Where Is Russian Labor Market Heading?

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At this point in the crisis, an essential repositioning in relations between potential employers and prospective employees has taken place: The years-long dominance of job-seeker interests has been abruptly replaced by an employer's market.

Let us see how and why this happened. During the country's economic upturn, many companies were raising funds to invest in projects, business expansion, or development of new markets. A dire need for specialists brought about the job-seeker's market, which for any company seeking to attract human resources dictated a choice between raising salaries and loosening professional requirements for prospective employees. According to our surveys, overall pay levels in Russia grew 21 percent over 2007, while in the Central region (which includes Moscow), growth reached 34 percent. Sure enough, this situation favored rapid career progression for employees.

However, the crisis that began in 2008 has fundamentally changed the balance of forces. A considerable decline in business volumes started to take place in a number of segments, namely in investments, banking, retail, large manufacturing and construction. The real sector has been affected by the global problems to a lesser extent.

At the end of the year, an overwhelming majority of companies instituted a hiring freeze, which, on average, remained in force until March 1. In early spring, companies closed the previous financial year and approved their 2009 budget, causing demand for people to whom new tasks could be assigned. Although it is still a long way to go before the 2008 figures will be reached: the number of vacancies has decreased threefold compared with March of last year. A similar decline in the volume of requests for recruitment has occurred in virtually all Russian regions. However, starting from March, a revival of search and selection projects has been observed, along with an elevated demand for staff leasing or outstaffing services.

The new economic conditions will put a special emphasis on the assessment and analysis of personnel productivity and performance. Our survey reveals that 54 percent of companies have such programs in place. However, this percentage is much higher in foreign companies than it is in Russian firms: 70 percent versus 42 percent, respectively.

An interesting trend has been noticed regarding salaries. During recent years a convergence of pay levels in Russian and foreign companies had taken place. In an attempt to attract the best personnel, Russian companies would sometimes offer higher compensation than foreign firms. In the new economic conditions, the situation has changed, and the last survey shows that salaries offered by Russian companies are again losing their competitiveness against those offered by foreign ones. It should be noted, though, that this is primarily true for cross-industry positions.

In short, starting from fall 2008 and up until now, most companies have completed their employee performance assessment exercise and displaced those who had been hired in anticipation of potential projects and quick profits, but failed to provide value in the new situation. This inflow of human resources gave rise to larger demand for a smaller number of vacancies in the labor market thus leading to lower expected and offered compensation levels.

The crisis has adjusted the demand for personnel to draw more interest to people capable of combining several functions.

In the highest demand are companies' "money makers," e.g. sales managers or capable and experienced manufacturing specialists. Obviously, their achievements during the crisis will serve as a launch pad for further career growth.

In today's market, demand is stronger for high caliber professionals than it was before the crunch. They are top-tier specialists with experience in the optimization of both costs alone and the process as a whole.

It should be noted that compared with fall 2008, no significant changes have occurred in pay levels across all positions in ANCOR's survey.

Overall, the current situation has significantly affected the adjustment of previous years' patterns in the labor market. The following trends can be identified:

•Redistribution of companies' resources (optimization of companies' structures, their staffing table)

•Revision of components of employment benefits

•The market turning around from being candidate-driven to being employer-driven

•Slower overall growth of salaries

•Lower salaries in certain industries.