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Regular version of the site

Socio-demographic aspects of labour market dynamics in Russia

Priority areas of development: economics

Present report concludes the project dedicated to the studies of socio-demographic processes of Russian labour market that were conducted by the Centre for Labour Market Studies of NRU HSE in 2016-2018. Set of studies comprising present report were carried out in 2018 and cover socio-demographic aspects of labour market dynamics in Russia.The report presents the results of the studies of the various demographic processes, such as reduction in the working-age population, aging, late entry of young people into the labour market, decline in fertility, external and internal migration, as well as their implications for different labour market indicators.

Goal of research is the comprehensive study of the influence of demographic factors on the evolution of the Russian labor market. It was based on a retrospective analysis of statistics and micro-data of various representative surveys, and also contained a projection of the main trends in the Russian labour market over the coming decades.

Methodology of the surveys combined both descriptive procedures - comparison of the mean values, distributions and ratios, the estimation of transition matrices - as well as the use of more sophisticated techniques based on the estimation of various types of the Mincer wage equation, multinomial logit regressions, probit models, panel regressions with fixed effects, the calculation of the Dissimilation Index (Duncan's Index), Fuchs’ decomposition of gender-based occupational inequality, Oaxaca-Blinder decomposition of the differences in the average wages of men and women.

Empirical base of the research is largely provided by the Russia Longitudinal Monitoring Survey – Higher School of Economics (RLMS-HSE) covering the period of 1995-2016.  Microdata of the surveys of the Federal State Statistics Service (Rosstat) - Labour Force Survey (LFS) for 1995-2015, Survey of Occupational Wages for 2005 and 2015, Survey of Vocational Education and Training of Employees in 2016 – were also used together with the data on the populations forecast prepared by Rosstat. The description of the characteristics of employment of Russians in the German labour market was based on the data from the Institute for Employment Research of the German Federal Employment Agency in Nuremberg. Comparison of the labour market position of various socio-demographic groups in foreign countries was carried out on the basis of the OECD Employment Protection and Labor Statistics, ILO employment protection legislation database – EPLex, ILO database of national labour, social security and related human rights legislation – NATLEX and OECD Dataset on the public expenditure and participant stocks on labour market policies.

Results of research demonstrate that, despite the obvious problems, the future of the demographic structure in Russia, according to forecasts, looks relatively good compared to other countries. In the next few decades the relationship between the economically dependent and the economically independent population will inevitably deteriorate quite strongly. However this deterioration will be less dramatic than in most other countries. The real threats to the economy come not from the actual aging of the population, but from the incompatibility of this process with the established institutions of social support for the elderly. These institutions were created up to the middle of the last century in completely different demographic and economic conditions without taking into account the long-term problems that they could cause. The report also analyzes the relationship between age, labour productivity and wages in Russia. The evolution of the age-wage profiles of Russian workers is the focus of research which shows that, contrary to developed countries where wages monotonously increase until the retirement age, in Russia this profile looks different. Wage growth ends by the age of 40 years, and after that wages are reducing. This results is supported by alternative estimations using various data sources, including an analysis of the dependence of non-cognitive skills on age. The report discusses the possible causes of this non-standard profile associated with the evolution of various components of human capital. If this pattern persists, then older age groups will fall even further behind the income growth from the middle and junior age groups. The report also provides an analysis of the gender wage and employment gaps. Despite the unfavorable economic background, in the period from 2005 to 2015 employment rates among men and women increased. However it grew at a faster pace among men, and in 10 years period the gender gap in employment rates increased from 8.7 to 11.1 percentage points. Women, in turn, started to leave the labour market for a long time due to childbirth more often, and their subsequent integration into employment may be accompanied by serious problems. The analysis shows that the distribution of men and women by industry and occupation remains extremely uneven. This asymmetry only intensified during the period analyzed. The concentration of women in industries with predominantly female employment (trade, education and public health) and men in industries with predominantly male employment (manufacturing, construction, transport and communications) are increasing. Gender differences in employment patterns described inevitably affect wages.  None of the occupational groups, including those with predominantly female employment, demonstrates equality of earnings between men and women. The report also covers the issue of the differences in the return rates from education between Russian regions which are very large. For example, the estimation of the basic Mincer equation for 2015 shows a variation in regional estimates from 38% to 125% (calculated as a % of the average wage of workers with secondary education), while the national average is 65%. These results indicate that the country-wide estimates of returns are, at least, uninformative, and, at most, can shift our understanding of the returns on investment in education, since policy decisions are often made at the regional level.  The report also contains the results of a study of the position of Russians in the European labour market based on the German statistics. The relevant chapter describes the historical context of emigration, its dynamics, as well as available studies on immigrants from Russia to Germany, analyzes the conditions of the host labour market. For the first time, a quantitative and qualitative description of Russian citizens employed in Germany is presented using administrative data from the Institute for Employment Research (IAB) of the German Federal Employment Agency. The results demonstrate that the presence of Russians in Germany does not decrease in time, on the contrary, the migration activity of Russians has noticeably increased after 2011. The available administrative statistics on the labour market shows that Russians are not a marginal group in the German labour market. On the contrary, employment of Russians is similar in its structure to the employment of local workers. The report also provides an analysis of the impact of non-cognitive skills on the process of falling out of employment and education for Russian youth. One of the important factors of the so-called NEET (Not in employment, education or training) status is the lack of social skills. Low levels of conscientiousness, which imply bad abilities for organization, responsibility and diligence, are significantly associated with the NEET-inactive status for young men and NEET-unemployment status of young women. In turn, high values ​​of conscientiousness are attributes of employed youth of both genders. This finding is consistent with previous studies on the relationship of non-cognitive skills with labour market position and participation in education. According to them the ability to work diligent and hard, the tendency to think over important decisions provides significant returns in the form of higher wages and increases the probability of employment in general. Among women, the only significant non-cognitive characteristic of NEET-inactivity is emotional instability (neuroticism). Nervousness, inability to remain calm in stressful situations is an important factor which reduces the likelihood of finding a job. This result also goes in line with previous studies. In turn, among men, neuroticism was not significantly associated with being in a state of NEET-unemployment or NEET-inactivity. The final chapter of the report presents the results of a study of the impact of demographic changes on the reform of labour market institutions in OECD countries. Changes in labour market institutions that took place from the beginning of the 1990s to the second half of the 2000s significantly worsened the situation of young people, workers with lower levels of education, economically inactive individuals who decided to look for a job. The liberalization of temporary contracts maintained strict regulation of permanent employees and made vulnerable groups to bear the brunt of adaptation to economic shocks. They were captured in temporary jobs with low wages and hazy career prospects, minimum job security, frequent transitions between employment, unemployment and economic inactivity. Temporary workers have become the buffer that employers used in order to fight back deteriorating macroeconomic conditions. At the same time, insiders with permanent contracts could demand a pay rise without fear of losing their jobs. The labour market reforms, the beginning of which is associated with the global crisis of the late 2000s, were aimed at eliminating the imbalance in the regulation of permanent and temporary jobs. However, despite some attempts to limit the use of temporary jobs, their share in total employment varies little. The reform of active policy measures, which is generally aimed at accelerating the employment process for the unemployed, equalizes the access of certain groups of the unemployed to benefits, but it also has its “victims”. In a number of countries, single women with adolescent children lose the opportunity to receive benefits, which, together with low incomes and the shortage of kindergartens, contributes to the spread of poverty.

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

Results included in this report can be used in the development of economic and social policies. They also have a number of implications for the evolution of the theory and methodology of analysis of the Russian labour market in the context of demographic changes. They provide new empirical results on the state of Russian employment, thereby contributing to the understanding of its current trends. The results obtained can be also used in the labour economics, population economics and social policy courses.




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