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Regular version of the site

Article

Decentralisation of the minimum wage setting in Russia: Causes and consequences

Economic and Labour Relations Review. 2016. Vol. 27. No. 1. P. 98-117.

In this article, we study the minimum wage setting reform in Russia that aimed to decentralise the fixing of the minimum wage and to increase the involvement of social partners into this process. The old system of minimum wage setting was based on
a single nationwide minimum wage which was differentiated across regions and occupations via a cumbersome framework of coefficients. The new system is a mixture of the government-set minimum wage at the federal level and collective agreements
at the regional level. We show that the system of minimum wage setting has become more flexible. The reform succeeded in raising the real value of the minimum wage and increasing earnings of low-paid workers without causing significant negative effects in terms of employment. The reform did not lead to greater regional variation of minimum wages. Nevertheless, it introduced some new imbalances: an unintended consequence of the reform was the emergence of separate regional wage sub-minima for private and public sector workers in many regions. The major challenge in coming years is to strengthen the institutions of collective bargaining, introduce evidence-based evaluation and boost the capacities of government and non-government monitoring agencies.