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Friday, April 20, 2018

The cheapness of labor in Russia is due to holes in the statistics

Workforce in Russia is seriously undervalued – is the position of the social block of the government. The country is really growing level of poverty, but economists doubt that the government generally has reliable picture of the situation. Trying to survive the crisis, people simply derive their income in the “gray area”. How to deal with it and do I need to do?

The most optimistic indicator of the Russian labour market is the extremely low official unemployment rate of 5.6%, or 4.3 million people (according to the latest data of Rosstat). “The situation in the labour market is stable. We coped with the unemployment”,said Prime Minister Dmitry Medvedev, speaking at a Russian investment forum in Sochi. Another thing is that news in this: six months ago, Deputy Prime Minister Olga Golodets has described the situation in approximately the same words: “we Have a very special situation: we have no unemployment.

“Good allowances gratuities – without “bonuses” and “envelopes” – you get a completely legal feature migrant workers, such as porters”

The problem is that, according to the same Golodets, Russia is “absolutely cheap, low cost labor force.” 4.9 million people currently get paid the minimum wage (SMIC), which currently is 7.5 thousand rubles, which is significantly below the subsistence level (about 11 thousand). This statement has become almost the main event of the first day of the forum, pushing into the background even plenary discussion on development of regions. The way out of the situation Golodets sees raising the minimum wage to a living wage that “will give serious winnings and production, and the economy, and people.”

According to statistics, the total labour force in Russia at the beginning of this year amounted to 76,1 million people. In other words, wages of the minimum wage will receive about 6.4% of the working population. And the main question is how to interpret this frightening figure here expert opinions differ.

First of all, there are serious doubts that the phrase “salary at the level of the minimum wage” actually reflects the reality beyond the statistics. “I think that to live on such money it is impossible”,says the managing partner of the company “FLC (Financial and organizational consulting)” Moses Furdik. In his opinion, the main reason for the large share of salaries at the level of the minimum wage was held a few years ago, the increase in insurance premiums for employers, causing more income for their employees began to leave in the shade. “To control and take into account it is difficult,says furdyk.More real wayor radical increase in the minimum wage, or reducing the tax burden on the wage Fund (PAYROLL)”.

Supporter of the first option is Golodets, who oversees the social block of the government. At the same time in the Cabinet, there are adherents of reducing insurance premiums as an incentive for economic growth. So, the Ministry of economic development offers a tax maneuver by the formula “21 vs 21” to raise the VAT rate from 18% to 21% while reducing the total rate of payments to social funds from 30% to 21%. However, last week, that proposal was criticized by the Minister of labour and social development Maxim Topilin, and at the forum in Sochi has joined her immediate supervisor Topilin in the government, that is, all the same Golodets. “Any hasty decisions without proper oversight, lead to negative economic results, I’m not talking about social,”she said on the sidelines.

The same view is shared by the head of the Pension Fund of the Russian Federation Anton Drozdov, which may be the biggest loser – one of the options of the tax maneuver envisages to reduce the rate of insurance premiums only at the expense of pension contributions.

Another thing that and increase the size of the minimum wage to a living wage is not a panacea. This measure will require significant budget fundsDeputy Minister of labour of Love eltcova has said that raising the minimum wage to 300 rubles from 1 July will require 5.2 billion rubles from the budgets of all levels on increase of salaries to state employees. But visible and detrimental downstream effects.

“The logic of sentences Olga Golodets clear: the increase in wages should lead to the expansion of the internal market, but the problem is that in reality, the market economic theories are exactly the opposite,said the Professor of NIU VSHE Pavel Rodkin.Without serious pressure on the market to make this initiative possible: the costs the owner will compensate for the expense of employees or shift them to the consumer. Therefore, without government intervention, the increase in wages will lead only to higher prices and increased unemployment. The same Donald trump to return US production more competitive (in the terminology of Olga Golodets) market with higher wages, to solve jobs I intend to resort to harsh tax pressure and regulation”.

However, given the Vice-Premier of the disappointing data provide evidence that in Russia progresses, the level of poverty, and at the same time decreases the quality of jobs. As acknowledged by Golodets, low-cost labour in the country makes it unprofitable investments in innovative production technologies for business. Therefore, it appears virtually unattainable task, which in 2012 set by the President Vladimir Putin – to create and upgrade by 2020, 25 million jobs.

According to the head of the Center for economic research Institute of globalization and social movements Vasily Koltashov, the emergence of a large number of “bad” jobs with low official salary and does not require a lot of skill – was the cost of adaptation of Russian economy to the next crisis. “Salaries are lower, requirementsstiffer loadmore, and no prospects, and this is no secret. In fact, we fell into the Western trap of crisis, and this keeps the internal framework of the crisis, whatever may be said by the government about overcoming the downturn in the economy”,said Koltashov, estimating the total number of poor in the country 4050 million people. For comparison, in the middle of last year Rosstat has published statistics according to which 22.7 million people in the country are below the poverty line (that is, have income below the subsistence minimum).

Again, all of this does not negate the question of the quality of economic statistics on the basis of which decisions of the authorities. Day in and day out with a sensational statement Golodets in Sochi VTSIOM published a study of the labor market: 9% of respondents said that they have only informal income, 6% identified themselves as self-employed (that is, with an unregistered business or non-declared employment earnings), and 1% classified themselves to the category “grey entrepreneurs,” and 2% did not give a definite answer about the sources of their income. Eventually build up quite a large group that has a tendency to increase. If in 2015 in a similar study by VTSIOM official work had 89% of the respondents, now their share dropped to 86%.

Golodets in 2013 (i.e. before the crisis) acknowledged that in Russia of 86 million people of working age, only 48 million are working in sectors that are “visible and comprehensible” to the government. But in the new economic realities opportunities for informal income in Russia is still very diverse. “In many areasfor example, in construction, but not only there is still a significant part of the income of workers accounts for a different kind of “award” and “bonuses”lists the independent analyst Alexander polygalov. Good allowances gratuities – without “bonuses” and “envelopes” – you get a completely legal feature migrant workers, such as porters. Those who are engaged in tutoring – say, teachers or pensioners with a small salary, the proceeds from this nothing is affected. Freelancers can be registered by employees in any small office with an official wage value of the minimum wage. Finally, you can simply pass the grandmother’s apartment and not pay any taxes.”

While it is not necessary to expect that the proportion of people with informal incomes or self-employed stabiliziruemost, on the contrary, it will only increase, given the new wave of technological substitution of labor. The most typical example here is the recent statement of the President of Sberbank German Gref that the development of remote services will lead to the downsizing of the Bank is approximately two times from the current 330 thousand people. “Technical re-equipment of production, which emphasizes the government also bears the risk of rising unemployment,says Pavel Rodkin.Robotics puts a serious question: what to do with millions of unwanted people? This problem is not solved even conceptually all over the world, not to mention ready-made recipes. Business to consider innovation only as a way of reducing economic and social costs and increase profits, so I hope for technological progress in the existing socio-economic and ideological paradigm is unlikely to yield positive results for the majority of the population.”


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