PROBLEMS OF WAGE ARREARS
ROLE OF UNIONS IN RESOLUTION OF THESE PROBLEMS
Introduction
SITUATION WITH WAGE ARREARS IN THE SAMARA OBLAST
(statistical data)
The Samara Oblast is one of the few oblasts - donors and is considered an advanced region in relation to reforming the economy. The following industries are located in the Samara Oblast: machine-building (mainly enterprises of the former military industrial complex), oil and gas production and procession, automobile industries. The largest cities are Samara and Tolyatti.
The number of residents is 3,304.4 thousand people. The number of economically active population is 1.6 million people. Approximately 70% of them are employed in the area of material production. The level of unemployment increased since early 1997 from 3.1% to 4%. 30,700 people were sent on forced vacations on the initiative of administrations in 1997; 1,200 people of them were sent on forced vacations without payment of wages. The average monthly nominal wage (calculated) of employees of large and medium enterprises is 1,034 thousand rubles.
In March 1997, the Samara Oblast Tripartite Agreement on regulation of social and labor relations was signed (between the Oblast Administration, Federation of Unions and Union of Employers) for one year. The Union of Employers unites only several representatives of largest enterprises. The work of the Tripartite Commission on 77 points of mutual obligations, part of which were related to timely payment of wages, was acknowledged satisfactory.
However, the timeliness of wage payments is one of the most difficult problems. Lately, the tendency towards decreasing the arrears formed: in the first half of 1996 the maximum amount of wage arrears was 842.5 billion rubles; in the first half of 1997 it was not higher than 507.4 billion rubles. The overall amount of overdue wage arrears as of September 1, 1997, was 446 billion rubles. Approximately one half of them is related to the industry, approximately 19% - to agriculture, 15% - to construction, 7% - to transportation and 7% - to budgets of all levels.
The number of enterprises which have the largest amount of overdue wage arrears: 42 industrial enterprises (2 of them - due to the lack of the federal budget financing); 207 agricultural enterprises (3 budget enterprises); 22 transport enterprises (5 of them - due to the lack of local budget financing); 28 construction enterprises (5 of them - due to the lack of budget financing); 32 health care organizations (all are financed from the local budget); 11 education organizations (8 are financed from the federal budget, 2 - from the local budget); 10 culture and art organizations (all are financed from the local budget); 15 science and scientific servicing organizations (8 are financed from the federal budget).
Approximately 2,000 suites were lodged by unions of the Samara Oblast for 9 months of 1997 (10 of which were collective suits). 104 billion rubles were received through courts.
Analysis of the Situation at Enterprises
SHAR Joint-Stock Company
1. Enterprise Characteristic
The Ball Bearing Plant SHAR (former GPZ-4) has been one of the largest enterprises of Samara for a long time. The history of the plant started from October 1941 when a ball bearing plant was evacuated from Moscow to Samara (former Kuibyshev).
In 1991, the plant produced approximately 200 million ball bearings annually, i.e. 20% of all ball bearings produced in the former Soviet Union and 80% of all ball bearings produced for military purposes. Therefore, the plant was practically a part of the military industrial complex. The range of products produced at the plant made it the largest plant in Russia and CIS: the plant produced 40% of the range of ball bearings in the former Soviet Union.
Its production was exported to 40 countries of the world.
The number of employees of the plant in early nineties was approximately 30,000 people.
In the end of 1992, the plant was privatized in accordance with the second variant of privatization and was renamed “Samarskaya Podshipnikovaya Korporatsia SHAR” (Samara Ball Bearing Corporation SHAR).
Since 1992 the plant has been experiencing serious problems like the majority of large Russian machine-building enterprises. First of all, this was connected with the sharp decrease in military orders for high-accurate ball bearings. Destruction of links with old clients and suppliers of raw materials (many of them were at the territory of Ukraine and the system of bank settlements with Ukraine became very complicated), introduction of the pre-payment system and increase in prices for energy carriers negatively affected the plant.
In 1992-1993, the plant repeatedly was at the verge of stoppage. A limited work week was introduced in July - September 1992 (4 days 6 hours each); some divisions worked 18 hours per week for a month (3 days 6 hours each). Forced vacations of employees became a widely-spread practice.
According to the Deputy General Director for Production, actually “the plant was thrown back to the 1965 level in relation to final products production volumes and to the level of fifties in relation to the range of products”.
The plant repeatedly conducted redundancies; however, the major part of employees left the plant voluntarily due to low wages and first of all due to long wage arrears. At present (as of September 1997), the overall number of employees of the Corporation including subsidiaries is approximately 7,500 people.
Therefore, the SHAR Joint-Stock Company shared the fate of many Russian machine-building plants: high-rocketing crisis practically without any periods of temporary or relative stabilization. Each new change at the level of the macro-economy of Russia immediately most negatively affected the situation at the enterprise.
Problems of the SHAR Joint-Stock Company were aggravated due to relations within the management team. In the beginning of 1995, a new Director was appointed; at the same time, in May 1995, the Director of another Samara similar profile plant - the major shareholder of the SHAR Joint-Stock Company (former GPZ-9, nowadays it is called “Samarsky Podshipnikovsky Zavod” Joint-Stock Company (Samara Ball Bearing Plant)) - was appointed the Chairman of the Board of Directors of the SHAR Joint-Stock Company. For some time he did not interfere directly in the production management, but by the end of 1995 there was issued the order “On Re-Distribution of Management Authorities” and he actually became the Director of both enterprises. The SHAR management team found itself in a latent opposition. The situation itself did not facilitate stabilization of the economic situation at the enterprise; the arbitration court repeatedly considered the issue of declaring the SHAR Joint-Stock Company bankrupt.
This was the background for restructuring of the enterprise. Four subsidiary enterprises (general purpose ball bearing plant, special ball bearing plant, device ball bearing plant - former affiliate, and ball bearing repairs plant) were divested March 1996 from the Corporation. Later, in May 1997, the fifth division - the Social Center, which included remaining social assets of the plant: housing, hostels, a tourist center and a children summer camp - was created.
These subsidiaries are not formally included in the Corporation because the reason for their creation was to transfer huge debts of SHAR to the Corporation so that enterprises did not have any debts at the moment of divestiture. The Corporation is the founder of these enterprises, and in accordance with the Charter it has the right to appoint Directors and Deputy Directors at all plants. The managers of the Corporation intend to transform it in the future into a holding company due to the fact that the Corporation possesses the required number of shares.
Therefore, at present there is no united SHAR and the economic situation at four enterprises formed on its basis differs significantly. No general statistics are maintained in relation to them, and this prevents from tracking the changes in the personnel of the Corporation. We considered it advisable to focus mainly on surveying the largest subsidiary enterprise - the General Purpose Ball Bearing Plant (GPBBP). This is connected with the fact that this enterprise, which was in the past the main division of SHAR, had most significant wage arrears; the most principal aspect is that only employees of this plant participated in protest activities provoked by these arrears.
Actually, GPBBP did not function for one and a half year from the beginning of restructuring (from December 1, 1995, to March 18, 1997). In April, the number of employees of GPBBP was 2,500 people; 300 employees were recruited during half a year. The average age of employees is 46 years. At present, GPBBP shows graduate and slow increase in production volumes. The average wage as of September 1997 is 460,000 rubles (workers’ wage is 600,000 rubles) which is significantly lower than the average wage in the town and sector.
Two unions exist at GPBBP: the “official” Avtoselkhozmash Union and the alternative independent workers’ union Solidarnost. Formally, Solidarnost was established in May 1992; however, its core was created during the strike of workers of the ball workshop in December 1991. This is a purely workers’ union; administration starting from the level of foreman are considered “representatives of owner’s interests”.
2. Situation with Wages
Wage arrears at SHAR started simultaneously with the general economic crisis of the enterprise. Gradually, wage arrears became longer and longer and reached 8 - 9 months in 1995 - 1996. For example, wages for October 1995 were paid in July 1996 not in the full amount.
As was pointed out earlier, from December 1995 to March - April 1997 the largest division of SHAR - the General Purpose Ball Bearings Plant - was not functioning; its employees partially went on forced vacations and partially were made redundant (the overall number of employees made redundant from GPBBP in 1996 was 2,500 people; according to the Chairman of the GPBBP Union Committee, approximately 7,000 people were made redundant from the entire SHAR).
From the mid-March the plant resumed its work and employees returned from forced vacations. From this moment to the moment of the survey (September 1997) there were no significant wage arrears at GPBBP (and in all other divisions of SHAR). Therefore, the situation at SHAR and GPBBP is interesting not just as an example of considerable wage arrears and accompanying labor conflicts, but also as an example of relative stabilization of wage payments. Correspondingly, the reason for arrears, resources which enabled to overcome them as well as the position of both unions at each of these stages will be surveyed.
The interviewed employees and specialists gave approximately similar reasons for arrears - they are typical for a large heavy industry enterprise. In 1992, a sharp decrease in production occurred in the machine-building sector; correspondingly, the demand for ball bearings and sales volumes decreased. Military orders practically phased out. The enterprise administration did not take any active measures to overcome the crisis and implemented the “balancing conservatism” policy (as it is defined in scientific literature). Working capital including necessary wage payments was replenished mainly at the expense of credits received from commercial banks under high interest rates. The enterprise failed to pay taxes - in the result, taxes and payments for power supply in 1994-1995 were transferred from the enterprise account under collection orders, i.e. without signature of the account owner. According to the Chairman of the Board of Directors, “sales returns practically did not cover tax payments and payments for power supply and prevented from payment of wages and procurement of material resources for renewal of production”.
Therefore, the first reason for wage arrears at SHAR was reduced production sales and large debts to the State, social funds and especially to commercial banks (according to the President of the Joint-Stock Company, “we received 18 billion rubles, returned 25 billion rubles and still owe 40 billion rubles”). Apparently, this reason is typical for similar enterprises.
The second reason which is also characteristic for large machine-building enterprises was the passive personnel policy which led to employment of large numbers of employees despite the disastrous reduction of production volumes. In April 1993, the number of employees at SHAR was still 25,937 people. Naturally, there were no funds sufficient for payment of wages to such a large number of personnel.
The third reason may be the size of the enterprise which incurred high non-production costs of maintaining in the normal conditions of its territory, paying for power, water and heat supply for its numerous workshops even if they practically ceased operation. Operation and maintenance of huge social sphere (kindergartens, housing, etc.) were a heavy burden for the enterprise budget.
Finally, the fourth reason in our opinion may be the passive management policy and serious internal problems within the management team. According to the Head of the Planning and Economic Department of SHAR, “while we were fighting for power, we gave no attention to the plant. It did not operate for a year and a half; moreover, even the package of orders was not formed for this year”. During 1996, the GPBBP management was shuffled several times; the question was even raised about the owner due to the fact the Director of the Samara Ball Bearing Plant intended during some period of time to buy out the plant for the shares which belonged to him. “We did not know who will be the owner,” - explained the Chairman of the Avtoselkhozmash Union Committee.