached 70 to 75 million.
About 20 million people found themselves on the verge of poverty. Compare: in 1995 the
number of people with income below subsistence minimum comprised 24.7% (a quarter
of total Russian population. However, compared to 1998, there were more people in
extreme poverty—by about 10 percentage points, and on the verge of indigence (37.6 and
27.6% respectively), that is, their money income was 2 times and more below the
subsistence minimum61
Owing to falling real incomes, half of the country’s population lived under the
subsistence level. Meanwhile, with the widening scale of poverty, several major shifts in
the economic position of low-income people were observed. Their average per capita
income dropped from 70 to 50% (in 1999) of the subsistence minimum, which produced
61 The Living Standard of Russian Population. Moscow, Goskomstat Rossii, 1996, p. 86, 94.
51
worsening consumption quality. The share of prime necessity goods and services in
overall consumer spending grew from 84% in 1996-1997 to 91% in 1999, and for capital
goods fell from 9 to 4%. In addition, differentiation in spending for durables and capital
goods became even more pronounced: before the crisis lower income strata accounted for
16% of expenditure for these items, and the middle income groups 47%. Post-crisis, the
percentages shifted to 7 and 65% respectively.
Post-crisis, consumption once again took on features of intensive self-provisioning
production (similar to those of the early transition period). The share of bartered
resources in all available resources of low-income citizens grew from 13% in 1997 to
14.3% in 2000.62 The low wage level was coupled with huge wage arrears.
3. The mechanisms that had supported and sustained the former welfare model formed at
the initial stage of transformation, weakened sharply. The major shift occurred in the
behavior of enterprises. They generally turned from social paternalism towards more
reliance on market rationalism. One indicator of this shift was the refusal of many firms
to index employees’ wages in accordance with the inflation rate from autumn 1998 to
autumn 1999, when enterprises were accumulating funds to develop production. Another
important manifestation of the changing strategy was a new attitude of employers
towards extra-employment (hidden unemployment). The latter dropped from 36% in
1997 to 15% in 1999.
4. Following the crisis, the space for vertical social mobility contracted. Many former
opportunities to gain high incomes decreased sharply, or even vanished. A process of
“downward” mobility came to be felt, i.e., the social status of higher and middle social
groups started to decrease, which is particularly worrying.
5. Evidence showed that those groups of population, which in one way or another were
connected with the new private sector, had in the years of radical reforms of property
relations become sufficiently agile and flexible to ward off (though with losses63) the
shock of the August 1998 crisis. Moreover, many were able, within one year, to recover
and design new strategies of their economic activity, adequately suited to post-crisis 62 Polyakov I. How the Russian Welfare Model Changes, Demoscope Weekly, No. 47-48, 2001.
52
social-economic conditions. For example, though the totality of business incomes and
property revenues contracted by 7 to 8% in 1998-1999 (inflation rate considered), the
share of incomes of this social group increased to 40-42% by early 2000 (compare: 35-
38% in previous years).
One-fifth of middle-class representatives polled succeeded in reorienting their businesses
rather rapidly. This business re-orientation appeared particularly necessary in two
economic spheres, trade and the real economy. The same reorientation trend applied, to a
great extent, to respondents engaged in consulting. Here the main reason was the growing
demand for consulting services for post-crisis mutual settlements, paying off debts,
business restructuring, etc. In other words, demand produced supply, and the
professionals laid-off in the credit and financial sectors occupied the field, combating
problems created by the sector they were engaged in before the crisis. However, the
frequently expressed assumption that the crisis would produce mass layoffs in banking,
finance, investment and insurance, as well as in advertising, proved not to be true.
Research shows that by 2002 those families where bred-winners work in private
enterprises occupy a firm position above the poverty line. Under the fateful line are those
who work for the state.
Official assessments suggest that in Russia in the 1990s the share of employees in the
private sector (joint ventures included) increased in average yearly terms from 13.5%
(1991) to 48.8% (2000).64 Unfortunately, official statistics interpret broadly the notion of
private sector and include also enterprises initially set up as non-state, as well as those
enterprises which became non-state as a result of changing their status during
privatization. With this approach, even former collective farms fall into the category of
private enterprises. Several surveys in which those polled evaluated their enterprise’s
sectoral identity, suggest that perhaps no more than 20% of workers are concentrated in
the new private sector65
63 Only 40% of those who, before the crisis, attributed themselves to well-to-do middle layers, conserved their social status (results of monitoring the social-economic position of different population groups, carried out by VCIOM). 64 Russian Statistical Yearbook. Moscow, Goskomstat Rossii, 2001. 65 Kapelyushnikov R.I. The Russian Labor Market: Adjustment without Restructuring. Moscow, GU-High School of Economics, 2001, p. 135-138.
53
Youths under the age of 25 account for ¼ of private industrial sector employees, while in
state-owned enterprises this age group represents only 6%. Sociological surveys report
that young people are eager to work in the private sector, almost exclusively because of
higher wages. This came to be known in the following way: it turned out that in families
of those who are working in the private sector, the average per capita income is lower, in
addition, the majority of them are main bred-winners. This makes them waive “luxuries”
such as job guarantees, and wage and position stability and it leads them to work more
intensively and longer hours in order to gain more. 65% of workers in private enterprises
see an immediate relation between their wages and their personal labor contribution
(among workers of joint-stock companies virtually nobody sees this relationship).66
All this allows us to conjecture that the new private sector and its workers have more
successfully fitted into market game rules, are more flexible and adjust better to the
quickly changing situation on the market, which helps them secure a higher living
standard for their employees.
* *
*
Conclusions
The research undertaken leads to the following conclusions:
1. In Russia since early 1990s a new welfare pattern is evolving which typifies an
income structure different from the previous one; new employment opportunities and
priorities; high income and property differentiation which is becoming the fundament
for a deep social stratification of society. The present situation in the distribution of
income in the Russian population and in its employment is the outcome of various
interlaced components within the process of radical systemic transformations, among
which privatization is only one of the factors.
2. As a result of applying a privatization model, specific to a major degree, an
ownership structure similar to that in developing countries of Latin America has
evolved in Russia. For these countries the following features are typical: high
concentration of property with the oligarchic structures, low transparency, non-
existence of a broad class of petty owners, failing protection of minority shareholders.
66 A.Naryshkina. The Labor Market in Russia: Render to Caesar the Things That Are Caesar’s, and to the Locksmith That Are Locksmith’s. Vremya novostey, July 10, 2002.
54
Small business is not integrated into the national economic network, it is in most cases
driven into the “shadow” of the economy, represents the sphere of survival for the
majority of its agents.
3. The above specificity of the evolved private sector predetermines the population’s
income structure and the scale of its differentiation, non-transparency of distributional
relationships in society, big and middle-sized businesses’ interest in pushing capital
abroad. The scale of capital flight has become unprecedented for the post-socialist
world.
4. Up to date, privatization has exerting less influence on the situation on the labor
market. The dismissal of inefficient workforce goes on slowly due to its high price for
the employers, and the fact that they have found mechanisms to “press out” the
workforce mainly by means of wage non-payments. Extremely low wages, scanty
minimal wage guaranteed do not motivate the entrepreneurs to reduce the number of
workers.
5. With numerous negative trends in the formation of income and labor market structure
as a background, one cannot but point out that privatization results in these spheres are
many-sided. They are presented in the diagram below in their most general form.
55
Diagram
Dual impact of privatization on employment and incomes of the Russian population
Negative (destabilizing) Positive (stabilizing)
Evolving new opportunities to radically change the material
status using one’s own intellectual and physical
resources
Growth of employment primarily due to personnel
reduction on privatized enterprises of the state-run
sector
Development of individual private entrepreneurship and job creation in the private sector of
economy
Widening informal employment and hidden
sources of income, criminalization of society
Diversification of income sources as a factor of lowering the risk of a sharp living standard decrease
Deeper property differentiation, wider poverty
zone
The making of the middle class Deeper social and status dissociation
56
References
Analytical report of the Civil Society Academy. http://www.academy-go.ru/Site/SocBarom/Anatitica/Doklad.shtml Argumenty i fakty, December 13, 2000. Bim, A. Ownership, Control Over the Enterprises and Strategies of Stockholders. Vienna: IIASA, 1996. Blasi J., Shleifer A. Corporate Governance in Russia: An Initial Look. In: Corporate Governance in Central Europe and Russia (ed. by Frydman R., Gray Ch., Rapaczynski A.). London, 1996. Brown J.D., Earle J.S. Gross Job Flows in Russian Industry Before and After Reforms: Has Destruction Become More Creative? SITE Working Paper, No. 160, July 2001. Carlin W., S. Fries, M. Schaffer, and Paul Seabright. Competition and Enterprise Performance in Transition Economies. Transition Newsletter, 2001, Vol. 12, No.2. Chetvernina T., Lomonosova S. Social Protection of Workers of the New Private Sector: Myths and Reality, Voprosy ekonomiki, No. 9, 2001. Chirikova A.E. The Leaders of Russian Business: Mentality, Sense, Values. Moscow, Institute for Sociology, RAS, 1997. A Decade of Transition. Regional Monitoring Report, 8. MONEE project. UNICEF Innocenti Research Centre, Florence, 2001, p. 28-29 (Russian version). Deryabina M.A. Reforming Property Relations (Privatization) in Russia (1992-1996 Experience). In: Problems of Market Transformation in Transition Countries. Vestnik nauchnoy informatsii, IIEPS RAS, Moscow, No.12, 1996. Dolgopyatova T., Yevseeva (Boeva) I. The Survival Strategy of State-Owned and Privatized Enterprises under Transformation Conditions. Moscow, 1994. Earle, John S. and Klara Sabirianova. Equilibrium and Wage Arrears: A Theoretical and Empirical Analysis of Institutional Lock-In in Russia. http://pubs.carnegie.ru/books/2001/11tm/21. Federal Law on Insolvency (Bankruptcy) No. 6-FZ as of January 8, 1998. Federal Target Program of Providing Employment of the RF Population 1998-2000 approved by the RF Government Resolution dated July 24, 1998. The Formation of the Middle Class in Russia. Moscow, Bureau of Economic Analysis Foundation, 2000.
57
Glinkina S. et al. The Problem of “Capital Flight” from Russia and Ways to Repatriate It to the Russian Economy. Moscow, National Investment Council, 2002. Glinkina S.P. Shadow Economu in Russia. In: Economic Criminality. Moscow, Yurist, 2002, p. 39-72. Granvill B., Shapiro J., Dynnikova O. The Lower Inflation, the Lesser Poverty. In: Social Policy in the Period of Market Transition. Ed. by A. Aslund and M. Dmitrieva. Moscow Carnegie Center, Moscow 1996. Gurkov I., Maital S. Perceived Control and Performance in Russian Privatized Enterprises: Western Implications. European Management Journal. No. 4, 1995. “Has the Voucher Ever Existed?” Mir Novostey, August 20, 2002. Kapelyushnikov R.I. The Kingdom of Insiders. Property and Control in Russian Industry: Some Results of Polling Russian Enterprises. http://www.politcom.ru/aaa_c_econ4.php Kapelyushnikov R.I. The Russian Labor Market: Adjustment without Restructuring. Moscow, GU-High School of Economics, 2001. Kapelyushnikov R.I. Wage Arrears: A Microeconomic Approach. In: T. Maleva, Ed. Payday or the Day of Reckoning: the Problem of Salary Delays. Moscow, Gendalf, 2001. Kapelyushnikov R.I. What does “hidden unemployment” hide? In: State and Corporate Employment Policy. T. Maleva, Ed. Carnegie Moscow Center. Moscow 1998. Kwiatkowski S. Intellectual Entrepreneurship and Sustainable Economic Development in European Post-Socialist Countries. Problemy teorii i praktiki upravleniya, No.3, 2002. Lehmann H., J. Wadsworth, A. Acquisti. Grime and Punishment: Job Insecurity and Wage Arrears in the Russian Federation. In: T. Maleva, Ed. Payday or the Day of Reckoning: the Problem of Salary Delays. Moscow, Gendalf, 2001. Liborakina M.I. Women and Privatization. Moscow, Municipal Economy Institute Foundation, 1999. The Living Standard of Russian Population. Moscow, Goskomstat Rossii, 1996. Main Directions and Priorities of State Social Policy in Improving Incomes and the Living Standard of the Population. http://www.nasledie.ru/fin/6_7-1/1.html Mikeli M. Where Wages Are Growing. Profil, No. 17, 2001. Moskovskaya A., Moskovskaya V. Qualitative and Quantitative Shifts in Employment. Voprosy ekonomiki, No. 11, 1999.
58
Naryshkina A. The Labor Market in Russia: Render to Ceasar the Things That Are Ceasar’s, and to the Locksmith That Are Locksnith’s. Vremya novostey, July 10, 2002. Nekipelov A.D. Essays on Post-Communist Economics. Moscow, TsISN Minnauki Rossii, 1996. “Obshestvennoe mnenie – 2000”. Moscow, VCIOM, December 2000. On the Employment Policy. Analytical Report Prepared by the Federation of Independent Trade Unions of Russia, 2002. http://www.fnpr.ru/soc-documents_3.htm Ovcharova L. Inequality in Income Distribution, Demoscope Weekly, No. 11-12, 2001. Pelekhova Y. Russian Oligarchs. Versiya, July 1, 2000. Polyakov I. How the Russian Welfare Model Changes, Demoscope Weekly, No. 47-48, 2001. Popova D. Adaptation Strategy of Russian Workers to Market Reforms. Russian Economic Review. Workshop for Economic Reforms attached to the RF Government. Russian-European Center for Economic Policy. No.1, 2002. Radaev V.V. The Making of the New Russian Business. Sociological Aspect. Moscow 1993. Radaev V.V. The Sociology of Business (1999-2000). Course of Lectures. www.ckp.ru Radygin A.D. On Some Perspectives of “Loans-for-Shares” Privatization. In: Russian Economy: Trends and Perspectives. Institute of Economy in Transition. Moscow, August 1996. Razumova T., Roshin S. Economic Analysis of Second Employment Causes. Voprosy ekonomiki, No. 9, 2001. The RSFSR Government Resolution No. 195 “On the Abolition of Wage Limits” dated December 26, 1991. Russian Economic Review. Workshop for Economic Reforms attached to the RF Government. Russian-European Center for Economic Policy. No.2, 2002. Russian Statistical Yearbook. Moscow, Goskomstat RF, 2001. Russians spend at least $37 billion on bribes. http://www.gazeta.ru, May 22, 2002. Savchenko P., Fedorova M., Shelkova E. The Living Standard and Quality of Life: Notions, Indicators, Present State in Russia. Russian Economic Journal, No. 7, 2000.
59
Social Indicators of Population’s Income and Living Standard (as of April 20, 2002). Moscow, Department of Population’s Income and Living Standard, RF Ministry of Labor and Social Development, Issue No. 4(102), 2002. The Social Situation and the Living Standard of Russian Population. Moscow, RF Goskomstat, 2001. Soptsov V. There Is No Alternative to Active Income Policy. Chelovek i trud, No.6, 2001. State Privatization Program of State-Owned and Municipal Enterprises in the RF approved by the Decree of the RF President No. 2284 as of December 24, 1993. Trotskovsky Y.A., Rodionova L.V., Chertov N.A.. Characteristic Features and Consequences of Privatization in a Depressive Region (Case Study of the Altai Region). Barnaul, AGU, 1999. Varshavskaya Y. What Is There “in the Shadow”? Chelovek i trud, No. 11, 2001. Working towards a Poverty Eradication Strategy in Russia: Analysis and Recommendations. Moscow, ILO Moscow Office, 2002. http://www.ilo.ru/publication