ABSTRACT
This paper 1 assesses the income protection policies in the Russian economic reform program by considering their content and the background to their development in comparison with earlier Soviet reform policies on social safety nets. It finds that, while mass joblessness has not yet hit Russia, the Yeltsin leadership is walking a tightrope between the requirements of financial stabilization and the need to maintain political stability. The government has run into strong opposition from domestic constituencies opposed to reform. As a result, Russia’s leaders have not yet adopted the hard-headed approach to employment and minimum income protection that will be necessary to ensure the success of their economic reform program.
At the beginning of 1992 the Russian government embarked on a bold program of market-oriented economic reforms. Price liberalization and macroeconomic stabilization have already led to a fall 291in average living standards and, if Russia is to make a successful transition to a market economy, unemployment also threatens many workers. This paper attempts to assess the income protection elements in the Russian reform program by considering their content and the background to their development in comparison with earlier Soviet reform policies on social safety nets.
The paper is organized as follows. There is first a review of the employment protection arrangements currently in place in Russia and an assessment of their general effectiveness and financing. A brief review of the scope and financing of income indexation and the setting of minimum wages and pensions follows. The paper then reviews the debate among Soviet/Russian economists and policymakers over the best approach to the provision of social safety nets during the transition.
Finally, some conclusions are set out. Briefly, these are that the Yeltsin leadership has found itself walking a tightrope between the requirements of financial stabilization and the urgent necessity of maintaining social and political stability, and that it has run into strong opposition from powerful domestic constituencies opposed to reform. As a result, the Russian government has not yet adopted the hardheaded approach to employment and minimum income protection that is necessary to ensure the success of its economic reform plans.
