22:16 GMT +322 June 2018
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    Global crisis implications for labor market

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    MOSCOW. (RIA Novosti political commentator Maxim Krans) - The global financial crisis, which has now reached Russia, is predictably expanding into a general economic recession complete with all the usual repercussions.

    Employment layoffs and suspended production at major corporations, although insignificant so far, have nevertheless generated fears of further and deeper rounds of layoffs. It is hard to tell at this point whether the ominous prophesies will come true or not, and to what extent.

    In any case, experts in various fields who gathered for a roundtable discussion at RIA Novosti on Thursday were unanimous that Russia's labor market is in for a major shake-up in the next few months.

    The ghost of a crisis is haunting Russia. Naturally, financiers were the first people on whose door it knocked. Foreign banks promptly reacted by tightening credit programs and cutting personnel, with their Russian counterparts in close pursuit.

    Next, automakers took a turn. Two weeks ago, Russia's auto giant GAZ suspended production of its Gazelle mid-sized trucks, vans and buses. Last Monday, the plant suspended production of GAZ trucks for four days, sending its workers and engineers on a forced vacation.

    KamAZ, a major truck maker based in the Volga republic of Tatarstan, slowed to a four-day week, and slashed its 2008 production plan by 20%.

    Foreign car manufacturers with operations in Russia have also adjusted production projections as banks tighten consumer car loan programs.

    Next the crisis hit the construction industry which until recently seemed strong enough to weather any market turmoil. There was a media leak that Mirax Group, a major investment and development corporation, dropped all construction projects for the next year and began reducing the number of top managers.

    Other major developers, Inteco and Sistema Gals, and Eurocement (Russia's leading cement producer) are also revising their near-term projections.

    Alarming signals are also coming from large steel producers. The Magnitogorsk Iron and Steel Works (MMK) has announced a 25% cut in production and the lay-off of nearly 3,000 employees.

    Russia's aluminum industry, according to parliament member Mikhail Tarasenko, is actually working only to fill warehouses. Dwindling lending programs naturally bring down demand, especially for cars and new housing, which means market demand for metal products is falling as well, accelerating a vicious circle.

    So, do we need to brace ourselves for another collapse similar to the default crisis ten years ago, with people losing their jobs in torrents?

    Labor experts invited to the RIA Novosti roundtable tried to appease the reporters' panic, but not entirely, because they didn't seem to be able to firmly rule out the possibility.

    Only Yevgeny Gontmakher, director of the Center for Social Studies at the Institute of Economics of the Russian Academy of Sciences, said Russia wouldn't see any apocalyptic developments like America in 1929.

    Yet, analysts admit that dismissals are inevitable. Yelena Malkova, faculty at the Russian Academy of National Economy, said secretaries, drivers and other support staff would be the first to fall victim to the trend. "Less efficient" and disgraced employees will be hit next. If economic "health" isn't restored after that, middle and even top managers will be asked to go one step down or be fired.

    On the other hand, some experts predict a different scenario, assuming that the country's economy doesn't go to pieces. Vladimir Gimpelson, Ph.D., Director of the Center for Labor Market Studies at the Higher School of Economics in Moscow, said that employers facing plummeting demand for their products would naturally try to cut costs, but not by firing people, but rather by slashing salaries, bonuses and other benefits. They won't resort to dismissals, not out of compassion, but because they are constrained by legal restrictions. Some will stick to the old "socialist tradition," and some will be pressured by administrative measures taken by local officials to avoid heightening social tensions.

    Federal officials responsible for the economy and finance seem to be guided by the same motives.

    The windfall of petrodollars which have flooded Russia in the past decade, gave us all a feeling of false security - the government lost vigilance, led to believe that Russia's economy is as stable and shock-resistant as could be. It has made ambitious plans for the coming decades, and is reluctant to consider any less than optimistic scenario.

    This is where their nonchalance has led us all: the crisis crept in stealthily, taking most government bodies by surprise.

    Fyodor Prokopov, executive vice-president of the Russian Union of Industrialists and Entrepreneurs, said our labor legislation turned out to be unable to take the blow, because it had been drawn up in a completely different economic situation.

    Russia's employment service is also quite unprepared - according to Prokopov, it was very ill-advisedly scattered across the regions and therefore cannot respond to the challenges of the times on a national scale.

    He also said that the most recent idea to shift the bulk of the pension reform burden to employers was anything but helpful in the current situation.

    Russians en masse also appear unprepared. However, a recent survey by the VTsIOM national pollster has revealed that increasing numbers of people now realize that the current financial crisis is not an abstract notion having nothing to do with Russia. Moreover, 41% said they feared it would hit their families eventually.

    The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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