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Section The Real Sector of the Economy 01/20 12/08/01/08/08/12/--01/-1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/Fig. 11. Index of Industrial Projections, 2005So, the second wave of the crisis, or its new stage, or the continuation of the recent crisis is quite possible and is just a matter of time. Other issues in question are certainly the scale, deepness and other specifics of future developments as compared with the ones that took place in Russian industry at the end of 2008. With regard to this in September-October managers of enterprises participating in IEPs surveys were asked the question, What is your enterprise going to do (what can happen) in case of the second wave of the crisis and the lowering of demand for the produced output, and the following 13 variants of response were suggested:

1) lowering of ex-factory PRICES;

2) significant (15% and more) reduction of OUTPUT;

3) lowering of COSTS;

4) increase of DELAYED payments by buyers;

5) increase of NON-MONEY settlements with buyers;

6) lowering of WAGES, part-time working week;

7) DISMISSAL of employees;

8) halting of enterprise OPERATION;

9) complete or partial changing of OWNERS;

10) real risk of BANCRUPTSY;

11) forced LEAVES of employees without pay;

12) more active MARKETING, searching for new buyers and markets;

13) NONE of the above mentioned.

First time we included (or, to be more exact, managed to include) this question in the questionnaire in December 2008, after the IEPs surveys were the first to register the actual rather than expected beginning of the crisis (the record of November 18, 2008). Later the questions about the actual business responses and expectations were asked four more times, the last in March 2010. As a result we obtained a unique by its immediacy and frequency array of data on expectations, plans and responses of enterprises to the crisis that began in Russian industry RUSSIAN ECONOMY IN trends and outlooks in November 2008. The question posed in 2011 can help both Russian enterprises and Russian ministers to get prepared for the possible new wave of the crisis.

Lowering of wages, part-time working week Significant reduction of output Lowering of costs More active marketing, searching for new markets Dismissal of employees Leaves of employees without pay Delay of payments by buyers Lowering of ex-factory prices Halting of enterprise operation Risk of bankruptcy Increase of non-money settlements Complete or partial changing of owners None of the above mentioned 0 10 20 30 40 50 60 70 Fig. 12. Possible responses of enterprises to the second wave of the crisis, % In case of the second wave of the crisis (lets term so possible negative developments in the nearest future) Russian industrial enterprises first of all plan to cut wages and switch to a part-time working week (see Fig. 12). 69% of enterprises will take such actions. These anticrisis measures hold the first place by their popularity with enterprises of all sizes and among respondents of different ranks (from the director to an average executive). The latter fact illustrates a sort of class consensus that formed in the industry during the first three years of the crisis. But the possibility of such response greatly differs by branches. While in ferrous metallurgy, machine-building and construction materials industry over 80% of enterprises are ready to take such measures (and except for ferrous metallurgy they are the most widely spread), in timber processing they are possible at 40% of enterprises, in food industry at 28%, in electric power industry at 14% and not at a single enterprise in the non-ferrous metallurgy.

One can suggest that the most likely reason why Russian enterprises name the lowering of wages and switching to a part-time working week first in the list of measures to be taken in response to the crisis is the normalization of situation with wages in the Russian industry after the acute (first) phase of the current crisis was overcome. This indicator was included in the quarterly questionnaire in 2007 and now permits to trace the assessment of employees wages by executives. According to estimates of enterprise managers (and these are the ones who take decisions on revision of wages), at the end of 2011 wages reached normal levels at 64% of enterprises. On the eve of 2008 crisis only 53% of respondents could provide normal wages to their workers (see Fig. 13). So, one can assume that in autumn 2011 industrial enterprises had much better opportunities for wage maneuver in case of the crisis escalation as compared with the end of 2008.

Section The Real Sector of the Economy NORMAL % 56 57 43 45 32 BELOW NORMAL 1/07 7/07 1/08 7/08 1/09 7/09 1/10 7/10 1/11 7/11 1/Fig. 13. Assessment of wages paid to workers and specialists by enterprise managers To check this hypothesis, lets compare the probability of wage responses to the second wave of the crisis by enterprises that pay normal wages to their workers and by the ones that assess the paid wages as being below normal (see Fig.14). It turned out that the normal level of wages is not conducive to the lowering of wages and enforcement of a part-time working week in case of the second wave of the crisis. Its rather vice versa.

But it seems that the second wave of the crisis can finish off enterprises which have failed to restore after the peak of the first wave and still pay insufficient wages to their workers. Such enterprises 1) four times more often expect that their operation will be halted;

2) two times more often are ready to send their workers on unpaid leaves or just simply dismiss them; 3) will more often be forced to reduce output thus further aggravating the situation. Meantime, delayed payments by buyers are less acceptable for enterprises with insufficient wages; they are in desperate need of pay for their produce, even in the form of nonmoney settlements which they are twice more ready to accept as compared with enterprises that are able to provide normal wages to their workers. The latter will assume more active (aggressive) position in case of the new escalation of the crisis: they are 1.5 times more disposed to intensify marketing and search for new markets.

In December 2008 the lowering of wages and switching to a part-time working week ranked third (59% probability) being surpassed by such classical anti-crisis measures as the lowering of costs and searching for new markets and buyers. As the crisis was overcome, its expected application fell from 43% in the II quarter of 2009 to 28% in the I quarter of 2010.

But the actual extent of its use was greater and ranged from 64% to 53%.

Only 37% of enterprises in industry at large are ready to apply the most severe measures dismissals in relation to their employees. The probability of such actions does not depend on the size of enterprise but apparently varies by branches (see Fig.15). While in non-ferrous metallurgy, timber processing and food industry dismissals are possible at approximately 20% of enterprises, in ferrous metallurgy, machine-building and consumer goods industry this share is as high as almost one half of enterprises. There is also less consent about this extreme RUSSIAN ECONOMY IN trends and outlooks measure between executives of different ranks: top-managers are ready to reduce personnel in 40% of cases while average executives twice more rarely.

Lowering of wages, part-time working week Significant reduction of output Lowering of costs More active marketing, searching for new markets Delayed payments by buyers Dismissal of employees Leaves of employees without pay Lowering of ex-factory prices Risk of bankruptcy Halting of enterprise operation Increase of non-money settlements None of the above mentioned Complete or partial changing of owners 0 10 20 30 40 50 60 70 80 enterprises with "normal" wages enterprises with wages "below normal" Fig. 14. Possible responses to the second wave of the crisis by enterprises with normal wages and those with wages below normal, % Consumer goods industry Ferrous mettalurgy Machine-building Construction materials industry Chemical industry Food industry Non-ferrous metallurgy Timber processing 0 10 20 30 40 50 Fig. 15. Probability of dismissals in case of the second wave of the crisis by branches, % In 2008 the probability of dismissals was estimated by enterprises at 47% and ranged 7th among the after-effects of the crisis. As the situation developed (2009-2010), the lay-off projections were initially registered at 30% of enterprises and then fell down to 24%. Actually Section The Real Sector of the Economy they were implemented at 38% of enterprises in the II quarter of 2009, with further reduction of this share down to 30% in the I quarter of 2010. The higher initial estimate of lay-offs probability as compared with later projections and even the actual implementation is most likely due to the surprisingly active (sometimes even too active) efforts of the government to halt dismissals as compared with the respective efforts (or, to be exact, their total absence) during the previous crisis of 1998. In 2011 enterprises already adjusted their projections taking into account the experience of the first wave of the crisis and, probably, national peculiarities of the election campaign. Lay-off projections are also constrained by chronic shortage of skilled labour in industry even in the situation of sluggish and/or fading industrial growth in 2010-2011.

The sending of employees on unpaid leaves is the last in the list of HR policy measures that enterprises are ready to take. The probability of such actions in industry at large is 31%.

Their application rate wont depend on the size of enterprises but will differ greatly by branches. Similar to dismissals, their most active use is probable in ferrous metallurgy (56% of enterprises), consumer goods industry (39%) and machine-building (37%). As compared with other HR policy tools, their probability is high in non-ferrous metallurgy (33%). Such practices will be less spread in food industry (15%) and timber processing (17%).

In 2011 significant (15% and more) reduction of output held the second place among possible anti-crisis actions of enterprises. 54% of producers in industry at large were ready to take this step. It was named second by enterprises of all sizes and by only two branches (machine-building and construction materials industry). At the same time, in ferrous metallurgy the reduction of output will be the most popular response to the crisis as claimed by 96% of factories in this sector (see Fig. 16). No other anti-crisis measure has such a high rating neither in industry at large nor in any of the surveyed categories of enterprises. Meantime, in food industry and non-ferrous metallurgy the probability of output reductions in case of the second wave of the crisis is the lowest.

Ferrous metallurgy Construction materials industry Machine-building Consumer goods industry Chemical industry Timber processing Food industry Non-ferrous metallurgy 0 20 40 60 80 100 Fig. 16. Probability of output reductions in case of the second wave of the crisis by branches, % Although at the end of 2008 the reduction of output ranked only 4th in the list with 56% probability, the realities of the first quarters of the crisis turned out to be more tough. At the beginning of 2009 75% of enterprises reported the actual reduction of output. By the I quarter RUSSIAN ECONOMY IN trends and outlooks of 2010 this figure fell down to only 62%. For this indicator the gap between enterprise projections and the severe reality was the biggest. In the II quarter of 2009 the reduction of output was projected by only 40% of enterprises, and by the end of monitoring their share fell down to 24%. But in fact no such (or even close) results were obtained within that period.

At the onset of the crisis (i.e. in December 2008) Russian industrial enterprises gave preference to the two classical anti-crisis measures: the lowering of costs (77% probability) and more active marketing and search for new buyers and markets (78%). The almost three-yearlong crisis experience of 2009-2011 made them revise their attitude towards these measures.

In 2011 only 46% of producers were ready to cut costs and only 39% of enterprises believed in the efficiency of efforts to intensify marketing and search for new markets and buyers. The probability of (and opportunity for) lowering unit costs in case of the second wave of the crisis is the highest in metallurgy (53% in ferrous metallurgy and 62% in non-ferrous metallurgy). Similar projections are made by enterprises of chemical (53%) and food (48%) industries. The reserves for cutting costs in case of the new phase of the crisis are the smallest in machine-building (43%) and construction materials industry (36%). The most optimistic about the effects of marketing and search for new buyers and markets are enterprises of food industry (60%) and ferrous metallurgy (53%) while enterprises of non-ferrous metallurgy have almost lost belief in these tools only 9% of them will attempt to take respective steps.

The analysis of possible responses of enterprises to the second wave of the crisis revealed that industry at large is ready to face it with due regard to its own experience and actions of authorities during the first wave thereof. Enterprises will respond to the inevitable reduction of output by the lowering of costs and dismissal of employees. The switching to non-money forms of settlement for the produce with a view to preserve the staff and continue operation is very unlikely as proved by the first wave of the crisis in 2008-2009. Therefore, one should not expect the growth of barter transactions (so much feared by observers at the onset of the crisis). But the second wave of the crisis can lead to the liquidation of inefficient enterprises that have survived owing to the state support and resources accumulated in 2003-2008. Three years of sluggish crisis have lowered the safety margin of our industry, and the feebleness of hopes for the restoration of former economic growth rates appears to undermine the optimism of owners and managers in fighting for survival of their enterprises.

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