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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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Supporting the working-age population more effectively and more fairly

Strong economic growth until 2008 led to a reduction in official absolute poverty rates since the beginning of the new millennium. The financial crisis has interrupted the downward trend but it has not led to a poverty rebound. However, large income inequalities remain in the Russian Federation. Poverty risks are highest among children. The social support system in the Russian Federation is not geared towards the working-age population who, if not physically or mentally impaired, are widely held to be undeserving of social support. In addition, the redistributive power of the social protection system is limited. Social benefits are badly targeted and social security contributions are paid on income up to about 1.5 times average earnings in 2010.

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