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Navalny’s labor union demands higher pay for civil servants, in accordance with Putin’s May 2012 executive order. Here’s why that’s impossible.

Source: Meduza
Ruslan Shamukov / TASS

In January, opposition politician Alexey Navalny created a labor union designed to hold state officials accountable for carrying out executive orders signed by Vladimir Putin on May 7, 2012. According to that presidential decree, kindergarten teachers, nurses, and lab technicians at hospitals and health clinics, as well as cultural professionals, should have started earning average salaries equal to 100 percent of the mean income in their regions, while salaries paid to doctors, higher education instructors, and researchers are supposed to average 200 percent. The idea promises to win Navalny a lot of new supporters: the government considers President Putin’s “May Orders” to be fully implemented, but most of the supposed beneficiaries are still surviving on below-average incomes, and sometimes their wages are still dramatically below average. Navalny’s labor union could boost his political popularity, but the project reproduces the same dangers Putin's executive order poses to the development of Russia’s healthcare, education, and culture.

What does Navalny propose?

In a nutshell: He’s asking civil servants to share information about their salaries — data his labor union will use to file collective complaints addressed to governors who failed to implement President Putin’s executive order.

Alexey Navalny is appealing directly to doctors, teachers, and cultural workers, inviting them to his website, where they can verify whether they’re being paid as much as they should, according to Russia’s May 2012 presidential order. If the numbers don’t add up, they can register a complaint. Navalny plans to use negative feedback to “clobber the governors” in regions where Putin’s decree isn’t being fulfilled. In the project’s description, Navalny openly acknowledges that the labor union is a political effort to expand his support base. “These are the civil servants who have been cheated and underpaid,” Navalny says.

Healthcare and low salaries are potentially explosive issues, and not just among civil servants: recent polling data show that these issues are the two most worrying in Russian politics today. The government formally considers the 2012 executive orders to be fully implemented, which has only antagonized doctors and teachers whose salaries never increased. Unsurprisingly, the initiative has already provoked some concern among the authorities: in March, the sociological center VTsIOM (which has close ties to the Kremlin) polled the country about Navalny’s labor union, but it never published the survey results.

So was Putin’s executive order implemented or wasn’t it?

In a nutshell: Based on data from Rosstat, the presidential decree was almost fulfilled on average. Nevertheless, many civil servants are still earning too little, as the salaries paid to doctors and teachers vary wildly by region, and even by hospital and school.

It depends on how you understand the presidential decree, which mentions only averages, not individuals' incomes. Navalny has adopted the following interpretation: if, for example, health workers are supposed to earn the average income in their regions, some will make slightly more or slightly less than the average salary, but earnings should not be magnitudes less. In other words, Navalny believes no civil servants should be making significantly below regional averages, which happens a lot.

Based on data from Rosstat, state officials have embraced a different interpretation: the executive order concerns average incomes, by region, by institution, and so on. According to official statistics, the average salaries paid to different public-servant categories across the country has almost caught up to the average salaries in their regions, and doctors and researchers, on average, are earning about twice as much. In other words, Putin’s 2012 executive order has almost been implemented — but not everywhere. In regions like Sakhalin, the numbers look good, but this is far from true in places like Bryansk and Kaliningrad.

If you look a little closer — studying the federal state universities and hospitals, and the regions, cities, districts, and villages — the disparity between the “rich” and the “poor” is obvious. Federal institutions' resources greatly exceed what is available on average in most regions, while local hospitals, libraries, and schools in cities and especially in villages subsist on budgets that are far below average. If you look at each institution separately, the wage gap among staff is even more palpable: some employees, for example the chief physician, earn well above the average salary, while others are essentially working for peanuts. This is why Navalny can count on an army of civil servants ready to complain about being underpaid.

State officials have addressed this problem with several tricks. Back in 2015, they changed the methodology used to calculate regional average earnings to include workers’ “informal earnings,” in order to lower the averages, rather than pay teachers and doctors more. Since then, the state has used two average monthly incomes: an ordinary figure (roughly 42,000 rubles, or $640, nationwide) and a separate figure for comparison with civil servants’ earnings (slightly more than 35,000 rubles, or $535). Officials in different regions and at various institutions concocted their own gimmicks, assigning overtime and delisting nurses as healthcare workers or firing them outright.

But these stunts were little help. In 2017, independent researchers found that doctors’ salaries were less than half of what they should be, according to Putin’s executive order. The situation was similar for education professionals, and far worse for cultural workers, where earnings were below average in regions nationwide.

Even Russia’s official labor unions, which Navalny has dismissed as useless and pro-Putin, have accused the government’s reports of “deceit that breeds distrust and discontent.”

Do doctors and teachers really earn so little?

In a nutshell: Yes, both compared to other countries and compared to other sectors of the Russian economy.

Yes, they’re underpaid (compared to their colleagues abroad), and it’s been that way since Soviet times, with the situation only getting worse in the 1990s. In Russia, most doctors, health workers, teachers, and cultural workers, are still paid by the state, which has always had other priorities. During the Cold War, the Arms Race gobbled up precious state resources, and Russia’s financial collapse in the 1990s necessitated drastic cutbacks.

According to calculations by scholars at the National Research University’s Higher School of Economics, the average doctor in Russia earns $28,000 a year (factoring in purchasing-power parity), which is not only several times less than colleagues in the developed world, but also less than doctors in many developing countries, like Turkey and Chile. Today in Russia, the average doctor’s official salary is less than the average earnings of tobacco workers, to say nothing of oil industry workers or computer programmers. Teachers are even worse off.

Can’t the state just pay all these people an equal salary?

In a nutshell: After battling the 2014 financial crisis, the state simply doesn’t have the money. Ahead of last year’s elections, the government spent everything it had left to raise average salaries for health workers and cultural professionals. Even if the resources existed, equalizing wages would be difficult because inequality is built into the system.

Equal salaries across the board would require an enormous amount of money. When Vladimir Putin issued his presidential decree in 2012, many experts immediately said it was unrealistic. For the first two years, implementation went fairly smoothly, but Russia experienced a financial crisis in 2014 that sharply reduced state revenue, forcing the government to make major spending cutbacks that affected the army most of all. The government spared the civil servants identified in Putin’s 2012 executive order, but the previously planned budget increases were now out of the question.

Ahead of Russia’s 2018 presidential election, state officials made a radical decision to flood civil servants in money, paying people relatively enormous “stimulus incentive” bonuses and even raising some workers’ salaries. As a result, according to official nationwide data for the first half of 2018, health workers and cultural professionals saw salary spikes between 27 and 28 percent — faster income growth than anyone in Russia except computer programmers. The state spent an additional 331 billion rubles ($5.1 billion) just to raise salaries in the medical industry, increasing subsidies to regional health insurance funds by 21.5 percent.

These payments, moreover, are not a one-time allocation: the money will keep flowing, growing rapidly in the future. Next year, the government will spend almost 80 billion rubles ($1.2 billion) to maintain salaries, and another 100 billion rubles ($1.5 billion) in 2020 and 2021. This is almost as much money as the state will spend on developing “high-tech medical care” (in other words, modern technology and medicine), and it’s almost as much as officials have allocated to the country’s new program to fight cancer.

Spending from Russia’s consolidated budget (the federal treasury, regional budgets, and health insurance funds) on healthcare, culture, and education currently exceeds 7 trillion rubles ($196.9 billion). This is slightly less than everything Russia spends on social security pensions, and it’s more than the country spends on law enforcement and national defense.

Even these massive infusions of cash, however, aren’t enough for significant salary raises at many municipal health clinics, schools, and libraries. First Deputy Prime Minister Anton Siluanov attributed the failure to Russia’s “insufficient power vertical,” arguing that the state lacks the capacity to deliver federal money to every recipient in each municipality. For example, in 2013, most of Russia’s municipal hospitals and health clinics were transferred to the property of their local regional governments, but the change did little improve these facilities’ provisions. Regional officials are also responsible for allocating funds to district-level institutions, but they generally prioritize regional facilities, like inter-district hospitals.

The disparities don’t end here. Since 2011, supervisors have determined work shifts, incentive payments, and pay raises at state-funded institutions. This means the final salary calculations at hospitals and health clinics, for example, belong to chief physicians who are more concerned with retaining key staff than ensuring social equality. It’s the same story with directors at schools and local libraries. Meanwhile, supervisors still need to pay the workers who aren’t covered by President Putin’s May 2012 order (in healthcare, for instance, this applies to roughly half the labor force, including everything from janitors to lawyers). Doctors and teachers now complain often that salaries have grown mostly at the executive level, and workers’ main goal has become ingratiating themselves with managers.

How much money is needed to implement Putin’s executive order the way that Navalny demands?

In a nutshell: Hundreds of billions of rubles a year, even if we’re only talking about salary raises in Russia’s smallest and most impoverished towns.

According to official data, Russia’s average municipal doctor, health worker, cultural professional, and so on earns 1.6–2 times less than at the federal level, and 1.3–1.4 times less than at the regional level. To raise the salaries of just 80,000 village doctors and 200,000-odd village health workers to regional levels, the government would need to spend at least another 90 billion rubles ($1.4 billion) a year. Municipal doctors and city workers would need a great deal more money (using Rosstat’s figures, it’s hard to determine the actual number of underpaid municipal employees).

Similar expenditures would probably be necessary to raise municipal teachers’ salaries to regional averages. Unlike doctors, moreover, teachers provide very few paid services, making them largely dependent on subsidies from the regional budget. In total, based on data from Rosstat and the Health Ministry concerning the number of municipal civil servants and their average incomes, fulfilling President Putin’s May 2012 order as Alexey Navalny interprets it would cost the state hundreds of billions of rubles in additional annual spending.

Has Putin’s executive order affected the quality of health care, education, and culture in Russia?

In a nutshell: There’s been an effect, and it’s mostly negative. Doctors and other health workers keep quitting, and there’s now significantly less money available for new equipment and renovations.

The executive order and especially the fight to implement it have had a mostly negative impact on services in Russia. In the health insurance system, wages now account for 70 percent of all spending (up from 60 percent), making it more difficult to buy and introduce new equipment and new technologies. Throughout the country, there has been no correlation between rising salaries and various medical indicators, like mortality rates. In other words, salaries are growing (though not at the pace Putin planned), but civil servants’ labor productivity hasn’t budged.

Putin’s May 2012 executive order also created a system to evaluate the job performance of civil servants at specific institutions, using public feedback and expert analysis. The system now exists, but hardly anyone uses it.

Meanwhile, Russia’s public sector is still hemorrhaging doctors and health workers, who are fleeing to private clinics and other industries for better positions. Supervisors have even welcomed this exodus, since it’s easier to raise the average salary with fewer employees.

Many experts recommended postponing the implementation of Putin’s executive order until Russia’s economy recovers. In 2016, for example, former Finance Minister Alexey Kudrin said the government should temporarily index salaries to inflation, or else it would need to cut spending on new medical equipment and school repairs. It’s entirely possible that wage growth in 2018 could harm the implementation of Putin’s latest “May Order,” which specifically proposes reducing mortality by introducing new medical methods and raising spending on cancer treatments. The president has also targeted Russia’s shortage of doctors and health workers, calling on the state to hire a lot more people.

So what can Russia do to pay its civil servants better?

In a nutshell: Wait for more money in the state treasury and try to reform a system that doesn’t link salary to results.

In Russia’s current executive system, in these industries, and with the current state of public finances, significant improvements are simply impossible. The Constitution guarantees citizens the right to free education and healthcare, which means the state must provide these services to the public, and citizens must pay their taxes and insurance premiums.

Meanwhile, doctors are offering more paid services that aren’t covered by the state but nevertheless make up part of their salaries. A third level of this system is people providing voluntary “consideration” to medical professionals, which has effectively replaced the mechanisms for independently assessing doctors and medical institutions.

At the same time, the gap in medical services received by wealthy Russians and poor Russians continues to widen, as the former group turns more often to private clinics.

There are several ways to improve this system. For example, officials could introduce more effective contracts, pegging salaries to objective performance indicators, not supervisors’ opinions.

In education and culture (which rely on regional budgets, not the insurance system), improvements will be even harder.

Dmitry Kuznets

Translation by Kevin Rothrock

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