You Pretend to Work, Putin Pretends to Pay You

The "resilient" Russian job market.

The self-deprecating joke among the lumpenproletariat in the USSR near its end was that they pretended to work, while the Soviet Union pretended to pay them. I suppose that not much has changed with the supposed end of the Communist era: as oil and commodities prices have fallen, so too have the fortunes of today's Russia. Then, as now, there remains an urge to put on a brave face in front of the [insert your choice of usually foreign villains here] who are blamed for its misfortunes.

Hence the curious case of rosy employment figures in today's Russia amid a commodities bust:

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.

The way to buoy Russian employment figures is to disguise underemployment, abetted by some of the toughest laws for letting workers go:

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 neighboring country’s conflict erupted last year. Instead of easing the consumer plight, the stretched labor market betrays an economy geared toward ensuring social stability and ill-prepared to meet the challenges of an aging and shrinking workforce, content to punt the issue until the next crisis. “Choosing between radical reforms and stability, the government will favor stability,” said Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow. “That’s a Soviet-like choice--to conserve the current system with its problems, though to provide stability.”

During communism, unemployment was all but outlawed. What Putin has now are some of Europe’s most restrictive labor rules and employers still stinging from the dressing-down received for idling plants during the last recession six year ago. Protections against firing individual workers are among the strictest in Europe, according to the Organization for Economic Cooperation and Development.
The resulting resilience of the labor 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 vacations.

During the crisis in 2008-2009, unemployment peaked at 9.4 percent. While it has now risen from a record low of 4.8 percent a year ago, the effect is less dramatic. The rate grew to 5.5 percent in July from 5.4 percent a month earlier, according to the median of 18 estimates in a Bloomberg survey. The statistics office may report the data on Wednesday.

I guess old habits die hard. The hammer and sickle never really went away.