Russia May See More Labor Unrest as Slump Worsens, Study Shows

Categories: Economy/Labor

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By Paul Abelsky

July 6, 2009 (Bloomberg) — Russia may face outbreaks of labor unrest last seen in the 1990s as manufacturing slumps at a record pace and companies struggle to pay employees, according to a study by Moscow’s Higher School of Economics.

“Spontaneous demonstrations demanding payments in owed back-pay and such protests as hunger strikes” have broken out, researchers led by Tatyana Chetvernina and Irina Kozina wrote. “If labor disputes take the form of hunger strike, it shows a lack of faith in any possibility of dialog with the employer.”

The country had 99 labor disputes in the first five months, compared with 93 in all of last year, the researchers said. The economy shrank 9.8 percent in the first quarter and industrial production fell a record 17.1 percent in May. Wage arrears rose 10.8 percent the same month and unemployment jumped to the highest level in more than 8 years in April.

A government stimulus package of more than 2.5 trillion rubles ($80 billion) and three interest-rate cuts since April have failed to rekindle growth.

Labor stoppages this year in a mining town in the Russian Far East to an industrial town near St. Petersburg, were sparked by grievances over owed back-pay as production stalled and external financing dried up.

Prime Minister Vladimir Putin lambasted billionaire Oleg Deripaska on June 4 for idling a plant in Pikalyovo, a town of 23,000 in the north west.

No Easing

Several hundred people blocked a highway to alert Putin to their hardships. Putin said on Feb. 27 that the government “cannot, must not and will not” restrict “legal forms” of social protest, though it will crack down on illegal protests.

The worsening economic downturn won’t ease the pressures that lead to industrial action. By the end of the year, 17.4 percent of the population, or 24.6 million people, will live beneath the subsistence level of $185 per month, about 5 percent more than before the crisis, the World Bank said on June 24.

Unemployment may exceed 13 percent by year-end as the economy shrinks 7.9 percent, the Washington-based lender said. The bank estimates about a quarter of the population is vulnerable to poverty.

Strikes, legalized in 1990, have shown the clout of industrial workers since communism fell. Hundreds of thousands of coal miners went on strike in 1989 and later helped topple the government of Soviet leader Mikhail Gorbachev in 1991, the Higher School of Economics researchers wrote.

Growth Decade

Miners also led labor protests in the 1990s, driven primarily by grievances over unpaid wages that peaked in 1997, a year before the government defaulted on $40 billion of domestic debt and devalued the ruble.

The number and intensity of strikes subsided in the last decade, according to the report, as average wages rose sixfold during the recovery that saw Russia’s economy grow an average of almost 7 percent a year.

Workers’ rights aren’t protected by anyone, according to 43 percent of respondents in a survey by the Moscow-based All- Russian Center for the Study of Public Opinion published on May 26. Sixty percent of Russians believe trade unions have no real influence in the country, the organization said.

Workers are hampered in the defense of their rights by restrictions placed on trade unions and poor enforcement of existing laws, the researchers wrote.

Legal procedures necessary for a strike to go forward take at least 42 days, the report said. Only those unions representing more than 50 percent of total workforce are allowed to negotiate with the employer.


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