Is There More Show Than Substance to Soviet Layoffs?

Mikhail S. Gorbachev has quickly discovered that the benefits and the bounties of more reliance on the market are just what the lagging Soviet economy needs, but they come at a high price.

In particular it is impossible to produce responsively and efficiently and to increase productivity as long as enterprise managers have no need to trim their bloated work forces. But that means, among other things, massive firings--something that the Soviet economy has generally avoided. The Soviets have long insisted that the guarantee of full employment is one of the true advantages of their society. Indeed, freedom of the fear of being fired has often been cited as a basic Soviet human right, absent in the Western world.

Against that background, the announcement in Pravda that as many as 16 million Soviet workers will have to find new jobs by the year 2000 has inevitably generated enormous unease. This could involve 13% of the Soviet work force. Considering that a 10% unemployment rate in the United States is a source of political disquiet, imagine what an even higher Soviet rate would mean, particularly since the Soviet Union has never experienced anything comparable. That explains in part why a survey of Siberian workers found that only 30% supported Gorbachev’s reforms. Those opposed have gone so far as to strike, and in one extreme case--in the Turkmen Republic--to murder one of the officials responsible for implementing the reforms.

So far, however, the specter has been more dramatic than the reality. There have been a few widely reported large-scale layoffs. More than 12,000 workers were fired from the Belorussian railroad system in 1985 and 1986. The experiment was then extended to several other railroads and subway lines, with the loss of an additional 100,000 or more jobs. This was predicated in part on an earlier experiment from the 1960s when several hundred workers were fired from the Schkino chemical plant.

But even in the railroad and chemical-factory examples there is often more show than substance. The Soviets call it pokazuka , and it can best be described by recalling the newspaper announcements that more than 60,000 bureaucrats in the Moscow ministries and the state planning organization would be released by 1990. After considerable grumbling, the report was quickly amended to only 38,000. Now some wonder if in the end there will be any meaningful reduction at all.

What has happened is that while members of the ministries may actually lose their present jobs, the result in terms of improved productivity are insignificant, if not actually diminished. To generate support for the process, those who are not released are promised that they will be able to share the wages of their former colleagues. Thus the total wage bill will remain much the same. But it turns out that, as often as not, productivity actually suffers. The reason is that those released, particularly from white-collar jobs, generally seem to end up doing much the same thing that they were doing before.

In some instances, as in the Ministry of Finance and Gosplan, a new institute was set up, in part for the specific purpose of absorbing those who were fired. Far from being improved, productivity actually suffers. There are now two payrolls to pay--not a reduced one. It is a bit like playing musical chairs--except that, instead of reducing the number of chairs, the chairs are increased.

Since we sometimes have difficulty reducing the size of the work force in the United States, particularly within government agencies, the fact that the Soviet process is not proceeding smoothly should not surprise us.

Soviet economists, however, are particularly concerned about the lack of an infra-structure to handle the new task. In part this is a consequence of the Soviets’ insistence, at least until recently, that there was no such thing as unemployment in the Soviet Union. If it did not exist, why do anything to cope with it?

Soviet employment offices were officially created in 1967, but they never took on any meaningful function. Thus the Soviets now find themselves ill prepared to handle the relocation process that sooner or later they will have to undergo. For example, they have no computer base listing available jobs, and no facilities for retraining. Moreover, moving from city to city in the Soviet Union is not an easy process. Police permits must be obtained, and there is no such thing as United Van Lines or U-Haul. Clearly this will have to change.

Some Soviet spokesmen insist that finding alternative jobs will not be difficult. After all, there is an enormous shortage of labor. Those who are fired have ample alternatives. But what these Soviet observers fail to realize is that once Soviet enterprises find themselves forced to take lower productivity seriously, those unfilled jobs will disappear. Then the system will indeed begin to become more productive. What is uncertain, however, is whether or not the system and the leaders will survive such a bold upheaval.