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Interaction of Internal and External Labor Markets

Priority areas of development: economics
2012
The project has been carried out as part of the HSE Program of Fundamental Studies.

The project was implemented within the framework of the HSE Basic research program.

In the globalized economy, there are significant and dynamic changes in the sphere of labour. Demographic changes, the growth of technology, and consequences of the world financial crisis intensify cross-border competition among workers, and have changed the employment situation. This has lead to a situation where employment regulation and labour market policy, that should eliminate market failures and imbalances, and institutional failings which limit job creation, became more and more relevant.

Discussion of labour relations and employment changes manifested as hiring, firing, and movement of employees at enterprises’ level is becoming increasingly important for economic development. Therefore, analysis of employment using enterprise data on the internal and external labour markets interactions is increasingly relevant and represents a new methodological approach for the Russian economy. In this research, the interaction of internal and external labour markets, influenced by complex of various labour supply and the labour demand factors, was analyzed based on this methodological approach.

The purpose of the research was to develop recommendations for employment policy and labor market policy which is based on a complex analysis of various labour supply and labour demand factors and their influence on the interaction between internal and external labour markets. The object of the research was enterprises and employees, and their interactions on both internal and external labour markets.

As a result of the research we defined, substantiated and presented labour supply and demand factors that determine the interaction of internal and external labour markets. We also classified methodological approaches for internal and external labour markets interaction analysis, taking into account the influence of labour supply and labour demand factors. Empirical analysis that considered the specificity of Russian data and Russian labour market institutes was also carried out.

Our findings shows that Russian enterprises used two main strategies of adjustment to the strict Employment Protection Legislation (EPL) in Russia: (1) evasion or violation of EPL without additional costs, and (2) compensation of employment protection costs by paying less to their employees. Nevertheless, some Russian enterprises did not fully compensate their employment protection costs that limited their abilities to determine their staff size, so the negative effect of EPL on the employment was expected.

Agency work was one of the different instruments which Russian enterprises used to adjust to economic fluctuations and institutional changes. It reduces the role of the specific human capital and makes internal markets more open. Internal markets became weaker both in primary (senior managers recruitment) and secondary (youth recruitment) sectors. Demand for employees’ specific skills was satisfied by on-the-job training. However Russian enterprises preferred to train more able and productive employees (including university graduates), and provided less training for industrial and low qualified workers. Thus, the labour resources of the enterprises could suffer from both a lack of employees and reduction of their quality due to health deterioration on internal and external labour markets . The maintenance and the improvement of employees’ health (especially for elderly people to extend their working period), smoking limitation and restrictions, and compensation for childcare costs could have a positive influence on human capital in Russia, and could also increase the economic activity level in Russia.

The obtained results are of scientific and applied importance and can be implemented by federal and regional authorities for developing policy measures in the framework of employment and socio-economic policy, and also for the regulation of employment, labour relations and enterprises’ human resource policies. They also can be used as educational materials.

Publications:


Смирных Л. И. Нестандартные трудовые договора: опыт российских предприятий // В кн.: XII Международная научная конференция по проблемам развития экономики и общества. В четырех книгах. Книга 1. / Отв. ред.: Е. Г. Ясин. Кн. 1. М. : Издательский дом НИУ ВШЭ, 2012. С. 435-443.
Смирных Л. И. Дифференциация российских регионов: тенденции кризисных лет 1998-1999 гг. и 2008-2009 гг. / Воронежский государственный университет. Серия С50 "экономическая". 2012. № 11-1.
Солнцев С. А. Иностранные топ-менеджеры на российском рынке труда: тенденции 2000-х // Вестник федерального бюджетного учреждения "Государственная регистрационная палата при Министерстве юстиции Российской Федерации". 2012. № 2. С. 37-43.