State Lays Out Job Stimulus Program

Opening up a private business in Russia may no longer prove to be a daunting task — for the unemployed, that is.

To stimulate employment and the economy, the government will give 60,000 rubles ($1,700) to unemployed Russians as startup capital to open small businesses, Deputy Health and Social Development Minister Maxim Topilin said Thursday.

In addition, the government will provide subsidies to companies to put employees facing imminent layoffs through re-education and training programs, Topilin said. Other workers will be paid to relocate to areas within their regions where jobs can still be found.

Topilin announced these and other measures aimed at fighting the country's billowing unemployment rate on Thursday and said they would be implemented as early as next week in the five regions that had most quickly offered proposals for the federal government's 43 billion ruble ($1.3 billion) employment-stabilization package: Krasnoyarsk, Yaroslavl, Tatarstan, Tyumen and Bryansk.

"Now [unemployment] stands at 5.8 million [people]. It is difficult to forecast, but I think it could reach around 7 million by the end of this year," Topilin told reporters.

The number of unemployed workers rose by 1 million from September to December, now making up 7.7 percent of the work-age population, according to the State Statistics Service, which calculated its figures using the International Labor Organization's methodology.

Despite numerous appeals by President Dmitry Medvedev and Prime Minister Vladimir Putin, many regional governments missed a Jan. 15 deadline to submit proposals to stimulate employment.

"We had to extend the deadline indefinitely," said Yevgenia Okoreva, a spokeswoman for the Health and Social Development Ministry, which is implementing the program.

As of Thursday, 66 regions had submitted proposals, Okoreva said.

Not all of Russia's 83 regions are required to submit proposals. The city of Moscow, for example, is not seeking federal funds and has created its own department to tackle the issue.

Next Monday, agreements between the federal government and the five regions whose programs were approved will be signed, and "nothing will stop them from getting to work," Topilin said.

The federal government will subsidize 95 percent of each region's employment program, but the regions must come up with the remaining 5 percent and adjust their 2009 budgets accordingly.

Zoya Rozhnova, the head of Krasnoyarsk city's employment service, said by telephone that she was "thrilled" that the government was allocating the entire region 667 million rubles ($19.7 million) in unemployment relief.

Before submitting their program to the government, Krasnoyarsk government and labor authorities went to major regional employers to evaluate their labor situation and ask them about their needs for workforce retraining programs, Rozhnova said.

"We are very optimistic that the funds will make a difference here," she said.

The government is clearly worried about soaring unemployment. Medvedev told regional authorities at a conference on Jan. 21 that "job security is one of our top priorities, one of the government's principal social obligations."

"Unemployment and the labor market have never gotten as serious attention from the government as now," said Dmitry Badovsky, deputy director of Moscow State University's Institute of Social Systems.

As of Jan. 21, some 14,100 businesses around the country had announced imminent plans to lay off 365,000 employees and reduce 549,000 full-time workers to part-time, an employment status that also includes mandatory unpaid vacation, Topilin said.

The government's employment-stabilization program is made up of four components — specialist training and workforce re-education, public works creation, job relocation assistance and small business development.

The government's aim is to create at least 901,000 jobs, including 700,000 new temporary positions across the country and 50,000 new jobs in small business. It also will offer professional development and training programs for 114,000 workers facing imminent layoffs; give companies subsidies to pay for the employment trial period for 10,000 new university graduates; and subsidize the costs for 27,000 people to move to work in another area of their region.

A large portion of the temporary jobs the government aims to create will be in the area of public works, including infrastructure and municipal services projects such as road building and the painting and cleaning up of schools and hospitals, Topilin said.

For small business, the government will give 60,000 rubles to a target number of 50,000 unemployed Russian citizens to open their own enterprises, Topilin said.

Only those officially registered as unemployed will be eligible to apply for the funds, a one-year advance payment on their monthly unemployment checks. The regional governments' employment agencies will help applicants legally register their businesses and create business plans.

While praising the government for its attention to the labor market, economists and employment specialists were skeptical of the program's economic effectiveness.

"It is well-documented and proven that subsidizing jobs is not an effective method of job creation," said Vladimir Gimpelson, director of the Higher School of Economics' Center for Labor Research. "When the subsidies stop, the jobs go too."

Gimpelson was also pessimistic about giving money to the unemployed to open businesses.

"The usual corruption, bureaucratic regulation and inefficiency of government administration will get in the way," he said.

Alexandra Eftivyeva, chief economist at VTB Capital, said the best way to support employment was not to directly support people but to help their employers "restore their working capital credit."

"Right now, companies are laying off because they do not have enough capital to pay salaries," she said.

Gimpelson said it would be difficult to find jobs even for those retrained in new fields of work. He compared Russia's labor market to an ocean with two islands: a "vacancy" island and an "unemployed" island.

"For the unemployed to get to the island of vacancies, they get retrained and educated on the way," he said. "But now we only have one island: the island of the unemployed, and no island with vacancies. Until the island with vacancies comes back, I don't know how the program for re-education can work."