Russia’s job market: from bad to worse


It's cuts all round as Russia's economy takes a nosedive.



Alexandr Litoy
8 April 2015

Employment problems are inevitable during an economic crisis. Mass layoffs are already taking place in Russia, although serious unemployment is still some way off. But the average Russian citizen is being paid considerably less than a year ago, and is having to work harder, too.

The same old story

‘Our firm produces analytical reports on the oil market, and problems began to arise as soon as the sanctions started’, says oil website editor Andrei Z. ‘Russian oilmen know that the main thing is bribing the appropriate official. They don’t commission anything from us. Foreign companies know it too, but they are used to monitoring the market as well, so they ask us to run figures. But since the events in Crimea the only clients we have left are a couple of Chinese businesses – the rest have disappeared.

‘At the start of last year there five of us in the office: my boss, me, a secretary, a sales agent and a freelance designer. The designer was first to go, after our print journal closed down. Then the secretary was made redundant and the saleswoman started working from home on a commission basis only. I had to take on the secretary’s role as well as my own and also work from home.’

The oil analysts no longer have an office; its furniture and equipment are now housed in the one-room flat Andrei shares with his wife and children. ‘The boss said: “do what you like with it – throw it out, keep it, sell it”’.


Looking for work in Vladimir, Russia. Photo: (c) Sergey Pyatakov via RIA

For five years, Natalya worked as manager of a clothing production company. ‘In November they told me they were having to make cuts, and offered me three months salary to take voluntary redundancy. It all happened at once; on Wednesday they asked me to leave, and on Thursday I no longer had a job. I haven’t found any other work yet, but then it’s always difficult around New Year’, she says, trying to reassure herself.

On Wednesday they asked me to leave, and on Thursday I no longer had a job.

Stories like this are becoming more and more common. Staff being switched from full to part time work, or having to work harder to compensate for the loss of colleagues’ made redundant, are common practices now. One of the first anti-crisis measures taken in most companies was the abandonment of regular salary rises, which combined with a steep rise in prices has meant an effective drop in income for all.

The labour relations website Antijob.net has carried out a survey of its visitors, asking them whether their pay covered their food costs. Only 8% of their 4,500 respondents answered that less than 20% of their income went on food, and 65% answered that they were unemployed or not paid enough to feed their family, or that food was their main item of expenditure.

The only people to have benefitted from this situation are firms and freelancers working directly for foreign companies and being paid in foreign currency – everything from the US dollar to the Chinese Yuan has risen in relation to the rouble. And among the people worst affected are, of course, Russians working abroad, but for Russian employers.

Designer Konstantin moved to Berlin after the annexation of Crimea, on the assumption that things wouldn’t improve in Russia in the near future. But he is still working for Russian clients. ‘Prices here are going up all the time, but my income drops immediately every time there is the least fluctuation in the exchange rate’, he says. ‘I’m still just about managing, but I might have to move back to Russia soon.’

First the tourist industry, then the rest

Mass redundancies began in the summer of 2014, with the tourist industry the first sector to suffer as the rouble fell and security officials (its best customers) were banned from travelling abroad on holiday. But since the end of 2014, the crisis has been hitting one sector after another.


An applicant fills out a job form in Kazan, Russia. Photo: (c) Maksim Bogodvid via RIA

One of the worst hit areas has been Crimea. ‘A lot of our industry has come to a standstill; no one wants to be involved with Crimea’, I am told by Yaroslav, a computer programmer from Sevastopol. ‘And the usual flood of tourists has become a trickle.’

Crimea used to be one of the USSR’s main IT centres. Programmers would settle on its warm coast and work for customers around the globe. But that all stopped at the beginning of 2015. Western clients can’t use the local IT sector because of anti-Russian sanctions, so now pro-Ukrainian firms are moving to Odessa, along the coast to the west and part of Ukraine, while pro-Russian companies are transferring their businesses eastwards to Krasnodar, the nearest Russian city to the peninsula.

Food companies meanwhile have held their ground despite the ‘anti-sanctions’ – Russia’s ban on exports to ‘hostile’ countries – not by laying off staff, but because they have benefitted from the rise in food prices (by 100% on some goods). Restaurants, however, have been hit: in some cities one in five eating and drinking establishments are reported to be closing.

Alyona Vladimirskaya, head of Pruffi, Russia’s leading online headhunting agency, predicts that the next groups to suffer from the downturn will be journalists, bank employees, advertising experts and people in the commodities sector. And next will come those working with luxury goods (expensive cars, household appliances and top-end cosmetics), employees of consulting and development companies and state owned corporations. And when the crisis reaches its peak, businesses will pull back from all but their core activities and people in all sectors will be in danger of losing their jobs.

38% of survey respondents believed that they or members of their families would lose their jobs.

According to Vladimirskaya, job opportunities will then be concentrated in debt collection agencies, tourist firms providing holidays in Russia itself and specialising in cheap packages and companies at the bottom end of the market selling everything from food to household appliances.

A survey conducted by the All-Russian Public Opinion Research Centre (VTsIOM) in February showed that 38% of respondents believed that they or members of their families would lose their jobs, and 7% were absolutely sure it would happen or had already been made redundant. About half thought they would keep their jobs, but that their working conditions would decline.

At the same time, for business, the job situation is not the main element of the crisis. Anton Stepanov, a director of Delovaya Rossiya (‘Business Russia’), a lobbying association of business owners, redundancies have not yet caused serious conflict between employers and staff – managements have been able to offer adequate packages, and highly qualified staff who have lost their jobs can now be re-hired for less than before.

And the figures keep rising

‘It’s become too difficult to write individual news pieces – there’s too much happening with all these cuts and redundancies’, says Sergei Smirnov, editor-in-chief of the Mediazona website, as he explains the appearance on the site of a new permanent column headed ‘The crisis. Fear and cuts in Russia’. Here are just a few extracts, typical of those that appear daily:

‘All the enterprises belonging to the Transmashholding Group have closed down either completely or partly’, writes Vedomosti, a leading business daily, quoting a source close to the company. According to this source, TMH plans to get rid of 18% of its staff (about 9,000 people). The group comprises 17 firms, ten of them producing railway coaches and locomotives. One of these, the Tver Wagonbuilding Works – the largest manufacturer of passenger coaches in Russia – will suspend production from 9 February and plans to shed 20% of its staff (2,000 people) by the summer.’

‘Russian airlines are being forced to make large cuts in their workforces because of the economic crisis, the fall in air freight, fluctuating exchange rates and the failure of many tour companies. UTair, for example, will need to make 1,500 staff redundant, including 300 pilots’, reports the RIA Novosti news agency. ‘Orenburg Airlines, a subsidiary of Aeroflot, are preparing to shed around 700 people, 110 of them pilots. Meanwhile Bars Aero has closed down completely and I-Fly has announced 30% redundancies.’

There are currently just under a million Russians registered as unemployed.

‘More than 300 staff will lose their jobs at the Khimprom factory in Volgograd today, as part of a third wave of redundancies’, announced Lyubov Nikitina, the head of the company’s main trade union body.

Other companies are resorting to paying their workers partly in kind. Another Volgograd firm, the sausage manufacturer Tsar-Products, is paying its workers 10% of their wages in gift vouchers for the company shop.

The depth of the present crisis can also be gauged by the talk of redundancies and pay cuts in the police and FSB, although in recent years the law enforcement agencies have been prioritised in government spending. Less important law enforcement bodies such as the Federal Narcotics Control Agency and the Federal Migration Service are slated for closure, although the Narcotic’s Agency’s head Viktor Ivanov argues that growing unemployment is, on the contrary, a strong reason for retaining it. He predicts a 10% increase in drug addiction, mainly among the educated classes who will be losing their jobs or having to downgrade to less high status work.

There are currently just under a million Russians registered as unemployed, out of a population of 140m – quite a low figure for a country in crisis. However, as Yelena Gerasimova, CEO of the non-profit Centre for Social and Labour Rights, tells me: ‘Finding work will become more difficult. There are still jobs around, but it’s a question of their quality. People who have lost good, highly paid jobs will be offered lower status work with inferior conditions.’

Gerasimova, a prominent industrial arbitration specialist, is wary about estimating the total number of people made redundant by the current crisis. She points out that many firms have been announcing job cuts of between 10%-30%, but some workers are officially taking voluntary redundancy, which, under Russian labour law, puts them into a different category, skewing the figures.

Growing protests

Last autumn staff cuts at hospitals brought thousands of Muscovites out on the streets in protest. The government had reduced the number of planned redundancies but 8,000 of the capital’s medical workers nevertheless lost their jobs. Meanwhile there is evidence of an increase in mental health problems among the unemployed, with people resorting to violence against their former bosses and colleagues.

The only jobless people to so far organise themselves are former employees of the US fast food chain Carl’s Jr. in St Petersburg and Barnaul, hundreds of whom have been made redundant. They are demanding the redundancy payments to which they are legally entitled but which the company has failed to provide.

Aleksei Etmanov, the revered head of Russia’s Interregional Workers’ Trade Union Association, says that the unions are so far not particularly involved in the redundancy issue. Firstly, because there are not many ‘militant’ unions in Russia, and secondly, because many people losing their jobs are offered compensation of around five times their monthly salary. This suits employees, and the unions don’t get drawn in.

Trade unions are so far not particularly involved in the redundancy issue.

But there is a clearly growing need for involvement on the part of the unions. According to official figures, employers’ wage arrears for January alone totalled 2.5bn roubles, an increase of 22%. And reports of protests over wages not being paid are coming in from all parts of the country. One result has been an increase in activity from the pro-government ‘In Defence of Working People’ movement, founded three years ago by workers at the Ural Wagon Building Works. The movement’s recent conference rejected the idea of strikes as ‘inappropriate forms of combat’, but the collective response of two major trade union bodies, the pro-government Federation of Independent Trade Unions of Russia (FNPR) and the independent Confederation of Labour of Russia (KTR) was a proposal to legalise strikes in support of workers in other companies (although not those engaged in a strike) and strikes in protest against government policies.

The Russian government has also finally made some response to the situation. It has allocated up to 52bn roubles (£605m) to resolving the problems of the job market, but, as the crisis deepens, this looks like a mere sticking plaster.

Standfirst image: Looking for work in Vladimir, Russia. (c) Sergey Pyatakov via RIA

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