The main focus of this article is labor relations during the transition from the socialist system to modern Russia. Rejection of socialism was perceived as the change from the kingdom of restrictions to the kingdom of freedom. The recent decades have been a complicated and ambiguous period that has not yet come to an end. Russian society and the Russian economy still have not reached stability and are usually considered to be in transition.

What were the main problems in the Soviet system of labor relations? First of all, restrictions. The Soviet Union tried to regulate everything. For example, the authorities established a single value for a given labor action or the cost of a single working hour for all occupations. For example, all specialists – economists, engineers, lawyers, doctors – received the same base salary. The only differences in their pay were related to the region or sector in which they worked. In the central regions, there were no supplements to the base salary, while in cold or hot regions, salaries were multiplied by a coefficient ranging from 0.1 to 2.0 in the far northern regions. The second problem was a mismatch between wage levels and the efforts of workers. Salaries were subject to “ceilings” that could not be exceeded. Differentiation of salaries depended only on the status of the worker and on the sector.

A rigid system of standards governed working hours, occupational safety, discipline, remuneration, etc. Modern, complex production required flexibility, but flexibility was impossible. Informal labor relations were often disguised by Party ideology. For example, rules on working hours were violated for ideological reasons. It was argued that workers were willing to volunteer to stay after hours to implement the plan, hence the use of “voluntary” initiatives such as “27 weeks of intensive work before the 27th Congress of the Party” or “voluntary salary cut and increased production norms”. Then came the appearance of the informal sector, where work was paid at contract rates and earnings were several times higher than the standard wage. Informal relations were allowed, but not approved. At that time, informal work and informal labor relations were seen as better and more efficient than formal ones.

Within enterprises, there was a three-level monitoring system for workers: the Party organization (unconditional submission to all requirements of Party management from workers who were Party members), Komsomol (control of young workers), and trade unions (control of other workers). Conflicts were banned. If a conflict arose, it was solved in one of two ways: either the workers were accused of incorrect behaviour, or the managers were accused of infringing on the interests of workers. It was a crime to go on strike. If workers were dissatisfied with something, they had to file a complaint and wait for a response from the authorities, government and Party committees.

This system of labor relations made it possible to control workers, but not to change the situation. The main advantage of the system of labor relations in the Soviet Union was its predictability and stability. Over the last 30 years of the Soviet Union’s existence, most people could plan their working lives and foresee their prospects for life in general. The main drawback of this system was its total regimentation. Rigid regulations caused deep dissatisfaction, among both blue-collar and white-collar workers. Experts also spoke of the need to abandon regulation, as it constrained the economic activity of the people. The idea of the emancipation of labor was proclaimed.

Real change began in 1989 with a major miners’ strike, in which 600,000 people participated. The result of this strike was the emergence of a new actor on the economic and political scene: independent trade unions, which became highly influential and backed many politicians at the local and federal levels. In the early 1990s there was a split among trade unions that has persisted to the present and that has an impact on the whole situation in the workplace. New trade unions are called “alternative” unions because they have tried other approaches to the regulation of labor relations, through advancement requirements, tough negotiations, conflicts, and strikes.

At the same time, the Soviet trade unions have retained their structure, bureaucracy, and conservative strategy: cooperation with the employer, rejection of strikes, talks at all costs, etc. The transition to the market was sharp and ambiguous. Today there are many works testifying that the Russian reforms in the 1990s were unfairly severe. Softer variants of reform were rejected.

In 1992, a new package of laws on labor relations was adopted. An important feature of this package was the restriction of the role of unions. The reformers had risen to power with workers’ help, but then betrayed them by limiting their influence. All this was done in order to restrict the influence of the Soviet trade unions, but the limits affected the new unions as well. For example, the organization of strikes was made subject to an extremely difficult procedure that is virtually impossible to carry out. The alternative trade unions had been deprived of their most effective tool.

Thus, the new Russian government has established limits for legal regulation of labor relations and created opportunities for employers to pressure workers.

Following these transformations, which became evident in the early years of the market and which hit all workers, came the removal of restrictions on employment. Employers now had the possibility of dismissing workers for economic reasons. In the Soviet period, dismissal of a worker by the administration was considered a punishment, and a fault on the worker’s part was necessary for this to happen. Dismissal without fault violated a long-standing tradition, but it was the first market transformation that hit Russian workers, and it was a shock.

Nonpayment of wages became the second major feature of post-Soviet transformations. Millions of people went unpaid for several months. Nonpayment decreased only after a default in 1998, when wage arrears depreciated. It was a time of general denial of any formal rules. Employers violated all the rules they could. Workers did not remain in debt. Strikes were held everywhere and on any occasion, but their effectiveness was low. The workers could force the employer to pay wage arrears, but in the next month these arrears reappeared.

In the late 1990s, the debate over the problems of labor and labor relations in Russia took the form of a neoliberal discourse, which concentrated on the idea that business must be free of any social obligations and that all restrictions on the use of labor should be removed. Some experts made proposals to abrogate the labor laws and turn labor contracts into a kind of bilateral commercial transactions.

The Russian neoliberals see labor only as a market, excluding from it any hint of a human component. In a neoliberal paradigm, labor market research is confined to affirming the necessity of reducing the rigidity of labor legislation. The neoliberals are constantly talking about reducing the social burden on the state, refusing the standard norms of social support in relation to socially weak groups. For example, the monthly allowance for the unemployed in Russia is about €110. It was set a few years ago, and the main motive was to give “no incentive to remain unemployed.”

Another important feature of the neoliberal approach to social and labor problems is that social consequences, especially medium- and long-term consequences, simply are not considered. The only thing that constrains solutions of this kind is the fear of instant social indignation and protest. In 2002, Russia adopted a new Labor Code, which was a compromise between the old trade union bureaucracy, neoliberal politics, and business. The main change in the new labor legislation was to reduce the impact of unions and workers in the formation of labor relations. It weakened trade unions’ ability to block layoffs and dismissals, as well as the possibility of negotiating; it also set a very complicated procedure for organizing strikes. At the same time, the new law retained many of the old standards on work, recreation, health etc. The code has been criticized. Business considers it excessively rigid and protective of workers, while trade unions say that it is unfairly liberal.

The main criticism of the labor legislation is its rigidity, which prevents management from reducing labor costs. The main demand of neoliberal experts, business and politicians is thus to allow more flexibility and have less regulation. The use of informal forms of employment is considered a consequence of the law’s excessive rigidity. Reducing this rigidity is seen as a way to form a legitimate employment relationship. Experience has shown, however, that as soon as the law is made more flexible, there arise new, radical demands to increase flexibility. For example, the 2002 Labor Code contained a tough list of conditions indicating when the use of temporary employment contracts was allowed. In 2004, this list was extended; in 2006, the restrictions were lifted for trade and small businesses; and in 2010, it was proposed to remove them completely. There are other examples showing that increased flexibility does not lead employers to start observing the law. On the contrary, they demand even greater indulgence, and informal labor relations are not reduced.

Another means of extending non-standard employment relations was agency labor. Formally, this is forbidden. However, informal employment agencies have operated since the mid-2000s, and there are more today. Proponents of agency labor consider that a major advantage of this form of precarious employment is that it helps young people, the unemployed, and the socially weak to enter the sphere of standard formal employment. Thus, it serves as a “bridge” from unemployment to employment.

Our studies have shown that this “bridge” does not work that way; rather, workers from the standard employment sector move to non-standard employment. For example, 30% of the staff of one of the largest metallurgical holding companies (more than 20,000 employees) moved to outsourcing and agency work without any justification. However, they continued to work in their usual places; only their organizational status had changed. This means that employees of outsourcing firms and agencies do not have the same rights and opportunities as standard workers. They have limited wage growth, less secure employment, no social benefits, etc. But most importantly, they cease to be members of the union when they move to another firm, and they do not form a new trade union there.

Another method used by employers is to create “filters” through which the workers recruited for the enterprise must pass. For the first half-year, they work in every type of position, but with a reduced salary (5-15% less). Beginners can become permanent employees if they work overtime, accept a reduced salary for six months and show loyalty. This example shows that agency work is not a “bridge”; rather, it means underreporting wages and gaining control over workers. An even more radical means of reducing costs was informal employment. Refusal to conclude a formal contract allows you to avoid paying taxes (income tax, social, health and pension contributions, etc.), compensation for harmful working conditions, overtime, annual leave, sick leave, etc. The employer can change the system and salaries arbitrarily. The main issue here is the increased dependence of the worker on the employer. The ability to dismiss a worker at any time qualitatively changes labor relations: it makes them unilaterally adjustable. The employer establishes working hours and rest time, working conditions, modes of payment, means of assessing the results of work, etc., that are favorable to him.

Today, the proportion of informally employed is variously estimated at from 25% to 40% of all workers. One might say that the dreams of neoliberals have come true. Relations of this type have now existed for more than 10 years, and today we can talk about the consequences.

1. First of all, this system constrains the workers in a precarious status. There is no “bridge”. Workers leave the sphere of standard employment and remain in precarious employment for a long time, perhaps for the rest of their working lives.

2. These are people with low incomes, dependent and alienated.

3. These people work 10-12 hours each day. They drop out of other activities of normal life. They have no time for a family, not to mention social or political activism and cultural life. Working long and hard, they undermine their health.

The human consequences of informal and precarious employment can be monstrous. Against this background, people remember Soviet times with nostalgia. In this area, there is no law, no social partnership, no signs of humanity; here the employer dominates by far. Actually, these are preindustrial labor relations, similar to what existed in Russia at the end of the nineteenth century. Along with the spread of informal employment among Russians since the mid-2000s, there were a large number of migrants, especially from the former Soviet republics in Central Asia. According to various estimates, the number of migrants in Russia ranges from 3 to 15 million people, i.e. from 5% to 20% of Russian workers. Migrants work only in the informal sphere. They are necessary to lower labor costs.

Migrants are even more dependent on the employer, because in Russia the procedure of receiving legal status and work permits is quite difficult. According to our research, 41% of working migrants have no right to live and work in the country. This makes them very vulnerable. Migrants earn even less than Russian workers, while their working conditions and recruitment differ little from slave labor.

Thus, at the moment there is a broad and diverse sector of precarious and unstable employment, characterized by the labor relations described above. In the area of standard employment, too, there are many problems. Employers are struggling to reduce labor costs. It is impossible to cut taxes, and tariffs on energy, transport and infrastructure monopolies are constantly increasing. Corruption is increasing as well. Therefore, labor costs are the only expense that can be reduced. But large enterprises and budget formulation must still comply with the law.

In enterprises where there are unions, it is necessary to conduct a dialogue with them on increases in wages and social benefits. This causes irritation on the part of employers. The pressure on unions has therefore increased recently. Employers are trying to destroy the union cells and leaders through pressure and violence. Even under the current laws, however, unions and workers can defend their rights and interests. In Russia there are constant protests and workers’ strikes. They are becoming increasingly organized. Moreover, trade unions blocked some laws aimed at further liberalization of labor relations.

Where there is no trade union, or where unions are weak or compromised, employers feel more comfortable. They can use the minimum payment standards, ignore issues of occupational safety, and demand loyalty from employees under threat of dismissal. Thus, modern Russia has two types of labor relations. In the sector of standard labor relations, which are governed by law and by the interaction of employers and labor unions, either the situation is stable or there is a slow decrease in labor standards. The informal sector has developed a system unilaterally directed by employers, with generally precarious labor relations. There are some workers, mainly internal migrants, who are not far from slaves.

There are transitional forms from standard to precarious employment, such as agency employees. But the direction of their transition is from standard labor relations to informal and often precarious ones. Has the transition from a kingdom of restrictions to a kingdom of freedom taken place? Today we can say that in many respects, these expectations were naive and unjustified. But not just naive. At the beginning of the market reforms, their initiators had limited and closed opportunities for employees to participate in the regulation of labor relations in the workplace. From the very beginning, workers were considered only as a business resource. There was no partnership, nor any humanization of labor relations.

The consequences of the degradation of labor and labor relations are already obvious. Today it is difficult to find qualified workers, and therefore the high-tech sector and modern industry are not developing in Russia. The poverty rate is still high, preserving the phenomenon of “working poor”. There is growing alienation, social dissatisfaction and aggression.

How can this situation change? The most appropriate approach would seem to be rejection of neoliberal values and, at the same time, an active struggle against informal and, especially, precarious labor relations. Russia needs to open up channels for workers that would allow them to engage in regulation of labor relations. The procedure for collective bargaining should be modified; that for organizing strikes must be simplified; and legal protection of union leaders should be restored. An inventory of the Soviet heritage is needed. For example, many regulations of the Soviet period in the field of labor protection are still in force today, and they have not become outdated: they are current. There is no need to copy the Soviet experience; rather, it is necessary to implement modern methods.

The task is to combine the advantages of regulation with the benefits of the market economy. Regulatory restrictions alone or market forces alone would be devastating. We may draw an analogy to a nuclear reactor, where the energy of the nuclear reaction is enclosed in a steel frame and concrete body. The Russian experience is important because in a historically short period, we were able to see different versions of labor relations. We live in an era of regulated labor, and now we know what it means to have no restrictions at all. Relying on the Russian experience can help us understand where to lay the boundaries between reasonable restrictions and an allowable level of freedom.