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The minimum labor compensation (MLC) of RUR 1,100 is effective as of May 1, 2006.Should MLC be raised up to the subsistence level, it might affect the fed eral budget and a broader circle of economic interconnections. An accelerated raise of MLC up to the subsistence level, which is scheduled for 2008, will prede termine an advanced rise of the labor compensation indicators. An overly advanced rise in the labor compensation fund is associated primarily with the fact that a radi cal rise of MLC will entail an adequate rise of a considerable fraction of higher sala ries and wages in the economy to maintain a certain differentiation between labor compensations payable to employees of different qualifications.

If one assumes that, resulting from the compression of all higher wages, their noted growth rate is twice inferior to that in MLC (i.e. the correlation between MLC and the average wage will be 20% instead of the current 8 10%), the amounts of the employers additional obligations with respect to labor compensations should grow drastically. Hence, there should emerge a danger of the rise in MLC vis vis the low qualified employees labor productivity rate. A centralized rise of MLC has an impact on the whole line of labor compensations and not only on those pay able to low paid employees. While effects from the rise in MLC so far have been Section Social Sphere moderate, from now on they should be intensifying. One should take into account sizeable and fairly steady cross regional and cross sectoral differences in levels of labor compensations that further aggravate the problem of raising MLC in individual sectors and Subjects of RF. An perfect illustration of the differences in question is the indicator of the proportion of employees whose wages due are lower than the able bodied populations subsistence level. Thus, according to Rosstat, over of the number of those employed in agriculture, culture and fine arts have their wages due under the able bodied populations subsistence level. The same situation is noted with regard to over 1/3 of those employed in the education, trade, public ca tering, health care and physical culture, and the light industry.

Accordingly, the employers expenses on labor compensations are differenti ated with account of such sectoral differences. Expert calculations show that if the employers additional costs, under the constant number of employed in the respective industries, account in the fuel and electricity sectors for less than 10% of the labor compensation fund, in the light industry, trade, public catering and education they would be comparable with the level of LCF, while in the agrarian sector would be in excess of LCF.

In terms of regions such a decision will entail a series of effects that would be different, due to the state of the economy of a given region. First, the regions with the current level of the average salaries and wages lower than the average nation wide ones will see a greater gap between the growth rates in salaries and wages and growth rates in MLC, while a rise in MLC in the wealthier regions does not have a catastrophic impact on the dynamic of the average salaries and wages. Second, even with account of contraction of differentiation in terms of salaries and wages due to employers qualification in the poorer regions, an additional burden on the employers may account for over half of LCF, while in the wealthier regions the rise in LCF is going to be relatively insignificant.

So, the Russian labor market to some extent faces numerous challenges in herent in the developed economies labor markets: with the future quantity of labor resources in the economy to be declining and structural disproportions between demand and offer of workforce to be persisting, there continues to exist the press ing challenge of acceleration of the pace of generation of job opportunities that im ply adequate labor conditions and decent compensations.

It was the Labor Code enacted in late 2001 (promulgated in February 2002) that was to create conditions of an efficient functioning of the national labor market in a new market environment. It replaced the previous Code of Acts on Labor and a great number of by laws passed over past decades. The newly enacted Labor Code was further amended in 2006.

The new law on labor became a fruit of compromise between different politi cal groups, which is why it is not surprising it contains provisions adequate to mar ket realities and restrictions inherited from the Soviet era. Experts are unanimous in their opinion of the Labor Code maintaining its restrictive nature compared with similar acts adopted by developed countries.

RUSSIAN ECONOMY IN trends and outlooks The Russian labor market is formally overly regulated, however, it demon strates a great deal of flexibility. By systematically breaching the labor law, corpo rations secure advantages for themselves and exercise a distorting impact on the functioning of the labor market.

Meanwhile, provisions of the labor law, which most experts regard as serious blocks to creation of job opportunities, are not perceived as such by enterprises, for their significance is lower than that of other, more critical, restrictive require ments.

In the area of labor relations, the prevailing role is played by administrative barriers, such as numerous licenses and permits on exercise of entrepreneurial ac tivities, a burdensome tax administration and incomplete legal provisions.

4.3. Migration processes In 2006, for the first time in the contemporary Russian history, the demo graphic problem was paid serious attention in the annual Presidential Address to the Federal Assembly of the Russian Federation2 as a most acute problem facing Russia today. The factors behind this attention are the long term and annual de cline in the size of the population of the country and ageing of the population. In or der to settle the demographic problem there was proposed to focus the govern ments attention on the lowering of death rates, effective migration policy and on increasing of birth rates. The Address focuses primarily on this latter objective. Last year, both the legislative and executive branches of government concentrated their efforts exactly in this area. Less attention was paid to the two other demographic problem components (mortality rates and migration). According to the logic indi cated above, the Birth Rate Improvement Program will suffice to reverse the trend towards depopulation, which has been observed in Russia for the second decade running. Nevertheless, demographic calculations reveal that even in the framework of the most favorable scenario of implementation of this program and a real in crease in the number of births it will be impossible to reverse the downward trend as concerns the natural population growth rates.

Let us assume that in 2007, after the start of implementation of the Presi dential strategy, the number of second and third children will really begin to grow.

As a result, the number of birth will of course increase also; however, this growth will be checked by a rapid decline in the number of potential mothers, women in the age group from 15 to 49 years. All the women to enter in this group in the next 18 to 20 years have been already born, therefore, their number is known and in the early 2020s it will be almost one third below the present level.

In the case it is assumed that a miracle will happen and there will be again registered the best indicators in Russia over the last 40 years, i.e. 42 per cent of Annual Presidential Address to the Federal Assembly of the Russian Federation. Verbatim record of the speech made on May 10, 2006. See:

http://www.kremlin.ru/appears/2006/05/10/1357_type63372type63374type82634_105546.shtml Section Social Sphere first born in the total number of births and 2.2 births per one woman (these indica tors were registered in 1987 and were observed for one year only), in 2025 about to 2.1 million children will be born in Russia. This number is above the present 1.million, but below 2.5 million registered in 1987, when there was much more women of procreative ages. However, if there will be no such a success and there will be registered not the record high birth rates of 1987, but a more usual birth rate observed in the early 1980s (now it is the birth rate in France, which is the best in Europe 1.9 births per one woman; the Russian birth rate at present is 1.3), and if a more difficult task to keep this rate is accomplished, in 2025 there will be born about 1.8 million children (about 55 per cent of the will be first born, whereas sec ond children will make about one third of the total number of births). Of course, these figures also look good; however it is insufficient to compensate the number of deaths, which is to increase even in the case of declining death rates, just be cause the share of seniors will grow. Therefore, natural growth of the population will all the same be negative. A. Vishnevsky Comments of the Demoskop Weekly to abstracts from the Annual Presi dential Address to the Federal Assembly of the Russian Federation of May 10, 2006 //Demoskop Weekly. No. 245 246. May 1 21, In this situation, even if the present needs of the labor market persist (and do not increase), the country will inevitably need migrants.

Economic realities observed at present consist of the following components:

the general tension on the labor market (according to the data presented by Rosstat the number of vacancies at enterprises registered with employment agen cies increased from 333 thousand in September of 1996 to 1140 thousand in Sep tember of 2006), a deficit of unskilled labor and structural imbalances observed on labor market of certain regions, especially those most dynamically developing and tertializing, a lack of trained labor resulting from a decline in the prestige of respec tive jobs and the collapse of the system of secondary professional education.

In the situation, where the size of employable population rapidly declines (as observed since 2007) by more than 1 million people a year), there will arise a gen eral deficit of labor supply, especially unskilled labor.

In accordance with an official forecast published by Rosstat of Russia, the size of the population being in the employable ages shall decline from 90.1 million per sons to 76.6 million persons in the period from 2007 to 2020; at the same time ac cording to the forecast the migration based increase in the Russias population growth will make from 150 thousand persons in 2007 to 430 thousand persons in 20203.

Predpolozhitelnaya chislennost naseleniya Rossiyskoi Federatsii do 2025 g. (The estimated size of the population of the Russian Federation up to year 2025). M.: Rosstat, RUSSIAN ECONOMY IN trends and outlooks The long term migration policy of Russia has to proceed from these economic realities as compared with political demands of the society. It is presumed that this policy should not exclude, but necessarily complement the complex of measures aimed at an increase in the birth rate.

4.3.1. Regulating migration: the legislative framework in In 2006, the Russian legislation concerning the sphere of migration was sup plemented with several new documents. Two federal laws concerning the proce dures governing registration and stay of foreign citizens in Russia came into force on January 15, 2007. Besides, since November 9, 2006, there has already been enforced the new procedure governing the imposition of penalties and administra tive restrictions, which was introduced in the framework of the RF Code of Adminis trative Offences (with the exclusion of certain provisions, which entered into force simultaneously with federal laws of January 15, 2007).

In 2006, there were adopted the following legislative acts in the sphere of mi gration:

- Decree of the RF President No. 637 of June 22, 2006, On the measures aimed at the provision of assistance to voluntary migration of fellow countrymen resid ing abroad to the RF (published on June 28, 2006);

- The Governmental Program aimed at the provision of assistance to voluntary migration of fellow countrymen residing abroad to the RF; Plan of measures aimed at the implementation of the Governmental Program aimed at the provi sion of assistance to voluntary migration of fellow countrymen residing abroad to the RF (approved by Decree of the RF President No. 637 of June 22, 2006);

- Federal law of the RF No. 109 FZ of July 18, 2006, On the registration of foreign nationals and stateless persons migrating to the RF (adopted by the State Duma on July 30, 2006, approved by the Federation Council on July 7, 2006, pub lished on July 20, 2006, enters into force since January 15, 2007);

- Federal law of the RF No. 110 FZ of July 18, 2006, On the introduction of amendments and additions to the federal law On the legal status of foreign na tionals in the RF and on the annulment of certain provisions of the federal law On the introduction of amendments and additions to certain legislative acts of the RF (adopted by the State Duma on July 30, 2006, approved by the Federa tion Council on July 7, 2006, published on July 20, 2006, enters into force since January 15, 2007);

- Federal law of the RF No. 189 FZ of November 5, 2006, On the introduction of amendments to the RF Code of Administrative Offences (as concerns increase in responsibility for infringements on the procedure governing employment of foreign nationals and stateless persons in the RF) (adopted by the State Duma on October 20, 2006, approved by the Federation Council on October 27, 2006, published on November 9, 2006);

In order to enforce these laws, in 2006 the RF Government adopted a number of regulatory and legal acts:

Section Social Sphere - Resolution No. 271 of May 5, 2006, On the introduction of amendments to the Regulations on the use of migration cards as approved by Resolution of the RF Government No. 413 of August 16, 2004;

- Amendments introduced to the Regulations on the use of migration cards as approved by Resolution of the RF Government No. 413 of August 16, 2004 (approved by Resolution of the RF Government No. 271 of May 5, 2006);

- Resolution No. 622 of October 20, 2006, On the approval of the rules concern ing the provision of state support from the federal budget to the subjects of the Russian Federation included in the Governmental Program aimed at the provi sion of assistance to voluntary migration of fellow countrymen residing abroad to the RF;

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