The Russian market welcomes the informally employed: how the situation affects the economy

Every fifth Russian works without a formal contract

In the third quarter of 2023, the number of informally working Russians increased by half a million people, to 14.2 million citizens. However, one should not confuse the informal employment sector with the shadow sector. MK found out from experts what the trend identified by Rosstat indicates.

In the third quarter of 2023, the total number of informally working citizens amounted to 19.1% of the total number of employees, Rosstat reported. If from July to September 2022, 13.7 million such people were identified, then in the same period last year their number increased to 14.2 million workers, which almost corresponds to the daily population of Moscow. These statistics include both citizens with self-employed status and those working in companies that are not officially registered, as well as those who earn their own income in agriculture, trade, services, construction and other areas or work for individual entrepreneurs. Accordingly, one should not confuse the informal employment sector and the shadow sector, in which criminal elements operate – these are different categories, Rosstat notes.

Informal employment has its pros and cons both for the economy and labor market, and for the citizens themselves. Experts have identified three reasons for the increase in informal employment in Russia. As noted by Associate Professor of the Department of State and Municipal Finance of the Russian Economic University. G.V. Plekhanov Artem Lyukshin, first of all, crisis processes in the economy are increasing the trend towards an increase in the number of informally employed. If we look at the official data from Rosstat, which was published several years ago, then the number of informally employed people identified in the third quarter of 2023 does not raise concerns, given the growing attention to them from the state. Thus, in the year the pandemic began, the number of such people in Russia was about 14.1 million people, and in 2021 it was already 14.6 million citizens. The growth in the number of informally employed is a response to the challenges facing the Russian economy: the labor market is changing, more opportunities for remote work are emerging, and interest in self-employment is growing.

For the budget, of course, the growing number of informally employed people entails a decrease in incoming taxes. In particular, personal income tax, which plays a big role in forming the revenue base of regional budgets, is being reduced, the scientist noted.

The second reason for the increase in the number of informally entertaining people can be called the consequences of sanctions. The trend helps businesses cope with the consequences of sanctions. “The economic opportunities that have opened up in many sectors of the economy are unique against the backdrop of foreign companies leaving the Russian market,” notes economist and communications director at BitRiver Andrei Loboda. — Hundreds of international corporations have not completely left Russia. Their employees continue to work from home and many have become self-employed by default.” Unemployment in Russia is at a historically low level: by the end of 2023 it decreased to 2.9%, according to the same Rosstat. In the labor market, candidates dictate their terms to employers, and they have to revise wages that were effectively frozen nine years ago. An amazing situation has developed in the country: all these years, employers have been saving on wages and maintaining business margins even against the backdrop of the falling ruble. It is not entirely correct to talk about a reduction in tax revenues. Today, the quality of life of Russians and the increased attractiveness of the labor market are important, the expert emphasized.

The third reason for the increase in the number of informally employed in Russia is the development of labor relations. Self-employment, civil contracts, individual entrepreneurship—you can formalize your relationship with an employer in a variety of formats. Many citizens combine formal employment with informal employment, which is a completely normal phenomenon. “More and more often, officially employed employees earn extra money in other companies, registering themselves as self-employed,” says independent HR expert Olga Osipova. Moreover, this state of affairs is beneficial both for employees who have additional income and for employers: in companies of any size there are one-time tasks that need to be completed now, and tomorrow they will no longer be needed. Self-employed people are great at covering such requests without extra costs.

Published in the newspaper “Moskovsky Komsomolets” No. 29195 dated January 16, 2024

Newspaper headline:
Workers went informal