Russia’s Federal Employment Service
By Irina Denisova

Russia’s Federal Employment Service (FES) must carry a double burden: it tries to pursue active labor employment policies, including retraining programs, but because of Russia’s underdeveloped social safety net, at the local level the FES also functions as a social institution (see the box). The result is that FES offices are underfunded and confused about their role.

Under a project on profiling the unemployed funded by the World Bank, CEFIR undertook a study to learn more about the FES’s practices. The FES encourages the unemployed to enroll in a variety of training programs in an attempt to reduce involuntary idleness. Our research covered four regions in central and northwest Russia, the Urals, and Siberia. We conducted a survey of regional labor specialists and carried out a series of interviews in the pilot regions. We used micro-level data to describe the pool of registered unemployed and identify the groups with a high risk of long-term unemployment. We obtained some estimates of the effectiveness of the active labor market policies based on micro-level data.

In the regions the FES has to assume a social safety net role because of the overall scarcity of social support institutions and the virtual absence of an unemployment assistance system. Individuals who are seeking the status of "registered unemployed" while actually having a job represent about 25 percent of all unemployed. Registered unemployed receive various subsidies and preferences, including reduced fees for community services and discounts on medicines. Most applicants receive the required status from the FES.

The survey revealed that about half of the employment service officers believe that the FES should spend resources on those who have little or no prospect of employment, as there are no other state institutions to support them. This situation reinforces the FES’s perceived role as the only strong social institution at the regional level. As a consequence, the strong demand for its social services diverts resources from its retraining programs. About 70 percent of the surveyed local employment offices could not accept applicants for retraining programs because of a lack of resources. Applicants are usually registered on a waiting list and must wait for their turn. Retraining is especially costly for professionals, and professional-level retraining is also the most sought after program. The expected structural changes resulting from Russia’s possible accession to the WTO could further increase excess demand for retraining.

Little is known about the effects of Russia’s active labor market policies. The FES estimates the efficiency of various policies by comparing the ratio of those who found a job after participating in a training program with all those registered. We concluded that active labor market policies fall short of their goals in the four pilot regions. Further study is needed to elaborate the results and to figure out how those policies could be improved.

Irina Denisova is a senior researcher at CEFIR.