The anatomy of the corona crisis through the lens of the labor market adjustment

Abstract

The paper analyzes the main changes in the Russian labor market during the economic crisis caused by the COVID-19 pandemic. In previous crisis episodes, the Russian labor market reacted to downturns in a non-standard way — not so much by employment decline and unemployment surge as by wage cuts and reduction in working hours. The discussion focuses on the question whether this algorithm has been preserved under conditions of the corona crisis. The empirical basis is provided by microdata from the Russian Longitudinal Monitoring Survey (RLMS—HSE) for 2020. The paper describes the main mechanisms of labor market adjustment (wage cuts, part-time transfers, involuntary furloughs, telecommuting and others), analyzes the scale and dynamics of their use, assesses their differentiation by sociodemographic groups and types of enterprises. For each form of crisis adjustment both descriptive and econometric analysis is carried out. The Russian experience is compared with reaction to the corona crisis by other labor markets. It is shown that, like other countries, Russia managed to avoid a collapse of employment and explosive growth in unemployment mainly due to active utilization of two key instruments — various types of part-time employment and telecommuting. This allows us to conclude that the specific “Russian” labor market model has once again confirmed its ability to effectively accommodate even the strongest economic shocks.