Low productivity and the competitivenessof Russian firms have been among Russia's primaryeconomic challenges over the past decade. The Government ofRussia (GoR) has made boosting productivity a policypriority and since 2012 has rolled out several visiblepolicy initiatives to strengthen employment practices infirms to raise their productivity and positive spillovers,including the 2012 Plan for Raising the Productivity ofCompanies, the 2018-2024 National Project on LaborProductivity, and 2018-2019 National Plan for CompetitionDevelopment. The objective of this report is to contributeto this productivity agenda by analyzing the employmentpractices of state-owned enterprises (SOEs), theirimplications for labor supply and internal firmcapabilities, and the influence of state policy. SOEscontribute a significant share of output and employment inRussia's economy and academic recent research showsthat they have lower productivity than private sector firms.The implications of SOE employment practices—compensationand management—on overall productivity however, has not beeninvestigated, a gap that this report aims to fill byanalyzing the following questions: What are SOE employmentpractices and how do they compare to international andprivate sector benchmarks? How do SOE employment practices,particularly compensation, affect allocation of labor acrossfirms? How do SOE compensation and management practicesshape their internal capabilities? How does governmentfinancial and non-financial support to SOEs influence theseemployment practices? Taking the level and form ofgovernment participation in the economy as a given, thereport focuses primarily on the sector's currentpractices, and how government policies towards the sectorcan be improved to boost SOE performance and positivespillovers. We explore these questions using five Russianmicrolevel datasets, including worker and firm surveys and alarge firm register. The report utilizes a taxonomy of SOEsthat includes state SOEs which have 100 percent governmentownership, and mixed SOEs which have some share of stateownership that is less than 100 percent. The report findsthat Russian SOEs pay an overall compensation premium andthat this premium contributes to labor shortages in theprivate sector. While overall the SOE sector has a smallwage penalty, wage differentials with the private sectorvary by type and size of the SOEs. Mixed SOEs pay a smallwage premium over the private sector while state SOEs have asmall wage penalty. Both types of SOEs pay a wage premium incompetitive settings. SOEs have an overall compensationpremium as they provide more generous benefits like paidvacations, maternity leave, and training than private sector firms.
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