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Russia: Workers Still Waiting To Be Paid

By Tony Weselowsky

Prague, 11 February 1998 (RFE/RL) -- At first glance, it looked like a victory for Russia's beleaguered workers. Amid great fanfare, the government announced at the close of last year that it had paid out more than $1 billion owed to Russia's federal and local employees.

In doing so, the Kremlin said it had met a deadline set by President Boris Yeltsin to end public sector wage arrears by the first of this year.

In following weeks, it became clear that public sector workers in various regions did not get the promised payout. Nevertheless, for many doctors, teachers and others on the public payroll the government largesse gave reason to be thankful during the holidays.

The scope of wage arrears in Russia is staggering. According to data from the Brussels-based International Confederation of Free Trade Unions (ICFTU), Russian workers were owed more than $9 billion in back wages as of last September. The General Secretary of the ICFTU, Bill Jordan, has described the wage backlog as "mass theft" which ranks as "one of the greatest crimes of the 20th century."

So it seemed likely labor officials would welcome the Kremlin's efforts to pay out public sector workers. Wrong. Labor officials say the government's campaign hasn't made a dent in the wage arrears problem, merely it has shifted it onto the backs of those suffering the most from wage arrears--Russia's private sector workers. Moreover, a crucial Constitutional Court ruling in December has denied workers of one of the only levers at their disposal in winning back wages from delinquent plants.

Some of the money that eventually made its way into the pockets of Russia's public sector workers came from government efforts to collect tax arrears from delinquent private enterprises. That, say critics, was like robbing Peter to pay Paul, according to Stephen Pursey, chief economist at the ICFTU.

"The more that the International Monetary Fund (IMF) and the World Bank and the Russian finance ministry attempt to balance the budget by increasing tax revenue, thus bringing in the money needed to pay public budget sector workers, the more you pass the problem onto the private sector and the commercial sector," Pursey explained to RFE/RL.

Vadim Borisov, the director of the Moscow-based Institute for Comparative Research into Industrial Relations, (ISITO) says as part of its tax-collecting campaign, the government pressured the Constitutional Court to overturn a key civil code statute that can only spell doom for Russian workers.

"Here the issue concerns the contradiction between statute 855 of the civil code, which gives preference to the paying of wages, (over taxes), and the tax code, which was adopted in the beginning of 1990 under completely different economic conditions," Borisov told RFE/RL in a recent telephone interview from Moscow.

Prime Minister Viktor Chernomyrdin welcomed the Court's ruling as the "right decision." He and other officials claimed enterprise directors were exploiting the civil code as a loophole to fend off the taxman. While that may be true, the ruling was a blow to union efforts to win back wage arrears, as Borisov explains.

"Our research in Kemerovo, Samara and Sverdlovsk Oblasts showed labor unions were able to exploit the contradiction in the legislation to win back some wage arrears through court rulings. Now with the new Constitutional Court decision that becomes impossible."

In the first nine months of 1997, local trade unions launched 2,000 individual and collective legal suits against employers, according to the Financial Times. As a result, they were able to collect 104 billion old roubles in unpaid wages.

Marat Baglaj, the head of the Constitutional Court, seemed to back off from the ruling when he told Kommersant Daily on January 18 that he had sent a letter to Chernomyrdin and the speaker of the State Duma, Gennady Seleznyev, proposing an "idea of proportionality" under which neither wages nor taxes would be given a definitive preference.

Jordan says the court ruling was a "provocative" gesture against labor, and he says that will affect the more than 10 million industrial workers in Russia.

"I've personally written to (Russian President Boris) Yeltsin asking him to move on this and make it clear that there is an urgency that the State Duma legislate to put the ruling back in line with the Russian civil code."

(This article is one in a three-part series called Russia's Workers: Why They Go Without Wages. )