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Labor market and factors of productivity growth in Russian enterprises

Priority areas of development: economics

Goal of research: Determination of labor market factors of productivity growth in Russian enterprises.

The realization of the goal of research was carried out through the following directions:

  1. University quality and graduates’ wages
  2. Demand for second higher education among Russian senior executives
  3. Precarious work and innovation in Russian enterprises
  4. Quality of corporate governance and turnover of senior executives
  5. Immigrants in Russian labor market: the sectoral segregation and earnings differential
  6. Economic status, health and productivity of different socio-demographic groups (youth, seniors)


Analysis was carried out through using of different econometric methods and models, including Ordinary least squares (OLS-regression), logistic regression, probit regression, Two-stage least squares regression, fixed and random effects models. For sectoral segregation evaluation we used Duncan and Hutchins indexes. Earnings differentials between natives and immigrants were evaluated using Oaxaca-Blinder decomposition.

Empirical base of research:

  1. Russian Longitudinal Monitoring Survey of Higher School of Economics and data of Federal State Statistics Service (2002-2013)
  2. Monitoring of Quality of the university admissions (2011-2013)
  3. Enterprise survey «Interaction of internal and external labor markers» (2014) that represents Russian enterprises. The sample size is 2003 enterprises for 7 sectors of economy (mining, industry, construction, transport and communications, trade, finance, business services)
  4. Survey on 57 largest (on the amount of annual revenue) Russian enterprises (2003-2012)
  5. Russian enterprises' senior executives database (5000 senior executives, 2000-2010)

Results of research:

The conducted research shows, that graduates of high-quality universities have stable wage premium comparing with ordinary university graduates after control for academic, socio-demographic and labor market factors. It should be mentioned that university quality does not exactly reflect the quality of education. We found that one additional point at university USE enrollment rate provides graduates’ with 1,9 -2% wage premium.  Earnings of graduates’ of most selective and quality universities are 31% higher than earnings of graduates of the low-quality universities. We discovered that earnings of graduates majoring in economics and engineering are higher than that of graduates of other fields of study.

Studying on second higher education programs is the way to improve the quality of education or get a new profession. Only 1% of Russian population acquires second university degree. However, the second higher education is unequally distributed among different professional groups. Senior executives are the professional group with high level of education (99% of senior executives have at least one university degree). Moreover, among the senior executives of about a third have a second university degree. The study, based on unique Russian enterprises senior executives' database shows the high demand for second higher education degree among this professional group.  We discovered that second higher education was more likely to be in demand by senior executives who obtained their first diploma in engineering or humanities. Economic and business studies were found to be the most needed areas for the second university degree. Senior executives with first university degree in fields of economics or law are less likely to obtain second higher education. Leading Moscow universities are the most popular higher education institutions for obtaining second university degree. About 30% of senior executives obtained second higher education in foreign universities.

Education and training of senior executives influence quality of management. The growth of innovations in Russian enterprises during last 20 years is an evidence of these changes. Executives of enterprises may use different personnel management techniques. During the recent years the significance of non-standard forms of employment has increased. Fixed-term employment contract is one of the common form of the non-standard employment. In terms of use of fixed-term contracts Russian enterprises are close to the developed countries, but level of innovation activity of Russian enterprises is significantly behind them.

The impact of using enterprise workers with fixed-term contracts on the innovative activity of enterprises was evaluated on the database of survey of Russian enterprises carried out in the framework of project «The interaction of internal and external labor markets "(VVVRT) for 2014».

The study shows that a significant share of Russian enterprises (41%) does not use fixed-term contracts for employment and do not implement any innovations. However, 42% of Russian enterprises implement innovations. In Russia, innovations are more common for large enterprises, while in developed countries, on the contrary, innovations are usually implemented by small firms. Enterprises using fixed-term contracts are more likely to make innovations (51%) than firms that do not use this type of contracts (37%). Regression analysis confirms the previous findings connected with higher probability of innovation activities for enterprises using fixed-term contracts (19%). Nevertheless, the influence of fixed-term contracts use on innovations decreases for enterprises that have large investments. Fixed-term contracts are often used by enterprises as a mean of labor costs reduction while implementing innovations in conditions of limited financial funding. However, the possibility of such cost reduction is limited. As the number of workers with fixed-term contracts increases, the probability of innovation activities on enterprises decreases. Mass fixed-term employment decreases labor costs, but on the other hand, hinder human capital accumulation and lead to a shortage of qualified personnel to implement innovations.

Turnover of senior executives characterizes their status on the labor market and reflects the quality of corporate governance. The influence of enterprises’ performance on turnover of senior executives is one of the main indicators of the quality of corporate governance. The results of the analysis of Russian enterprises carried out on Survey on 57 largest (on the amount of annual revenue) Russian enterprises (2003-2012) shows that probability of senior executives’ turnover increases with increase of return on assets and earnings per share. Thereby, quality of corporate governance in Russia has the common features with other countries.

The productivity growth on enterprises can be inhibited by job segregation. There exists a demand for immigrants in Russian labor market, but immigrants are usually employed on unqualified and low-paid jobs in some industries. Using nationally representative data (RMLS-NRU HSE) from 2004-2012, we examined sectoral segregation between immigrants (persons with an immigration background) and native workers and its impact on the earning differential in Russia. Our results show that sectoral segregation in the Russian labor market gradually increased from 2004 to 2012. On average, labor income of immigrant is 14,5% lower than that of natives. The measured impact of sectoral segregation on earning differential between immigrants and native workers accounts for 29.46%.

The labor market status of different socio-demographic groups of workers affects their productivity. Analysis was conducted for two groups of workers: young and senior. We found out a significant improvement of youth economic status in terms of wages from 2000 to 2013 years. In particular, senior-young wage gap decreases by 13%. At the beginning of 2000-s wages of young workers made up 86% of senior worker’s wages, but at the end of period earnings of comparing groups equals. Wages of young workers grew faster than wages of older cohorts. The most considerable decrease in earnings differential between senior and young workers was found for low-qualified workers.

The study of senior population focuses mainly on impact of health status on labor supply of senior workers. Analysis conducted using RMLS HSE data for 2001-2013 shows that health status significantly affects retirement decision of old workers. However, the effect of health status is heterogeneous and varies by age and gender groups. The study findings shows that increase of health status could decrease a number of retired women by 3,2-4,4%, and number of retired men -  by 2,4-7,8%.

Level of implementation, recommendations on implementation or outcomes of the implementation of the results

The results of the project were published in different academic journals and preprint series, were discussed at seminars and conferences in Russia and foreign countries. The results of the project are also used in educational process in the preparation of teaching aids, manuals and lectures on labor and personnel economics.

The study findings have significant policy implications for realization of reforms of educational and public healthcare sectors. In particular, educational policymakers may take into the consideration impact of the quality of education on graduates’ labor market outcomes. Reforms of healthcare should be implemented in such a way that in addition to improvement of workers’ health, the duration of their employment increases.

The results of the study have also significant implications for formation of economic and social policy. Study findings are relevant for Ministry of Labor and Social Protection of the Russian Federation in the following in fields of employment and labor relations. Results of the project are particularly important for the development of measures for improvement of the conditions of employment of different socio-demographic groups of workers (young and seniors), and for implementation of pension reform. Moreover, the study findings are relevant  for the development of measures for the use of immigrant workers as well as discriminated groups of workers.

The results of the study of Russian enterprises and senior executives can be demanded by the Ministry of Industry and Trade of the Russian Federation and the Ministry of Economic development for the formulation of the measures to stimulate industrial production and entrepreneurship, efficient use of human and financial resources, development of real sector of the economy and increase of the productivity of labor.


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