The "Gordian knot" of the Russian labor market

Failures in the course of economic reforms led to disparities in the sectoral structure of employment and the economic activity of the population. It was accompanied by a sharp drop in productivity and an increase in the concealed and registered unemployment. This resulted in low competitiveness of the sectors of the domestic economy and, consequently, in the lagging rate of employment generation. The domestic labor market is similar to the "Gordian Knot", twisted from different structural features and socio-economic factors. Like the Gordian Knot", the domestic labor market is strong, complex, unconventional, and most importantly, stable. Therefore, the state, companies, and even employees, despite all the shortcomings, consider the current system of the labor market advantageous, that is to say, workers are employed and, have a minimum income and time to look for alternatives; companies can share risks with their employees, adapt and maintain social relations, while the state is characterized by social and political stability due to the low combined level of unemployment and lack of social conflicts related to large-scale release and bankruptcies. The phenomenon of wage flexibility, high employment and consistently low unemployment in Russia during the crisis is the most obvious distinguishing feature of the model of the domestic labor market in comparison to other models, videlicet, the Anglo-Saxon and Scandinavian models. The Russians are afraid of layoff and ready to choose a pay cut for employment, as it is impossible to survive on scanty unemployment compensation. Companies do not seek to dismiss workers because of the strict Russian legislation on job protection obliging to pay the severance allowance. For this reason, mass layoffs are not observed in Russia. Obviously, distressed companies simply can afford it. In this context, retaining workers is more profitable, which is achieved through sending them on an unpaid leave or transferring to a part-time schedule. This leads to a surplus of labor force, which provides opportunities to reduce wages. High level of employment ultimately leads to low wages, which in turn leads to low productivity, which does not allow companies to prosper and receive a decent income so that they can increase the wages. Excessive staff turnover in the domestic enterprises does not encourage employers to invest in employees' training because they can leave the company for a higher salary. It negates all the advantages of the current system of the labor market. The negative structural features and socio-economic factors of the Russian labor market were clearly manifested during the reduction of the production volume during the crisis. Establishment of a new regulatory framework in the field of employment is required to address them.

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