Reinforcing labour market institutions

The Russian Federation needs to reinforce its labour market institutions to improve the balance between labour market flexibility and the protection of workers. Employment protection regulation is relatively strict for workers on permanent contracts with short tenure, but relatively flexible for those on other types of contracts. But labour laws, in general, do not seem to impose major constraints on employers owing to the lax and unequal enforcement. The State Labour Inspection is relatively understaffed and sanctions for labour law violations are too low to act as a deterrent. The collective bargaining framework is fairly developed but has a very limited effect on wages and working conditions given the weak bargaining power of the trade unions. Employers almost entirely set wages on their own, which helps explain wage flexibility. Employment services and unemployment benefits have been scaled up in response to the recent economic downturn, but major restructuring of the system is necessary to provide adequate assistance to all unemployed people and to improve the cost‐effectiveness of existing programmes.