Economic slowdown in Russia. Big companies are cutting labor costs

Some large Russian industrial enterprises are sending employees on forced leave or shortening working hours in order to reduce costs in the event of an economic slowdown without increasing unemployment, as this could lead to social dissatisfaction, Reuters reported on Thursday.

As he explains, the actions aimed at reducing labor costs show growing tensions in the Russian economy, which is struggling with stagnant domestic demand and falling exports, which in turn is the result of Western sanctions imposed on Russia after its attack on Ukraine.

Reuters, citing industry sources, identified six companies in the mining and transportation sectors that have shortened the workweek in an attempt to reduce payroll costs without increasing unemployment. Some of them are industrial giants in their industries.

An example is Cemros, Russia's largest cement producer has switched to a four-day working week until the end of the year to avoid layoffs amid a sharp downturn in the construction industry and increase in cement imports.

– This is a necessary anti-crisis measure. The goal is to retain all our employees, said Cemros spokesman Sergei Koshkin. The company employs 13,000 people. employees and has 18 plants throughout Russia. He explained that an increase in imports from countries such as China, Iran and Belarus, combined with a decline in the number of new homes being built, had resulted in a decline in demand for cement. Cemros expects cement consumption in Russia to fall below 60 million tonnes this year, which was most recently the case during the COVID-19 pandemic.

Another example is Russian Railways (RŻD). As two sources confirmed to Reuters, the company employing 700,000 employees asked staff at the headquarters to take three additional days of leave per month at their own expense. According to economists, railway revenues, long seen as a barometer of the state of the Russian economy, especially raw material exports, are declining as the volume of coal, metals and oil transported declines.

Manufacturer of trucks KAMAZ, which employs approximately 30,000. people, switched to a four-day working week in August, just like GAZ, a leading manufacturer of commercial vehicles, where approximately 20,000 people work. peoplealthough, according to the spokeswoman of the latter company, normal operating mode returned on October 1. The trade union at AvtoVAZ, the largest Russian car manufacturer, employing approximately 40,000. employees, confirmed to Reuters that a four-day working week had been introduced there since September 29.

Alrosa, the world's largest diamond producer, reduced by 10 percent. remuneration of all employees not directly involved in miningpartly by shortening the working week. In spring and summer, it also suspended operations in less profitable mines. According to industry sources and company statements, work time reductions or production limits also occurred in metal, mining, wood and coal industry plants.

As Reuters notes, the geography of Russia's heavy industry – often the dominant employer in many cities – means that wage cuts could have a significant impact on the prosperity of entire regions. It recalls that in previous periods of economic slowdown, Russia subsidized large employers to prevent the outbreak of social discontent in many industrial cities, which are often dependent on one large enterprise. For example, RŻD and car manufacturers received state support during the global crisis in 2008-2009 to avoid mass layoffs, and in 2022 the authorities ordered car factories to send employees on forced leave rather than laying them off. (PAP)

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