Hidden unemployment in Russia

Abstract

The crisis of 2014 led to a sharp drop in production in Russia. However, along with production, the output per workplace also fell, which is not typical of a market economy. The article explains this phenomenon. It is shown that the development calculated by the existing methodology for the Russian economy does not reflect the true labor productivity and therefore this indicator can be used only with significant reservations. The reason for this distortion is due to the peculiarities of the labor market in Russia. This feature is that when production falls, it is not profitable for companies to dismiss workers as a consequence of large social obligations. Companies reduce wages, attract specialists without hiring, and take wages to the gray sector. Such actions, in our opinion, are the result of imperfection of labor legislation in the Russian Federation. All this helps to explain the fall in production value added per one working place and explain the growth of hidden unemployment. The article assesses the hidden unemployment at the time of the crisis. The lack of flexibility in the labor market in Russia is negatively affects to the country’s economy and confirms view point by Timothy Besley and Robin Burgess.