The Restructuring of Employment and the Formation of a Labour Market in Russia

Title

The Restructuring of Employment and the Formation of a Labour Market in Russia

The project builds on a programme of research on industrial restructuring in four regions of Russia which has been under way continuously since 1991. The purpose of the research is to identify the processes, scale and character of employment restructuring within and between declining and growing enterprises, and the formation of a labour market in these four regions as the basis for a reconsideration of policy in the areas of employment, unemployment and industrial restructuring in the face of large-scale structural adjustment. The research will also contribute to theoretical debates around the concept of segmented labour markets.

Aims and Objectives

1) to identify the processes, scale and character of employment restructuring and redeployment within and between declining and growing enterprises in four contrasting regions of Russia, including consideration of the extent to which enterprise provision of housing and social facilities is a barrier to labour mobility.

2) to identify the structure and forms of labour market emerging in Russia by identifying the operation and interaction of the ‘internal’, `shadow’ and ‘external’ labour markets and the relationship between ‘internal’ and ‘external’ labour reserves.

3) to explore the limitations of existing statistical data on employment by relating the collection and reporting of data to the underlying processes at the level of the enterprise.

4) to contribute to theoretical debates about employment restructuring and the development of labour markets in the face of large-scale structural adjustment, and to contribute to the development of an inter-disciplinary theorisation of stratified and segmented labour markets.

5) to develop the policy implications of the research, in the areas the restructuring of employment, the development of the labour market, the problem of unemployment and industrial restructuring at both regional and national level.

Timetable

The research programme is broken down into six month blocks, each beginning with a research workshop, bringing all researchers together to review progress and plan the subsequent phase. Data analysis and writing up will procede in step with data collection. The principal foci of research in each phase will be as follows:

Phase 1: Enterprise-based research: Acquisition and evaluation of quantitative data at all levels of the enterprise. Identification of bias in methods of data collection, recording and reporting. Identification of policy and practice regarding employment restructuring at enterprise and shop levels.

Phase 2: Shop-based research: interviewing and observation of management and workers at shop level, questionnaire survey of labour force. Identification of supply and demand factors within the enterprise. Elaboration of model of the local labour force.

Phase 3: `Shadow’ and `external’ labour markets. Research in enterprises linked by labour mobility and complementary employment (especially informal sector and SMEs). Research on external labour market in collaboration with local employment service.

Phase 4: Data analysis, writing up, filling gaps in fieldwork, culminating in dissemination seminar.

Detailed Proposal

The proposal is to research the processes underlying the restructuring of employment and the development of the labour market in four contrasting regions of Russia (Moscow, Kemerovo (Kuzbass), Syktyvkar (Komi) and Samara). This research builds on work on industrial restructuring which has been undertaken by the proposer and Russian research teams in these regions continuously since 1991, with employment restructuring providing a developing focus of the research. ODA funding has been secured for a pilot project on employment restructuring from July 1995 to March 1996. It is necessary to apply for further funding now to maintain continuity of the research and the research teams. The proposed research will be based on intensive case-studies of a total of sixteen enterprises, using established ethnographic and case study methods, supplemented by the collection and evaluation of enterprise and regional quantitative data, an enterprise-based local labour market survey, and research into the local labour market in collaboration with the local employment services.

1. Background

main work on which it draws; policy background

put aims and objectives in context

1.1 Policy Background

The proposed research addresses the policy issues of the restructuring of employment, the development of the labour market and the problem of unemployment. Although focused on employment restructuring in Russia, the research has wider application in questioning the basis of employment and industrial policy in the face of large-scale structural adjustment.

Employment and restructuring strategies for the CIS countries have focused on the attempt to create an ‘external’ labour market of the kind that supposedly exists in the advanced capitalist countries by targetting resources on the training and placement of the unemployed, primarily through the Federal Employment Service, and on fostering new SMEs as the basis of new employment growth, with the development of a ‘social safety net’ for the casualties of restructuring.

This policy focus corresponds to a view of employment restructuring as a three-stage process involving the displacement of workers through the closure of inefficient production facilities, a period of unemployment and retraining, followed by the recruitment of appropriately skilled and qualified workers by new employers, particularly in the service sector and SMEs. This view has dominated technical assistance to and research in the former socialist countries and the developing world more generally, and pervades the 1995 World Development Report.

Such a view does not correspond to the reality in the West, where the majority of job changes do not involve an intervening period of unemployment and where even high-quality training is not able to compensate for the negative impact of extended periods of unemployment on employability. It corresponds even less to reality in the developing countries, where ‘job creation’ is predominantly in a casualised informal sector concentrated in large cities swamped by rural-urban migration, while in the former socialist countries labour is extremely immobile geographically, new investment and the development of SMEs is strongly concentrated in the service sector, and there are very few exits to jobs from unemployment. The 1995 World Development Report recognises that its view of employment restructuring implies massive labour migration, with enormous economic, social and political costs, and the consignment of large sections of the population to unemployability, but this leads not to a questioning of the strategy, but to quite unrealistic proposals for the provision of a ‘social safety net’ and ‘empowerment’ of the victims.

Underlying this view of the process of employment restructuring is a simplistic picture of the process of industrial restructuring, based on a purely negative view of existing large industrial enterprises, with all hopes pinned on new SMEs and foreign investment. Again this view does not correspond to the reality of industrial restructuring in the West, which is based primarily on diversification and acquisition by existing large companies, and even less to the reality in the former socialist countries, where the absence of a well-developed physical, legal and financial infrastructure gives existing enterprises an overwhelming advantage over newcomers. Thus even TNCs investing in former socialist countries do so almost entirely through the acquisition and restructuring of existing facilities, and only very exceptionally through ‘green field’ projects. The proposed research therefore has policy implications which extend beyond the field of employment to the area of technical assistance in industrial restructuring and investment.

Russia provides a particularly important case for research because, although the principles and policies of structural adjustment pursued in Russia have been not dissimilar to those in ECE and developing countries, the employment impact has been very different. Despite a precipitous fall in industrial production, Russia still has very low levels of registered unemployment. The conventional wisdom that this is the result of resistance to redundancy on the part of conservative management is belied by the fact that the Russian labour market is very dynamic, with apparently high levels of job loss; relatively short duration of unemployment; and high labour turnover. There is no doubt that there are substantial reserves of labour retained by enterprises, but this is by no means a stagnant pool — it plays a very active role in the labour market.

The hypothesis to be explored in this research is that Russia is undergoing very active processes of employment restructuring, associated with active industrial restructuring, based not only on SMEs and the new service sector (including the rapidly expanding commercial/financial sector), but also centrally involving the former state enterprises which still dominate the Russian economy, in which employment restructuring has been linked to substantial diversification and major changes in product range. The implication is that the latter should be a major focus of restructuring policies.

1.2 Existing Research in the Field

Other agencies

The most significant existing research in the field in Russia has been carried out by Federal Government apparatuses, including the Federal Employment Service (FES) and its branches, by the EDI of the World Bank, and by the ILO. Although this research is important, it is methodologically limited in that it all relies on official or survey data gathered from enterprises. This data is strongly biased by fiscal, planning and political considerations. There have also been some limited labour force surveys, mainly concerning the unemployed. However, this research barely touches on the processes of employment restructuring which are the object of our proposed research.

The most sophisticated research is that of the EDI of the World Bank, which has sought to establish connections between economic and employment trends in the transitional economies. This research indicates the complexity of the relationship, and generates useful hypotheses for further research, but its methodological basis does not enable it to explore the processes involved in employment restructuring, as it makes clear in its recent report (Commander and Coricelli, eds, Unemployment, Restructuring and the Labour Market in Eastern Europe and Russia, 1995), which concludes that ‘further research will be required to understand more satisfactorily the options facing state and privatized firms and their subsequent choices over employment and wages’ (p. xxi), which is precisely the focus of the project proposed here.

Our research

The proposed research builds on a research programme on the restructuring of industrial enterprises in Russia conducted continuously since 1991 on the basis of collaboration with research teams in four regions of Russia, whose core is intensive longitudinal studies of large industrial enterprises, and a project on the restructuring of the coal-mining industry, focused on two of these regions. These projects have been funded by Nuffield, ESRC, INTAS, and various Russian sources, all of which expire by the end of March 1996. Over the past four years we have trained and worked closely with these teams, which have now established an international reputation for the quality of their work. The research network has been institutionalised with the creation of the inter-regional Institute for Comparative Labour Relations Research, based in Moscow.

Employment restructuring has been a growing focus of our research on industrial restructuring since September 1994, with specific studies having been carried out in a range of enterprises in the contrasting regions of Samara, Kemerovo, Moscow, and the Komi Republic (Syktyvkar and Vorkuta). In this connection we have been collaborating increasingly closely with the local employment service in each of these regions. We intend to extend this work with a more systematic pilot project on employment restructuring and the operation of the internal labour market in Samara and Kemerovo for six months, for which we have just secured ODA funding. The pilot project will enable us to develop the research methodology and acquire data for an initial sample of enterprises in Samara and Kemerovo. The present proposal will build on the pilot, the intention being that the enterprises which provide the focus of this research will be additional to those selected for the pilot, while monitoring of the latter will continue, to give us a larger sample in those two regions.

2. Detailed research questions

Our recent research on employment restructuring has indicated that such restructuring takes place through a variety of institutionalised channels which can best be analysed on the basis of the conceptualisation of three analytically distinct segments of the labour market, which we characterise as the `internal’, `shadow’ and `external’ labour markets. The `internal’ labour market is that within the enterprise. The `shadow’ labour market is defined by the existence of institutionalised channels of mobility (and/or dual job-holding) between enterprises (including between state and new private enterprises). The `external’ labour market is the conventional labour market in which the currently jobless seek employment.

The project will be developed within the framework of theories of segmented labour markets which have been proposed by sociologists and institutional economists. However, the weakness of most of these accounts of labour market segmentation is that they do not specify the institutional barriers which define distinct and discrete labour market segments, nor do they explain the reproduction of those barriers in the face of competitive pressures. The proposed project will focus on this missing link by identifying the institutional channels of labour mobility which define distinct labour market segments, and by explaining the reproduction of labour market segmentation in terms of both supply and demand factors.

Our research has generated five basic hypotheses whose investigation and elaboration will focus the substantive research proposed here:

1) that alongside high labour turnover, there has been a very high level of internal mobility and redeployment of labour within and between enterprises, leading to very considerable changes in the skill, qualification and age structure of the active labour force and the marginalisation of particular categories, particularly older, female and less skilled workers. This is the basis of the ‘internal’ labour market and the formation of a stratified labour reserve, part of which lubricates the ‘internal’ and ‘shadow’ labour markets, but a part of which comprises a potentially unemployable pool of surplus labour, which for the present remains on enterprise books. This reserve is currently sustained by short-time working and paid or unpaid administrative vacation, effectively supported by taxation since it reduces enterprise liability to the excess wage tax. Mass redundancy will strike primarily at the latter part of the reserve, which will dominate the ‘external’ labour market.

2) that labour mobility between enterprises takes place primarily through institutionalised informal channels, with existing employer sponsorship playing an important role in job search and job placement. This is the basis of a ‘shadow’ labour market, which is linked to the internal labour market and which defines a symbiotic relationship, in particular between ‘old’ and ‘new’ enterprises.

3) that the housing, social and welfare apparatus attached to large state enterprises does not provide nearly as significant a barrier to labour mobility, at least within the local labour market, as is often supposed by Western advisors. Access to the informal networks through which job search takes place is the decisive determinant of, and limit to, local and inter-regional labour mobility.

4) that enterprise-level data on levels, composition and changes in employment, which is the basis of official reporting, bears little relation to shop-level data or to the reality of the employment structure. Data is strongly biased by systematic mis-reporting and mis-classification at all levels, reflecting tax and social security regulations and the general economic policy framework and, within the enterprise, internal systems of manpower planning and wage determination. Systems of dual (or multiple) book-keeping persist at all levels of the enterprise.

5) that the Employment Service and the ‘external labour market’ plays very little role in retraining and job placement, in part because of mismatches between the characteristics of those seeking work, reported vacancies, training opportunities and employment opportunities, but more fundamentally because both old and new employers are very reluctant to recruit ‘from the street’, so that the majority of those leaving the register are those who find work independently.

Our existing research provides fragmentary and impressionistic support for these hypotheses. The proposal is for more systematic and detailed research to put qualitative and quantitative flesh on these findings, and so to develop a model of employment restructuring which embraces ‘internal’, ‘shadow’ and ‘external’ labour markets, and the ‘internal’ and ‘external’ reserves of labour, with at least an indication of the relative weight of different channels of mobility for different categories of employee.

3. Methodology:

3. Data to be collected and methods of data collection