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The situation on the labor market is a derivative from the general economic situation in a region. That is why the group of territories with the worst indicators of the functioning of the labor market comprises primarily regions with relatively mod est indicators of economic development. Those are, first of all, republics in the North Caucasus with their depressive labor markets. Thus, in the 1st half 2006 the unemployment level in the Southern Federal Okrug made up 11.3% (displaying a 0.5% fall vs. the prior year) against the nationwide average rate of 7.0%. In the Re public of Adygeya, the respective indicator was 14.0%, in Dagestan 21%, in In goushetia 61.2%, Kabardino Balkaria 21.1%, Kalmykia 14.9% While in other regions in Russia the nature of unemployment is mostly structural one, in the na tional republics practically all the volume of unemployment is explained by an insuf ficient demand for workforce, which is associated with the absence of points of economic growth. The bulk of the unemployed falls on rural areas. Unemployment in the national republics is quite long while in other Russian regions the propor tion of permanently jobless is relatively small (34%), in the republics it lasts longer, while the proportion of stagnantly unemployed being very high (over 60%).

In Russia, cross regional differences in the conditions of the labor market ap pear far greater than in other countries with similar conditions, which reflects a great level of heterogeneity of the regions. The cross regional differences are, as a rule, inertia driven, i.e. the regions that had been more successful at the outset of the transitional period, as a rule, displayed better performance ever afterwards, RUSSIAN ECONOMY IN trends and outlooks which testifies to a long standing nature of the differences. Creation of job oppor tunities and existence of vacancies is noted largely around huge urban conglomer ates with a fairly diversified industrial structure (especially with a huge and expand ing services sector, mature infrastructure and qualified workforce). By contrast, the employment prospects are extremely low and unemployment rates are high in monosectoral (highly specialized) industrial regions that suffer from idiosyncratic shocks of demand.

In the period of the economic upturn the dynamic of growth in salaries and wages was more considerable vis vis moderate growth rates in employment, with both nominal and real salaries and wages being on the rise (Table 6). The rise in salaries and wages has recently accelerated, as the gaps in the levels of salaries have. Not only enterprises restructuring resulted in a substantial growth of labor productivity, which in turn manifested itself in a notable wage rise, but it had a fa vorable impact on the insiders (i.e. the staff that have kept their jobs or suc ceeded in finding new ones).

The gap in labor compensations payable to qualified and non qualified staff, which had been shrinking prior to 1998, once again found itself expanding. Accord ing to some estimates, the return from the university education has grown in the 2000s. The gender differences in the level of labor compensations continue to per sist and have even intensified. Interestingly, for women a higher educational level neutralizes the intensification of the gender differences.

The period of the 2000s saw the renewal of the debate on the minimum salary as a regulator of labor compensations. It forms the marginal low index, which re duces the differentiation of labor compensation. It accounts, as a rule, for less than 20% of the average wages and often even a. 10% of those, and, accordingly it fails to play the part of inhibitor of the staffs incomes. This enables corporations to re tain low paid jobs, which by itself steers differentiation of labor compensations.

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.

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