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Meeting with Chairman of the Federation of Independent Trade Unions of Russia Mikhail Shmakov

December 29, 2020, The Kremlin, Moscow

Vladimir Putin had a working meeting with Chairman of the Federation of Independent Trade Unions of Russia Mikhail Shmakov.

The meeting focused on the situation in the labour market. The President and the Chairman specifically discussed the calculation of the subsistence rate and the minimum wage as well as the indexation of pensions for working pensioners.

* * *

President of Russia Vladimir Putin: Mr Shmakov, as you can see, basically all of our support instruments for businesses directly relate to people.

Chairman of the Federation of Independent Trade Unions of Russia Mikhail Shmakov: Yes, I am ready to support this. Moreover, I have been asked about this by the media many times, and I always say that all the measures that were taken by the Government and you as our leader were timely and very efficient. They helped us to retain the majority of jobs during the spring wave of this pandemic.

Of course, now it is a little more difficult because the morbidity rate is growing faster. But I am certain that the measures being taken not only to continue the support but, most importantly, to finish the work on the vaccines and use them for vaccinating the public, will definitely help maintain the number of workers. Although Ms Popova [Head of the Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor)] reported that the number of people who contracted the disease is growing among work teams. Perhaps Rospotrebnadzor’s recommendations are not followed everywhere. And where they are followed, everybody acts responsibly, both managers and workers. We are monitoring this as well.

Vladimir Putin: You know that almost all of our support measures, one way or another, and often directly, are aimed at maintaining the number of employees and not reducing staff. If a company can keep up to 90 percent of its workers, it does not have to pay back certain loans. Since the situation remains difficult for businesses, there was a request from businesses (they addressed me personally and other officials) about changing these conditions and giving them the opportunity to not pay back the loans which they were granted for maintaining jobs.

Mikhail Shmakov: Lower the bar.

Vladimir Putin: Lower the bar. What do you think?

Mikhail Shmakov: First of all, every case is unique because there are different types of employment and different types of businesses. But in general, this high bar, 90 percent, actually forces companies to maintain jobs. But as a result, businesses are operating at a loss. Small and medium-sized businesses are suffering the most because the effective demand is declining. But by maintaining jobs and paying wages, we support the effective demand as well. Therefore, we believe this decision should be made sector by sector.

Vladimir Putin: Good.

I know that you are still concerned about the Government’s proposal to estimate the ratio between the subsistence minimum to the minimum wage, the median approach, right?

Mikhail Shmakov: The fact is that there is indeed a need to change the methodology for determining the minimum wage and the subsistence minimum of course, because then you calculate the minimum wage based on this. Complete separation from real payments, from people’s real expenses. Today, the methodology is based on real expenses, and it is imperfect.

Vladimir Putin: What about relying on average per capita income?

Mikhail Shmakov: Average per capita income, yes, but nevertheless this is a mathematical interpretation of what is happening in the economy, what is happening with ​​wages, but what methodology will be applied in order to calculate this median per capita income? In principle, we are for separating the minimum wage from the subsistence level, so that it will be possible to index it faster and more dynamically.

But, on the other hand, we believe that at least some kind of transitional period should be allowed, so that we continue these calculations for now, based on the real household expenses, at least at the level of consideration by the trilateral commission.

And in general, we believe there is a need to enhance the role of federal Trilateral Commission on the Regulation of Social and Labour Relations as well as regional commissions in determining these parameters based on median income and median wages, so that the opinion of trilateral commissions, both federal and regional, is taken into account in this discourse. This will help us to avoid possible mistakes.

And in general, many people do not understand where the minimum wage or subsistence figures come from by calculation. That is why I believe, we believe, it should be left for consideration by trilateral commissions.

Vladimir Putin: This matter is very sensitive and affects almost the entire workforce. Now, according to the Constitution, our minimum wage cannot be less than the subsistence minimum, so this must also be observed. I agree with you that at least, this requires a very thorough discussion both at the expert level and at the public level.

Mikhail Shmakov: We have made our proposals. But we believe that this is a very important and indeed, as you rightly said, a sensitive matter. People ask questions. Dedicated experts understand this, but then there are questions: why was one or another coefficient applied to the median wage or to the median income? And we generally believe that there should be some kind of programme to increase this ratio. We understand that this depends on the economic situation. But the public should be a part of this at the level of specialists who sit on trilateral commissions.

Vladimir Putin: This principle is applied in most of the world.

Mikhail Shmakov: Yes, of course. That is why we believe this should be documented, not just left at the level of conversations and promises to take this into account some day. This must be documented.

Vladimir Putin: I see. Any other questions, Mr Shmakov?

Mikhail Shmakov: Adjusting working retirees’ pensions is another issue that has been questioned in our country for a long time now. It has fomented since the amended Constitution entered into force. From day one, we believed that the decision made in 2016 was not entirely correct. Back then, the adjustment of working retirees’ pensions was suspended. Clearly, compensation factors may be applied later, but the pensioners themselves are saying that these compensations do not cover their losses.

Also, this decision resulted in many employed retirees quitting their jobs. And by the way, they are also paying into the Pension Fund. So, we gained about 70 billion when we introduced this, but lost about 500 billion afterwards which are incomparable amounts of money. As a matter of fact, pensioners’ contributions to the Pension Fund cover a portion of their pensions. So, we believe we need to revisit this issue, especially since during the meeting on social issues that you held with the political parties on October 6, you issued an instruction to sort this out. Nevertheless, the Government keeps telling us that this is a settled matter, and that they will not return to it.

I believe we should, though. Perhaps, the Government should be instructed to go over this issue once again, because, in fact, this is a violation of the Constitution which stipulates regular pension adjustments. It does not say anything about working or non-working pensioners, it simply stipulates pension adjustments. If a person earned their pension by contributing to the Pension Fund for a long time, there should be no discrimination, either.

Vladimir Putin: They will say that it is being adjusted, but not paid out as long as the pensioner is working.

Anyway, you are absolutely right when you say that this matter needs our attention.

Mikhail Shmakov: Of course. We believe this matter must be taken seriously. In addition, this will also take care of major growing mistrust and tensions.

Vladimir Putin: There are elements of injustice stemming from inadequate pension adjustments…

Mikhail Shmakov: Technically, if we touch this, the cost will rise even more. If we go ahead with adjustments, it will entail changes in the overall approach to pensions. Perhaps, the work on pensions should also be continued.

By the way, we have not achieved our main pension system goals that we set ourselves in 2012. We made some progress in that area and then stopped for various reasons. This is not to say that there was malicious intent. However, I believe that ways to improve the pension system should be further discussed. It has so far remained a blanket system, a legacy of the past.

Today, we have different categories of employees who, I believe, are eligible for different but compatible pension systems. This is a very subtle matter, and specialists must continue to work on this complex matter.

Vladimir Putin: Good.

December 29, 2020, The Kremlin, Moscow