Economists assess the labor productivity of the self-employed – Eurasia Review

Economists have investigated the most acute labor market problems in Russia, such as unemployment, falling real wages and increasing number of people employed in the informal sector of the economy, i.e. – say workers hired by individuals or self-employed. employee.

New research shows that certain characteristics of informal employment have both positive and negative effects on labor productivity. This area requires constant monitoring to neutralize the potential negative effects associated with lower labor productivity. Scientists published the study in the highly rated scientific journal Sustainability (Q1).

Market volatility depends on the number of workers in the informal market

Informal workers do not have the status of a legal person but are involved in professional and commercial activities. This situation leads to a whole series of consequences in the economy affecting labor productivity, income and standard of living, tax revenue to the budget, increase the informality of labor relations in registration, conditions and remuneration .

The study involved teachers from the School of Economics and Management. Doctor of Economics, Professor Angela Karpushkina, Ph.D., Svetlana Voronina, Doctor of Economics, Professor Irina Danilova, Doctor of Economics, Professor Irina Savelyeva analyzed regional labor markets taking into account employment in the informal sector of the economy.

“Regional labor markets differ both in the scale of informal sector employment and in the directions of movement of employees between industries and between sectors of the economy (formal and informal). Job mobility is a natural consequence of the dynamics of the market system; changes in the economic structure, but in different ways affect the income of the population and the sustainability of the development of the regions of Russia. We should assess the polarization of employment in the informal sector in the regions of the Russian Federation. The consequences of intersectoral mobility of employed people for labor productivity, the gross regional product of each of the constituent entities of the Russian Federation, are urgent issues in the objective reduction of labor resources, national goals increase in labor productivity, ”said Irina Savelyeva.

One of the reasons for the volatility of regional labor markets is the high proportion of people employed in the informal sector. Russia’s economic space has a strong differentiation in the scale of these jobs. The analysis showed that regions with a high share of informal employment have the most volatile labor markets.

Findings and recommendations

The scientists formulated recommendations for strategies and a roadmap for the socio-economic development of the regions. Demographic burden, number of graduates from educational institutions, investment activity, sector structure are the key factors in the econometric modeling that scientists have used to assess the directions of workers’ transition between the formal and informal sectors.

“The decline in the labor productivity of employed people in the event of a transition (reallocation) from the formal sector to the informal sector and vice versa may be different. In other words, the loss of productivity in one sector due to the reduction in employment is not offset by growth in another, despite the transition of employees. We have referred to it as the negative effect of the overflow. It affects the growth of the regions’ gross regional product (GRP). Typically, negative effects are observed in regions with a high rate of informal sector employment. Despite the absence of official statistics to calculate labor productivity in the informal sector, an original method of calculation was proposed, which allowed us to obtain such an important result for labor productivity theory and policy of employment ”, explains Angela Karpushkina.

The authors identified the regions with a high probability of negative effects of intersectoral employee overflow and proposed a methodology for calculating the consequences on labor productivity and GRP. Scientists concluded that in regions with a negative effect of reallocation on labor productivity (i.e. the Republic of Altai, Ingushetia, Yamal-Nenets Autonomous Zone), it is necessary to intensify measures and develop state labor market regulation programs to change these trends.

These results will make it possible to improve the diagnosis and monitoring of regional labor markets, assess the dynamics of labor productivity and employment of the population, develop state employment programs, ensure the sustainable development of labor markets in Russian regions.

Economists plan to develop applied recommendations to regulate the scale of employment in the informal sector of the regional economy. It will help neutralize the potential negative consequences associated with a decline in labor productivity and implement preventive measures.

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