Russian government takes on wage arrears problem

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/48

Prime minister Dmitri Medvedev told a cabinet-level meeting on wage arrears last week that total wage arrears were less than 1 % of the total monthly payroll sum of the firms monitored. At the beginning of November, some 70,000 people, or less than 1 % of the workers in monitored firms, were owed delinquent wages. During the current downturn, wage arrears have seen a relatively mild increase. About half are concentrated in the manufacturing sector. Nearly 30 % of the arrears were owed by firms that had filed for bankruptcy.

Olga Golodets, deputy prime minister with social affairs portfolio, said that in the course of a month wage arrears sometimes increase to over four times the amount reported in the official end-month monitoring statistics. She noted that the official labour agencies on the average deal with almost 800,000 wage payment cases each month.

The government would like to see a more permanent solution to this problem. Medvedev referred to raising the fines on employers in wage arrears and increasing compensation paid to the workers as well as the interest rate charged on the late wages. Golodets noted a proposal was under consideration to establish the right to recover wages before taxes in bankruptcy proceedings.

Medvedev recalled the hard times in the 1990s and the prolonged times it took to settle wage arrears. For example in 2004, wage arrears were roughly a tenth of company monthly payrolls monitored, and about 4 million workers at slow-paying firms were affected. During the 2009 recession, wage arrears rose to around 2 % of total payrolls and the number of workers affected by wage arrears reached 500,000.

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