The Figure of 25 Million Jobs is not Accidental

On December 12, the Russian President Vladimir Putin in a message to the Federal Assembly set a target to create and upgrade 25 million jobs by 2020.


The figure of 25 million jobs is not an accidental choice. The country needs to upgrade industrial production facilities. Russia has long ago reached the upper limit in terms of economic growth: we cannot maintain high economic growth through exports of raw materials, since raw material prices cannot grow forever, and production increases only by 1-2% per annum.

The only way out is to increase the value added on products, and this is possible only with a radical increase in productivity, which in turn requires the overall modernization of the economy. In this respect we have a huge potential - labor productivity in the manufacturing sector in Russia is four-fold lower than in European countries.

Modernization is good, but there is a disadvantage about it, as in its progress, with the introduction of new technologies, the number of jobs has to be reduced. If we take only the manufacturing industry in Russia, upon its upgrading, 25 million workers will released by 2020 and will have to be employed somewhere else. An answer to the serious question : "Where?" has to be provided by business community. The government objective is to create conditions for employment.

I would like to note, that the process of modernization in the US and UK was followed (though not immediately) by a decade of unemployment at the background of economic growth. This is understandable: the technological system is changing, and the labor market gradually responds to these changes. This situation  is unlikely to happen In Russia, since the political will and a huge amount of investment are needed for the beginning of large-scale modernization. However, as the 2009 economic crisis has proven, when the government was making the best of all instruments for maintaining employment, the existing business elite happened to be unprepared either to "pay the social costs” of modernization or to develop targeted mechanisms of assistance. In addition, unfavorable investment climate hinders both, modernization of existing facilities and creation of the new ones. Therefore, the process of modernization will be more slow than in developed countries. But in any case, Russia will not avoid modernization: otherwise, labor productivity will be adjusted accodingly.

V.S. Hazarov, Ph.D. in Economics, Head of Budget Federalism Department