Transcript Review of Labour Market and Social Policies in the Russian

Labour Market and Social Policy Review:
Russian Federation
Moscow, Technical Seminar, 12 December 2011
[email protected]
Senior Economist- Social Policy Division
Organisation for Economic Co-operation and Development
www.oecd.org/els/Russia2011
Presentation overview
•
Background
•
Labour market issues
•
Social policy issues
•
Concluding remarks
The review is part of the “Accession” process
•
Review mission in 2008, including visits to Moscow,
Kazan and Samara.
•
Draft review was discussed at the Employment,
Labour and Social Affairs Committee (ELSAC), 22
October 2010.
•
Publication in 2011 while accession process is
ongoing, similar to what happened with Chile,
Estonia, Israel, and Slovenia.
•
Further discussion in ELSAC in 2012, with final
decision by Council
Labour market issues
Compared to OECD countries the crisis has had
a relatively mild impact on (un)employment…
Cyclical changes are calculated as deviations from the pre-crisis trend (covering 2005 Q1 to 2008Q1) over period during
which output growth declined (2008 Q1 to 2009 Q3 for the Russian Federation and 2008 Q1 to 2009 Q2 for the OECD).
Source: OECD Review of Labour Market and Social Policies: Russian Federation (2011)
… real wages remain the main adjustment
mechanism
Expressed as cyclical changes
Earnings
Employment
Labour productivity
OECD
Russian
Federation
0
-5
-10
-15
-20
• Real monthly wage growth
remained high in 2008
(+10% ), but turned negative
in 2009 (-1.6%), because of
reduced hours of work and
reduced hourly wages.
• When expressed relative to
its pre-crisis trend, the
cyclical drop in real wages
was ten times as large as
across the OECD avg.
-25
(%)
Source: OECD Review of Labour Market and Social Policies: Russian Federation (2011)
A dynamic but segmented labour market
• Employment growth has been mostly in lower quality
jobs
• Atypical contracts have increased significantly:
– Informal employment is limited
– Temporary, civil and oral contracts
• Wide disparities persist within the group of LMEs
• Disparities among regions remain large (despite
progress)
• Wage inequality remains high (although declining)
Reinforcing labour market institutions: labour law
is unequally enforced, and...
•
There seem to be significant differences of labour law
enforcement across firms.
•
•
Minimum wages are not always enforced
•
•
Labour inspectors are poorly paid, which risks corruption
With current resources, the labour inspectorate would be
able to carry out a control-visit of each enterprise on
average once every 20 years.
Recent proposals to increase fines for infringements
should be implemented.
…employment protection legislation is not very
strict
Employment protection legislation
(average scores 0-6 from lowest to highest strictness)
Source: OECD Review of Labour Market and Social Policies: Russian Federation (2011)
Collective bargaining has limited effect
• Collective bargaining framework is fairly developed:
o Provisions in Russian law for collective bargaining rights at
several levels
o Relatively high trade union membership
• But, limited effect on wages and working conditions
o Agreements set general objectives and minimum standards
are low
o Bargaining power of trade unions is limited, in part due to a
relatively limited right to strike
o New trade unions find it difficult to establish themselves
• Wage-setting is thus mostly in the hands of employers
Public spending on labour market policies is
relatively low
Public spending on labour market policy , % GDP
Netherlands
France
Germany
Portugal
Sweden
OECD
Italy
United States
Canada
Poland
Australia
Hungary
Japan
Russian Federation, 2009
United Kingdom
Russian Federation
0.0
0.5
1.0
1.5
2.0
2.5
• Limited spending on
“passive measures” as
unemployment payments
are low.
• Consider re-introducing UI
system.
• Refocus from short-term
work schemes into costeffective programmes for
unemployed to get back to
work.
• Rigorous programme
evaluation.
(%)
Source: OECD Review of Labour Market and Social Policies: Russian Federation (2011)
Social policy issues
Absolute poverty has declined since 2000
Rosstat (HBS), absolute poverty, mix of income and consumption data
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: OECD Review of Labour Market and Social Policies: Russian Federation (2011)
Until the recent global crisis, Russia experienced a
prolonged period of strong economic growth, and the
official absolute poverty rate - measured against the
federally set minimum subsistence level - dropped sharply
from 29% in 2000 to 13% in 2009.
Relative income poverty is above the OECD avg.
Gini coefficient (top scale)
Poverty rate, 50% median income (bottom scale)
0.20
0.25
0.30
0.35
0.40
0.45
8
11
14
17
20
(%)
Sweden
Netherlands
France
Hungary
Germany
Australia
OECD
Canada
Japan
United Kingdom
Italy
Poland
United States
Portugal
Russian Federation
Turkey
5
• Relative income poverty,
measured against the standard
OECD benchmark of 50% of
median household income
(adjusted for household size)
stood at 17% in 2008, above the
OECD average of 11%.
• Similarly, income inequalities
remain very high in
international comparison: the
Gini coefficient on income
disparities was 0.43 in 2009
compared with an OECD
average of 0.31.
Source: OECD Review of Labour Market and
Social Policies: Russian Federation (2011)
Who are the poor?
Proportion of (group) population with incomes
below the minimum subsistence level 2008
General population
Children (<16)
Young people (16-30)
Prime age persons (Men
30-60; Women 30-55)
Pensioners (Men over
60; Women over 55)
0.0
5.0
10.0 15.0 20.0
Source: OECD Review of Labour Market and
Social Policies: Russian Federation (2011)
• Children, young people,
and the working age
population, have the
highest proportions of
people with incomes below
the minimum subsistence
level.
• Already back in 2008, there
were relative to other agegroups there were relatively
few pensioners with
incomes below the
minimum subsistence level.
Social spending is below OECD average.
Cash: Pensions (old age and survivors)
Cash: Income support to the working age population
Services: Health
Services: All social services except health
France
Sweden
Germany
Italy
Hungary
Portugal
United Kingdom
Poland
Netherlands
OECD
Japan
Canada
United States
Australia
Russian Federation
Turkey
0
5
10
15
20
25
30
(%)
• Public social expenditure
(without housing) was 15% of
GDP in 2009, compared with an
OECD average of just over 22%.
• A large part of social spending is
on pensions (below) and health,
but income support for the
unemployed and families was
lower than in OECD countries.
• There appears to be room to
refocus social spending from
pensioners to the working-age
population and children: social
support must be aimed to
support employment.
Source: OECD Review of Labour Market and
Social Policies: Russian Federation (2011)
Total fertility rate remains below the OECD avg.
Ru ssia
OECD-34
Japan
Un ited States
4.0
3.5
3.0
2.5
2.0
1.5
1.0
Source: ?OECD Family database
•The introduction of family capital may well have contributed
to the recent increase in the TFR.
• For family policy to be effective in this sense parents have to
be confident they can reconcile work and care commitments on
a long term basis.
• Childcare support, improving housing policies and expanding
income-tested child support will reduce poverty and help young
young
Russians establish a family of their own.
Low life expectancy limits growth of the elderly
population.....
Men
(Women - Men)
Japan
Italy
France
Australia
Sweden
Canada
Germany
Netherlands
Portugal
United Kingdom
OECD
United States
Poland
Hungary
Turkey
Russian Federation
50
60
70
80
90
(Age in years)
Source: Health data
• Both the OECD and Russia have to
deal with population ageing. Old
age dependency ratios will double
to over 40% in 2050.
• In the OECD because the
proportion of elderly is increasing;
in Russia because the persistently
low birth rates will lead to a decline
in the working age population.
• Relatively low life expectancy
curtails growth of the elderly
Russian population.
• If health outcomes were to improve,
financial pressure on the pension
system will mount.
The replacement rate for pensions in Russia is around
the OECD average.
Net replacement rate
Gross replacement rate
Greece
the Netherlands
Austria
Italy
Russian Federation
Finland
OECD
Sweden
France
Germany
United States
Japan
United Kingdom
0
50
100
150
Source: OECD Pensions at a Glance (2011)
• Pension policy aims to generate
a replacement rate of about
40% of earnings on retirement.
• It will be challenging to achieve
the 40% replacement rate
objective as payment and
saving rates have been outpaced
by rapid wage growth until
2008/09; notional pension
saving is not linked to life
expectancy; and, the rate of
return of the funded pension
component of the system has
been negative since the start in
2002.
Spending on pensions has recently surpassed OECD avg.
Public expenditure on pensions as a per cent of GDP,
Russia and OECD countries, 2007
Italy
France
Portugal
Germany
Japan
Poland
Hungary
Sweden
OECD
Turkey
United States
Russian Federation
Netherlands
Russian Federation, 2009
United Kingdom
Canada
Australia
0
2
4
6
8
10
12
14
(%)
Source: OECD Review of Labour Market and
Social Policies: Russian Federation (2011)
• Significant increases in
transfer payments to
pensioners helped to keep
poverty in check during the
economic crisis.
• However, this has
compounded the imbalance
between pension
contributions and
expenditure: in 2009 public
pension spending equaled
about 6.5% of GDP, which
compares with only 2.5% of
GDP in contributions.
Reform is needed to secure the long term financial
sustainability of the pension system, including:
•
Raising low standard pensionable ages: Most
OECD countries have now the same pensionable ages for
men and women, usually 65, whereas in Russia these are
60 for men and 55 for women. As female life expectancies
are higher, the current gender inequity in standard
pensionable ages is difficult to justify. We encourage the
gradual equalisation of the standard retirement ages
among sexes.
Reform is needed to secure the long term financial
sustainability of the pension system, including (continued):
•
Limit access to early pensions: Many full pensions
are accessible before the already low standard
pensionable ages. Often service records of 20/25 years
grant entitlement to early pensions, which employees
often take while also continuing to work in the same job.
Early pension rights could be withdrawn gradually.
•
Measures to raise cost-awareness should also be given
prominence: shift the burden of costs away from the
Pension Fund of the Russian Federation, to the
employer.
Reform is needed to secure the long term financial
sustainability of the pension system, including (continued):
• The strongest shoulders should bear their fair
share of the cost: Russia should be commended for
abolishing the complicated and regressive Unified Social
Tax. However, since January 2010, maximum earnings
thresholds over which social contributions are due were
reduced to about 1.5 times the average wage. We
recommend to increase this maximum threshold to twice
the average wage or higher.
• To further improve the redistributive power of the
tax/benefit system, consideration should be given to
strengthening progressivity in the personal income tax
scheme which, apart from tax deductions for very low
income households, is flat, at a rate of 13%.
Concluding remarks
•
Russia needs to find a better balance between labour
market flexibility and workers’ protection. This can be
done by strengthening labour law enforcement and the
labour inspectorate, promoting workers representation
and collective bargaining, enhancing the effectiveness of
active labour market programmes and by removing the
possibility to use civil contracts for employment purposes.
•
There is a need for a greater focus of social spending on the
working-age population and children. Long-term financial
sustainability of the pension system is key to that strategy.
Russia needs to raise low standard pensionable ages, limit
access to early pensions and ensure that the strongest
shoulders bear their fair share of the cost.
Thank you for your attention!
www.oecd.org/els/Russia2011