A Conference in Moscow, organised by ILO-CEET and the Russian Ministry of Labour, included a call for a move away from a tax-based incomes policy and reliance on wage regulations to a negotiated incomes policy. Papers presented at the conference suggested that wage differentials have widened sharply, that wage flexibility had increased and that wage taxes were fuelling the growth of undeclared incomes. The Conference was opened by Gennady Melikyan, Minister of Labour, who indicated that the authorities were seeking alternative policies to limit wage inflation and growing wage differentials. There was also a powerful speech by Mikhail Shmakov, President of the main trade union body (FITUR), who expressed concern about wage arrears and the lack of effective instruments for implementing a wage policy. The vice-president of the main employer organisation (RUIE),Vladimir Kolmogorov, also spoke of the employers` willingness to develop collective bargaining with trade unions.
ILO reports for the Conference high-lighted that the Russian labour market was becoming more like those of other countries suffering severe problems. There is already high unemployment, coupled with millions of workers on unpaid leave (four million in industry alone in the first quarter of 1994) and millions more owed wage arrears. There were about 35,000 enterprises owing workers wages, amounting to over 2000 billion roubles, according to the trade unions. This maybe contrary to ILO Conventional No. 95, which the Russian Government has ratified.
The Conference discussed evidence showing growth of income and wage inequality. The minimum wage is less that 20% of minimum subsistence in-come and a tiny fraction of the average wage. "The level of the minimum wage is an absurdity and a mockery", said Arkady Soloviev, of FITUR. Survey data show there has been a shift from middle-in-come bands to both extreme poles of income distribution, and the Conference heard that wage differentials in Russia were among the greatest in the world. Growing wage flexibility reflected the withering of the centralised tariff system and increasing shares offerings coming from bonuses, fringe benefits and non-monetary benefits, which have also contributed to the widening of earnings in-equality.
Wages and salaries remain unrelated to economic performance or productivity. For instance, data showed there was no connection between sales performance and managerial salaries in manufacturing. The problem of linking pay to performance was compounded by avoidance and evasion of taxes on earnings. A representative of the employer body, the Russian Union of Industrialists and Entrepreneurs, suggested that less than one-third of taxes were collected.
Given the above mentioned trends, the ILO Team recommended that the Government move away from the tax-based incomes policy, on the grounds that the tax imposed on enterprises paying wages averaging above six times the minimum wage has led to new distortions, penalised productivity improvement, encouraged a shift into non-monetary forms of remuneration, and contributed to the non-declaration of incomes by the better paid. This debate is topical. There have been proposals to impose an even higher tax on incomes above twenty times the mini-mum wage (i.e., less than three times the average wage).
The ILO team also advised against utilising a regulatory approach based on wage and price controls. This approach has some support in Moscow. The ILO team, and the foreign specialists accompanying them, advised that this would not work, on grounds that include an inability to implement it and international evidence suggesting that such regulations induce market distortions and rigidities impeding economic growth and adjustment.
The ILO team advocated a negotiated incomes policy-v. This should include in-creased support for free collective bar-gaining at the national level, regional level and at the enterprise level. This would be the only way - in the context of the surprisingly flexible labour market- in which stronger linkages between wages and productivity could be achieved.
Several speakers also stressed that the strengthening of independent
collective bargaining, and a negotiated incomes policy developed within
the framework of the Russian Tripartite Commission, would be politically
wise as a means of strengthening democracy. As Stephen Pursey of the
ICFTU put it, "There seems a growing danger of social explosion unless consensual policies on incomes are developed". The ILO hopes to launch a series of technical assistance projects to strengthen bargaining procedures within the employer and union associations, and to upgrade the technical capacities of the Tripartite Commission secretariat. GS. RK.
