Newspaper article International New York Times

Russia Faces Pressure to Reform Labor Market ; O.E.C.D. Says Strategies That Worked before Will No Longer Sustain Growth

Newspaper article International New York Times

Russia Faces Pressure to Reform Labor Market ; O.E.C.D. Says Strategies That Worked before Will No Longer Sustain Growth

Article excerpt

The Organization for Economic Cooperation and Development proposed remaking labor practices to lift the country from its slump.

For the Russian economy to pull out of its current doldrums, the country will have to remake its labor practices.

That, in essence, is the conclusion of a study released on Wednesday by the Organization for Economic Cooperation and Development, the international group supported by the governments of 34 member countries.

For a decade under President Vladimir V. Putin, Russia's economy surged on the back of rising oil prices. But a different picture awaits in the years ahead, the O.E.C.D. report concluded.

Russia, the report said, can no longer rely on any of the major drivers of economic growth that had pushed the country forward since the late 1990s. Gains from rising commodity prices, utilization of legacy Soviet infrastructure and improvements from the introduction of capitalist management techniques, among other drivers, have all run their course.

The economy is already withering as economic growth slowed last year to 1.3 percent, the lowest level in a decade other than during the global recession in 2009.

At the same time, Russia is facing a long-simmering demographic crisis as its work force is expected to contract sharply in the coming decade. The issue is tied to the "tiny generation," the Russians born during the post-Soviet depression of the 1990s who are now coming of age.

"The Russian economy is at a crossroads," the O.E.C.D. secretary general, Angel Gurria, said in a statement about the study, the first issued by the group since the slowdown began here.

"It has tremendous potential but is still heavily reliant on volatile revenues from natural resources," he said. "It would do well to invest more in infrastructure, human capital and innovation, so that larger segments of society can partake in Russia's transformation."

With the work force shrinking and oil revenue flat, Russia's main hope for growth lies in improving the average productivity of workers, the O.E.C.D. suggested in its report.

The group offered several recommendations, like removing infrastructure bottlenecks and increasing competition. …

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