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The growth of unemployment has been the bane of many of the Central and East European countries in the transition from centrally planned to market economies. Russia's unemployment rate has been hard to measure accurately because many firms unofficially furlough workers but leave them on company rolls. This practice is a vestige of the paternalistic Soviet era, when the presence of workers in an enterprise often had no relation to that enterprise's actual production. Many of these furloughed workers find gainful employment in the private sector, where wages often go unreported. Such a system results in a haphazard, inefficient allocation of the labor force.

Western and Russian analysts have relied on International Labour Organisation measurements, which indicate that at the end of 1995, Russian unemployment had reached 8.2 percent (see table 17, Appendix). The Russian journal Ekonomika i zhizn' estimated the figure at 8.6 percent, or 6.3 million people, for the first quarter of 1996. Although the last figure still is below the unemployment rates of Poland and some other countries in transition, the full extent of unemployment has been masked by extended subsidies that delayed the shutdown of large Russian enterprises. In 1995 nearly half of plant directors surveyed said that they had more workers than they needed.

Unemployment varies considerably according to region. Moscow's unemployment rate, the lowest in Russia, was 0.6 percent in March 1996. The Republic of Ingushetia, which also has had the highest immigration rate because of its proximity to Chechnya, reported a rate of 23.5 percent in December 1995. In March 1996, Ivanovo, a textile center east of Moscow, had a rate of 13 percent, and the Republic of Udmurtia, a center of the struggling military-industrial complex, reported 9.4 percent (see The Defense Industry, ch. 9). At that time, women constituted 62 percent of Russia's officially unemployed, and 37 percent of the total were people below the age of thirty.

The Federal Employment Service (Federal'naya sluzhba zanyatosti--FSZ), the agency in charge of issuing unemployment benefits and placing unemployed workers, had only 3.7 percent of the working population registered for benefits in March 1996; many jobless workers do not register because benefits are so small (averaging US$22 per month in 1995) and because, after the guaranteed employment of the Soviet era, joblessness entails a significant stigma for many Russians. However, as the average term of unemployment grew from six to eight months between 1994 and 1995, more workers participated in FSZ programs. In 1995 the service placed an estimated 1.7 million workers in new jobs. That year, 9.8 million workers left positions and 8.7 million were hired, and the majority of those who left did so voluntarily--many because wages were not paid--rather than because of dismissal. Shortages exist in some types of skilled labor, and some companies actively recruit workers.


By 1995 delays in wage payment had become a chronic problem even in profitable Russian enterprises. In many cases, enterprises simply passed along the burden of late payments of state subsidies and customer debts. At the end of 1995, the Government owed a total of US$112 billion of subsidies, of which about 27 percent were more than three months overdue. Most of its debt was to the military and energy sectors. Through 1995 an average of 19 percent of wages were paid late, and in January 1996 a total of US$2.1 billion was overdue in agriculture, construction, industry, and transportation. The State Committee for Statistics (Goskomstat) began keeping separate statistics for wages formally paid and those actually delivered. The payment record of privatized enterprises was worse than that of state enterprises, and in many cases workers were paid in merchandise rather than in cash. In early 1996, the average rates of overdue payment were 62 percent in ferrous metallurgy, 86 percent in oil extraction, and 22 percent in food processing.

In his presidential campaign, Yeltsin promised to abolish state-sector wage arrears and to encourage improvement in the private sector. By squeezing the national budget, Yeltsin achieved temporary results in the state sector, but his promise had no effect on other enterprises. Officials proposed several programs to raise average wages and streamline the inefficient system by which wages are delivered, but no meaningful reform had been achieved by mid-1996. In July 1996, coal strikes in the Far East, southwestern Russia, southern Siberia, and the Urals threatened a nationwide shutdown in response to continued payment failures in that industry.

Data as of July 1996

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