Russian workers play along to hide crisis

Soviet workers knew they got a raw deal, and they played along.

“We pretend to work, and they pretend to pay us,” went a popular saying.

About a million job gains into Russia’s recession, the bargain still holds, with salaries plunging at a pace unprecedented under president Vladimir Putin.

Data set to be released this week will probably show unemployment holding at less than half the rate in the euro region, which has had nine consecutive quarters of growth. 

It’s a sign of a tacit deal that has ravaged productivity and limited economic flexibility.

With Russia in the clutches of an economic crisis as domestic demand implodes after a currency collapse and sanctions over Ukraine, the jobless rate is less than it was before the neighbouring country’s conflict erupted last year.

Instead of easing the consumer plight, the stretched labour market betrays an economy geared toward ensuring social stability and ill-prepared to meet the challenges of an ageing and shrinking workforce, content to punt the issue until the next crisis.

“Choosing between radical reforms and stability, the government will favour stability. 

That’s a Soviet-like choice — to conserve the current system with its problems, though to provide stability,” said Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow.

During communism, unemployment was all but outlawed. 

What Putin has now are some of Europe’s most restrictive labour rules and employers still stinging from the dressing-down given for idling plants in the last recession six year ago.

Protections against firing individual workers are among the strictest in Europe, according to the Organisation for Economic Co-operation and Development. 

The resulting resilience of the labour market is doing little to make up for a plunge in people’s spending power, reinforcing vulnerabilities that include the lowest productivity in Europe. 

Employers are opting for salary cuts, part-time work and unpaid holidays.

During the crisis in 2008-2009, unemployment peaked at 9.4%. While it has now risen from a record low of 4.8% a year ago, the effect is less dramatic. 

The rate grew to 5.5% in July from 5.4% a month earlier, according to the median of 18 estimates in a Bloomberg survey.


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