OECD Reviews of Labour Market and Social Policies: Russian Federation 2011

image of OECD Reviews of Labour Market and Social Policies: Russian Federation 2011

The global financial crisis interrupted a protracted period of strong economic growth in the Russian Federation. Despite a large decline in output, job losses and hikes in unemployment remained rather modest, and much of the labour market adjustment took place through reduced working hours and, in particular, real wages. Notwithstanding the recent recovery, the Russian labour market remains characterised by significant structural imbalances resulting in widespread segmentation and large earnings inequalities.

To improve the balance between labour market flexibility and the protection of workers, the Russian Federation needs to reinforce its labour market institutions.

Poverty and income inequalities remain well above the OECD average. Family policy is focused on increasing birth rates, but is ineffective in reducing poverty as working adults and children make up 60% of the poor. Instead, social policy is focused on the elderly and disabled, and in recent years there has been significant increases in transfer payments to pensioners.

Recent reform is likely to “eradicate” poverty among pensioners, as measured by official benchmarks, but raises questions about the long-term financial sustainability of the private pensions system. Rapid population ageing further contributes to the need to raise the low standard pensionable ages in Russia and limit access to early pensions. The challenge for Russia will be to rebalance its social policy towards more effective support for parents to combine work and family life. 

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Assessment and recommendations

The global financial crisis had a significant impact on the Russian economy and its labour market. The cumulative output loss during the recession was almost 11% in the Russian Federation, considerably larger than the equivalent output loss of almost 5% for the OECD as a whole. The impact of the crisis is even larger taking into account the high growth rates in the Russian Federation prior to the crisis. Indeed, the cumulative growth loss – comparing the loss in output with the growth in output that would have occurred in the absence of the crisis – is estimated to be 19% in the Russian Federation versus 8% in the OECD area. An economic recovery has been underway since the third quarter of 2009, with declining unemployment and a positive real wage growth. The latest OECD projections expect growth to be around 4 to 5% in 2010 and 2011.

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