Since the beginning of the 1990s, demographic, economic and social changes occurring in Russia and Ukraine have had an impact on both labour markets and social conditions. Even though some of the social safety net changes introduced at the beginning of the 21st century have brought positive effects, additional reforms are still necessary.Social security, social policy, Ukraine, Russia

Anna Ruzik

English

Research Papers in Economics

  CASE Network E-briefs 
 No. 05/2010       March 2010 
Since the beginning of the 1990s, demographic, economic and 
social changes occurring in Russia and Ukraine have had an 
impact  on  both  labour  markets  and  social  conditions.  One 
specific long-term challenge is their shrinking workforce. Low 
fertility, migration (higher outflows in Ukraine) and shorter life
-spans,  especially  for  males,  have  caused  a  rapid  rate  of 
depopulation  and  shifted  the  population’s  age  structure 
towards older age groups. 
Social security systems from the Soviet era’s centrally planned 
economy were not useful in the new economic system. Prior 
to  1992,  both  Russia  and  Ukraine  had  social  safety  nets 
common  in  all  Soviet  republics,  their  primary  goal  was 
maintaining certain levels of family per-capita income through 
supplemental wages. Due to the near 100% employment and 
supplementary character of the safety net, the majority of its 
administration was carried out by state enterprises. The safety 
net  relied  heavily  on  in-kind  benefits,  such  as  free  housing, 
childcare, subsidised food and prices for various goods. At the 
beginning  of  the  economic  transition,  social  programs 
expanded,  then  curtailed  and  eventually  administrative 
responsibility  moved  away  from  state  enterprises  towards 
more individualized solutions.  
Effect of restructuring on labour market Effect of restructuring on labour market Effect of restructuring on labour market    
Despite  an  ageing  and  declining  population,  the  size  of  the 
working  population  was  stable  in  Ukraine  and  Russia,  and 
activity rates were high. This was due to increased activity by 
the young and elderly, a result of poverty and social safety net 
inefficiencies.  In  addition,  many  people  work  in  informal 
sectors, often producing goods for their own consumption. 
In  the  early  years  of  economic  transition  unemployment  in 
Ukraine and Russia was much lower than in other Central and 
Eastern European countries with similar economic transition 
experiences. Additionally, gender differences among rates of 
employment were not high. According to historical  patterns 
female labour  activity remained high and close to the  male 
activity  rate.  There  were  slight  differences,  but  they  were 
partly attributed to the lower retirement age and child care 
responsibilities of women.  
In  the  second  half  of  the  1990s,  unemployment  began 
increasing  and  actual  rates  reached  levels  similar  to  other 
transition  countries,  although  the  officially  registered  rate 
stayed very low.  
 
Social security, labour market and restructuring Social security, labour market and restructuring Social security, labour market and restructuring    – – –    Russia and Ukraine Russia and Ukraine Russia and Ukraine    
By Anna Ruzik 
 www.case-research.eu 
Source: Statistical offices of Russian Federation and Ukraine, data from  ILO and IMF. 
Figure 1. GDP growth and unemployment 
-25
-20
-15
-10
-5
0
5
10
15
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
GDP growth Unemployment (ILO) Registered unemployment
-25
-20
-15
-10
-5
0
5
10
15
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
GDP growth Unemployment (ILO) Registered unemployment
Ukraine  Russian Federation 
The opinions expressed in this publication are solely the author’s; they do not necessarily reflect the views of  
CASE - Center for Social and Economic Research, nor any of its partner organizations in the CASE Network.  CASE E-Brief Editor: Ewa Błaszczynska One  of  the  reasons  for  the  disparity  between  actual  and 
registered  unemployment  was  labour  hoarding.  State 
enterprises were under pressure from the government – both 
local  and  federal  –  to  limit  the  flow  of  workers  into 
unemployment. So, though officially employed, a portion of 
the  workforce  was  unemployed  according  to  International 
Labour Organization (ILO) standards. In general, workers are 
willing to stay officially employed (with lower wages, shorter 
working hours or forced leave) because it offers them a sense 
of security, partial income, social benefits and time to work at 
a second job.  The differences between registered and actual 
unemployment prove that changes in unemployment laws and 
unemployment assistance are necessary. 
Labour  market  changes  have  affected  women  and  men  in 
different  ways.  Gender  asymmetry  can  be  observed  in 
employment  cuts,  change  of  employment  between  sectors, 
and access to jobs in the private sector. Downsizing and the 
closure of state-owned enterprises has led to unemployment 
for both men and women and to a significant decline in the 
labour participation rate. Although the gender differential in 
unemployment  rates  is  relatively  small,  the  female 
unemployment  rate  fell  slightly  below  that  of  men  in  both 
countries.  
The wage gap is one of the widely discussed characteristics of 
the labour market in Russia and Ukraine
1. Female salaries are 
reported as being, on average, 30% less than the equivalent 
for  men  in  Ukraine.  Almost  the  same  differences  exists  in 
Russia, where the gender wage ratio is calculated at 71%
2. In 
both countries, women are excessively employed in the public 
sector  –  with  lower  average  wages  –  while  a  significant 
number of men shifted to private sector employment.  
Social security system  Social security system  Social security system – – –    gender dimension  gender dimension  gender dimension     
Women  and  men  are  affected  differently  by  social  security 
systems.  Under  the  previous  system  women  were  given  a 
generous range of benefits, especially in the form of housing, 
medical facilities, social care institutions and childcare. When 
the transition began, those entitlements were decreased or 
eliminated.  The  reduction  of  previously  accessible  family 
benefits and social care services and the adjustment to new 
conditions,  such  as  shorter  working  hours  for  child  care 
institutions,  forced  women  to  seek  low  paid  and  less 
prestigious  positions  in  order  to  meet  their  parental 
obligations. 
Dramatic demographic changes – falling birth rates and high 
mortality  rates  --  resulted  in  relatively  generous  maternity 
benefits, allowances and longer parental leaves. However, it is 
still  too  early  to  evaluate  the  overall  effects  of  these  new 
regulations.  
The most distinctive gender characteristic in social security is 
the  lower  retirement  age  of  women.  This  has  left  many  to 
question whether women should leave the labour market 5 
years earlier than men. Even their higher life expectancy might 
support the prolongation of the pension  age. In Russia  and 
Ukraine, men 60 years of age or older, who worked for at least 
25 years, and women of 55 years of age or older, who worked 
for at least 20 years, qualify for normal retirement pensions 
regardless  of  whether  they  are  still  employed  or  not.  Male 
pensions  are  usually  higher  than  those  of  women,  because 
more often women fall into the group of workers with lower 
lifetime earnings. They also carry out a higher proportion of 
unpaid  work,  which  results  in  shorter  lifetime  contribution 
rates. Still, pension benefit formulas in the past were highly 
redistributive in favour of lower income workers, which, given 
the prevailing gender wage gap and shorter working tenure, 
was  advantageous  to  women.  However,  recent  pension 
reforms  instituted  a  closer  link  between  contributions  and 
benefits  as  well  as  greater  individuality  in  pension  rights, 
considered generally disadvantageous for women.  
Conclusions Conclusions Conclusions    
Even though some of the social safety net changes introduced 
at  the  beginning  of  the  21
st  century  have  brought  positive 
effects, additional reforms are still necessary. Social security 
systems in both Ukraine and Russia should be more efficient 
while social benefits and social assistance targeting should be 
improved.  For  example,  the  effectiveness  of  social  support 
programs in Russia in the mid-1990s was assessed at 19%
3. 
This  means  that  a  large  fraction  of  social  aid  was  not 
distributed to households with incomes below the subsistence 
minimum.  
Recent  pension  reforms  are  a  step  in  the  right  direction, 
although their impact will not be felt for a number of years. An 
increase in the economically active population is a good thing, 
but there are no reserves out of which this active population 
may  continue  to  grow.  Thus,  the    important  social  issue 
remains in how to reduce depopulation in the future. 
Last  but  not  least,  uncertainty  about  Russia  and  Ukraine’s 
economic  future  is  linked  to  oil  prices,  though  in  different 
directions. Russia’s reliance on commodity exports makes the 
country  vulnerable  to  boom  and  bust  cycles  connected  to 
swings in global commodity prices. Ukraine's dependence on 
Russian energy supplies and its lack of significant economic 
structural reforms make its economy especially vulnerable to 
external  shocks.  Such  vulnerability  could  influence  the 
effectiveness  of  long-term  social  safety  net  reforms. 
 
 
Anna Ruzik, Ph.D, is an expert and author of publications in the 
fields of labour economics and social policy. Since 2004, she has 
been participating in numerous research projects carried out by 
CASE. Dr. Ruzik is employed as an assistant professor at the 
Warsaw School of Economics and at the Institute of Labour and 
Social Studies in Warsaw. 
 www.case-research.eu 
         March 2010 
1 Gender Issues in Ukraine Challenges and Opportunities (2003),UNDP Kyiv 2003.  
2 Ogloblin C., G., (1999) The Gender Earnings Differential in the Russian Transition Economy, Industrial and Labor Relations Review, Vol. 52, No. 4. (Jul., 1999), pp. 602-627.  
3 
World Development Report 1996, The World Bank, 1996  

Social security, labour market and restructuring - Russia and Ukraine

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Social security, labour market and restructuring - Russia and Ukraine

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