EMPLOYEMENT POLICY OF RUSSIA.................

One main factor for the misleading official unemployment figures in Russia is the state of the governmental Employment Service, the so-called "sluzhba zanyatosti".[10] As an inheritance from the Soviet Union, this institution only by and by came to accept the fact that unemployment in Russia is rising at all. In the first two years after implementation of the new Employment Act[11] in the year 1991 the "sluzhba zanyatosti" had little to do and means in abundance. As in Soviet times unemployment was still relatively insignificant in this time. The biggest part of Soviet economy was still more or less running in its old tracks, while due to the reforms a couple of new jobs - as for example in the financial-creditory and the banking sector or in food production - started to emerge. Employment in this new branches though was hampered by the slow restructuring of the traditional sphere. The reforms did not yet take full effect on the labour market and the employers still paid their duties to the employment funds of the social insurance system more or less entirely and in time. The revenues of the social insurance funds therefore exceeded the expenditures by far.[12] A couple of regional Employment Services managed even to accumulate quite impressive sums in this time.[13] In the years 1994/95 the unemployment figures started to rise and the wages and positions of the workers started to differentiate. The old Soviet enterprises more and more had to face the fact that under the new conditions they were not able to compete on a free market. Especially traditional labour intensive industry like coal mining, textile processing or the so-called "Complexes" of military and agricultural industry had to diminish their workforce substantially. Regions around monopolistically concentrated big industries became well known for their skyrocketing unemployment rates. The infamous Ivanovo-district for instance, that due to its mainly female workforce of textile workers in Soviet time attracted men from all over Russia, not so much to work there, but to look out for a wife, developed in the course of a couple of years into a genuine problem zone of shut-down former textile plants and virtually no alternative possibilities to find paid work.[14] Another sphere, that was hard hit by the retread of the state in

financing labour, was the scientific sector, before all the one of the defence industry. Due to the reduction of state orders this sector had to dismiss a big part of its specialists, who left alone then often were lured to sell their knowledge on a rapidly extending black market, be it to illegal drug laboratories, alcohol distilleries or foreign defence industries.[15] And a third sphere that began to feel the icy wind of the free market in this time was the educational sphere, whose employees traditionally consisted at about 90 per cent of women.[16] Although the amount of unemployed throughout Russia stayed still relatively small in this period, in some regions a unique particularity of Russian social policy started to take effect. Renewed in 1991 the Russian Employment Act theoretically foresees a wide range of different sources to fill up the social insurance funds[17]. In practice though, for a long time the sole contributors to the funds were the employers. Still today their contributions make up for 70 per cent of the revenues of the funds. Other sources depend on the wealth of the regions. Whereas in rich regions sometimes entrepreneurs can, with slight force of authorities, be brought to become "voluntary" donors, in poor regions contributions consist mainly of means from the federal budget. Contributions by employees still today practically do not exist. As long as the number of unemployed still was relatively small, the employer's contributions[18] were enough to supply the foreseen[19] benefits for the jobless. In some regions though the combined effects of near-bankrupt-enterprises and growing numbers of unemployed started to diminish the means of the social insurance funds considerably. The employers could not pay their contributions anymore and the expenditures of the employment funds grew into the sky due to rising unemployment figures.

In the years 1996 to 1998 the crisis developed into Allrussian dimensions. The number of regions, whose insurance funds had to be supported, grew tenfold, whereas the number of welloff-regions diminished to half. The debts of the employers to the funds grew as fast as grew the obligations of the funds to the unemployed. In 1997 only 15 of 89 regions of the Russian Federation were able to pay unemployment money entirely and in time.[20] Already 1996 the average height of the actually paid dole laid only at 23 per cent of the average income. 40 per cent of the unemployed, who at least got still something, got less than the statutory subsistence minimum and 54 per cent of those, who were entitled to receive unemployment money, got nothing at all.[21] In some regions the average waiting time for the payments exceeded two years.[22] its decentralisation Around the year 1995 more and more Russian regions passed the four per cent level of registered unemployment.[31] Economists considered already 3,5 per cent of unemployment to be the level at which regions change from contributors to recipients in the existing distribution system of social insurance. But even regions with low unemployment rates now more and more often withheld their contributions to the federal part of the insurance fund, that is meant to transfer money collected from richer regions to the worst-off districts in Russia. The Republic of Sacha for instance or the Belgorodskaya Oblast' paid repeatedly less than five per cent instead of statutory twenty per cent to the fund, although the latter had relatively little expenditures with only 0,9 per cent registered unemployment. Other regions spent the means of their employment funds not according to their designation. The Republic of Marij El for instance, whose unemployment rate reached at the time 3,9 per cent bought, with the support of the local administration, stocks for nearly 20 per cent of the means of its employment fund. In some regions up to 50 per cent of the fund's expenditures were used to support run down enterprises instead of paying dole to the jobless. and its consequences for certain regions

In addition to the vanishing federal support, some Russian regions with high unemployment figures and low budgets were hard hit by their neighbourhood to wealthier regions with a greater demand for labour. Not only that qualified workers were drained away by this demand, the commuting of workers often caused costs for the regions that were not counterbalanced by any revenues. If for example a resident of the near Moscow situated Vladimirskaya Oblast', who commuted to Moscow for work, became unemployed, the employment fund of the relative poor Vladimirskaya Oblast' was obliged to pay unemployment money that is determined by the wages in Moscow, which are considerable higher than the ones in Vladimirskaya Oblast'. And this despite the fact that the former employer of the now unemployed never delivered one single Rubel to the fund of the Vladimirskaya Oblast'. Russian employers are obliged to pay their contributions to the fund of the region where their enterprise is located, whereas unemployed receive their dole from the fund on their place of residence. Since big regional differences are characteristic for the Russian labour market some regions are outright losers of this particularity. The few winners of the Russian social insurance system are regions with low registered unemployment, high average income rates and the practical impossibility to house migrating labour forces because of high real estate prices or rigorous migration restrictions. The typical example for such a region is Moscow.[34] Similar problems today arise in the arctic regions of the Russian far north. Their richness in natural resources like oil, gas, coal, metals etc. initiated already in Soviet times the commuting of time workers, so-called "Vachtoviki", who used to work for one or two months in the far north and then went back to rest another month in their southern place of residence before commuting again to their arctic place of work. If such "Vachtoviki" lose their job - what due to the restructuring of the labour-intensive Soviet mines and raw material sites in the north is no rare thing to happen today[35] - the employment funds of their hometowns are meant to pay unemployment money according to the high wages in the north. Since due to high unemployment and low contributions the funds of the regions, from where workers migrate to the north, belong to those hardest hit in Russia, their means to pay unemployment benefits are rapidly vanishing away.[36] In the 1990s the issue of historical significance in the cultural field in Russia was a transition from the Soviet model of cultural policy to a new one.

Cultural policy in the Soviet Union was part of the "Marxist-Leninist" ideological policy of the Communist Party that also broadly used education and enlightenment for party purposes. This system was basically formed in the 1920s and the 1930s. In the 1940s, it evolved and emphasised the strengthening of historical identities. This system remained mostly unchanged until the late 1980s, despite several superficial alterations. Its basic components included:

creation of a broad network of state cultural institutions with a strong educational component; formation of a strict, centralised administration and ideological control system; enactment of corresponding regulations; and support for classical or high culture that was perceived as loyal or neutral in content.

Priority was given to those cultural instruments with the greatest potential to disseminate information: radio, film, the press and, from the 1960s onwards, emphasis was placed more and more on television. The main task of a system of so-called "creative unions", covering the main art forms, was to control the artistic community and intelligentsia and organise their professional activities according to the needs of the Communist Party.

ECONOMIC POLICY OF RUSSIA. In 1953, the Ministry of Culture of the Soviet Union, and then those of each of the Soviet Republics, was established. The result was closed bureaucratic machinery for the administration of culture, which corresponded to the general system of government. Despite this system, national cultural life was multifarious and diverse because mass involvement in officially organised cultural activities was one of the political goals. As soon as control slackened, latent tendencies became visible. In the late 1950s and early 1960s, Khruschev's reforms and the socalled "thaw" raised aspirations for liberalism, including in cultural life. However, the change that followed was Brezhnev's "zastoi" - with its slogan of creating a new identity - "the Soviet People".

In the mid-1980s, Gorbachev initiated real changes, decreasing ideological pressure on the mass media and administrative control over cultural and educational institutions. The intelligentsia, artists and cultural workers became the most ardent supporters of "perestroika". In 1990, the Law on the Press and other Mass Media eliminated state censorship, thus proclaiming abolition of ideological control. By the early 1990s, the state had also curtailed its involvement in regulating cultural matters. As the economic and political crisis culminated, the state lost interest in cultural issues... and the Soviet Union collapsed. In December 1991, the Russian Federation (RF) was established as a new independent state; the rule of the Communist Party was banished; the Soviets of People's Deputies were re-named Dumas (as in the twilight of the tsarist Russian Empire); but the complex federal structure of the former RSFSR (Russian Socialist Federative Soviet Republic) was maintained. A period of radical transformation in the political, social and economic systems began and recently it was described as "a decade that shocked culture" (see reference in chapter 9.1). At first, the main goal of federal cultural policy was to guarantee freedom of expression, to preserve cultural heritage and the network of state cultural institutions. In June 1993, the government of the Russian Federation approved these goals and they formed the basis of the Federal Programme for the Development and Preservation of Culture and the Arts, 1993-1995. The state was also inclined to curtail its engagement in the cultural field, hoping for selfsupporting activities of cultural institutions, market regulations and sponsorship. The latter was only to develop in Russia in the 1990s, when financial problems were deeply felt across the complete cultural landscape. The task to renew the total legal base of the culture sector emerged. Public debates were focused on the contradiction between the high social status of culture and it's under-funding. The budget for culture was reduced several times and, therefore, was limited to salaries of those working in cultural institutions; that made the fight for resources the first priority. 1999 was the first year that the state cultural budget was achieved, which indicated a turn towards stability. However, public reverence for culture and the arts, particularly for high culture and artistic quality, diminished drastically. It was substituted by mass culture and entertainment, regarded primarily as commercial activities. In the mid-1990s, work undertaken to elaborate the National Cultural Policies Report helped to compare Russian priorities with those developed on the European level. The Federal Programme of cultural development for 1997-99 articulated social and political goals directed more towards development than preservation, but due to the ongoing political and economic crisis, those goals, especially that of development, have not been achieved. However, cultural life diversified, changing preferences and consumption patterns. On the eve of the 21st century, it was widely acknowledged that withdrawal of ideological control and providing freedom of expression was not enough to support cultural development. Public discussions on cultural policies were centred on two opposite poles: expanding state support for cultural productions and for all types of cultural institutions that carried out important socio-cultural functions or shortening the list of institutions, monuments, etc. supported by the state and changing their legal status, including privatisation.

Chapter updated: 14-02-2011

In 2009, there were about 818 thousand full-time employees working in arts and culture institutions under the Ministry of Culture (there were 840 thousand in 2004 and 800 thousand in 2006). The cultural sector is characterised by a lack of qualified personnel, of the younger employees entering the field, as well as by the sector brain drain. The problem is that these workers receive the lowest salaries compared to all other professions in the public sector. The regional situation is uneven in general and critical in rural areas; the federal and regional institutions' average salaries differ a lot, in 2006 they equalled relatively 11 497 and 5 368 RUB; in 2009, relatively 21 522 and 10 034 RUB. Moreover, the work of cultural sector employees is not stable and about a quarter of them change jobs each year. Table 4: Salary in RUB and EUR, 2000-2009 General Institutions under the Ministry of Culture Minimum level of Average Women Federal Regional subsistence for average in employees and local working RUB employees population (EUR*) 1 320 2 223 1 050 937 1 812 978 (85.5) 2 602 6 832 3 656 3 403 7 539 3 307 (181) 3 714 10 633 5 886 5 498 11 497 5 368 (306) 3 422 13 593 7 388 6 863 14 234 6 776 (532) 3 847 17 226 9 524 17 704 8 787 (416) 4 593 17 200 10 994 21 522 10 034 (392)

Year

2000 2004 2006 2007 2008 2009

Source: Number of workers and salaries in institutions and organisations of the Ministry of Culture of the RF, Moscow, 2002-2010.

There is also a need to find skilled workers trained in new technologies and capable of functioning in the new economic situation. Many of those working in the cultural field are elderly and trained in the old welfare state socialist system. Attracting cultural workers and training cultural managers and administrators remains a fundamental challenge. To increase wages in the public cultural sector, on 1 December 2008 a new sector specific salary calculation was introduced which was to boost wages by 30%. There are also examples of effective initiatives to attract cultural workers to rural areas by providing the younger workers with additional support.

MONETARY POLICY OF RUSSIA..

Russian monetary policy is geared at containing inflation and a stable ruble exchange rate. Substatial export windfalls have, however, lead to a steady real appreciation of the ruble as not all profits have been sterilized in commodity funds. Managing money supply stands out as the dominant monetary policy tool rather than the interest rate. The Central Bank claims to aim at a transfer to a free float and inflation targeting using the interest rate in the medium term. Development over the past years supports this reform option, but the 2008 crisis could impede financial market maturity leaving the Central Bank dependent on money supply as its main tool. In 2010 and 2011 the current account is expected to reach negative values in the case of average oil prices below $ 120/bbl. The 2008 crisis and the Central Banks defence of the ruble have demonstrated how vulnerable Russian foreign currency reserves are. Therefore, other regimes than a free float hardly seem feasible even in a 2 year perspective.

INTRODUCTION:. The starting point for this paper has been Russian monetary policy. The Russian macro economy is to a large degree influenced by Russian exports of natural resources, oil in particular. Over the last years oil exports have caused the trade balance and consequently current account to grow significantly, allowing an expansionist fiscal policy. This has lead to Dutch disease pressures. In addition, financial markets limited development affect monetary authorities scope of action. Understanding how monetary policy has accommodated these challenges is therefore key to understanding the interaction between energy export revenues and overall Russian economic performance. In the midst of a very serious, global financial crisis a discussion of monetary policy cannot be complete without discussing possible implications of the crisis. This paper

will therefore commence this discussion. However the financial crisis is only just unfolding and its effects have yet to come fully into play. An exhausting discussion of the crisis in Russia will The Russian trade surplus has been substantial over the last years leading to significant inflow of foreign currency. However, the trade surplus has been achieved by utilizing Russias inherited resource rent rather than efficiency advances in the tradable sectors of the economy. Consequently Russias tradable sectors have been, and are, subjected to the same pressures common to most resource based economies. Large foreign currency earnings tend to erode domestic competiveness on domestic and global markets through upward pressure on the exchange rate. If foreign earnings are spent, windfall profits also tend to heat up the economy leading to inflationary pressures that both erode the domestic value of export earnings and put further strain on tradables competitive position. . Exchange rate regime While the CBRs true decision rule is unknown to outsiders, an attempted approximation of this rule and an estimation of its effects on the nominal and real exchange rates are beyond the scope of this paper. However, in light of the contradictory findings of Dabrowski (2002) and Ivanova (2007) the CBRs efforts to manage the nominal exchange rate and scope real exchange rate management deserve at the least a superficial discussion.2
2

Monetary Policy

Exchange rate dynamics

As illustrated in Figure 2.5, the CBR has not kept the official ruble exchange rates within a strict stationary corridor. Nonetheless the CBR has a history of repeated intervention, swelling the banks foreign reserves to 595 billion USD on August 1, 2008. Thus, despite the CBRs concern for domestic producers competiveness it may seem that the bank, realizing the inherent inflation trade-off, accepts the underlying exchange rate trends, albeit trying to influence them to the extent compatible with the perceived acceptable level of inflation.