The Impact of Labor Productivity on the Standard of Living

of the Population of Russian Regions in the Context

of the Implementation of the National Project "Labor Productivity

and Employment Support"

Ilya Panshin

, Olga Yares

and Maria Markhaichuk

Vladimir State University named after Alexander and Nikolai Stoletovs, Vladimir, Russian Federation

Keywords: Labor Productivity, Standard of Living, National Project, Region.

Abstract: The study is devoted to assessing the impact of labor productivity on the standard of living of the population

of Russian regions. The authors theoretically substantiated and empirically confirmed using statistical data

that labor productivity in the region directly determines the income level of the economically active population

and indirectly affects the income of non-working citizens living in the region. The income of the population

is the main indicator of the standard of living, which directly links it with labor productivity. The work notes

the significant role of the national project "Labor productivity and employment support", which has been

implemented in the Russian Federation since 2019, and also provides recommendations for improving the

effectiveness of the activities.

1 INTRODUCTION

According to the Organization for Economic

Cooperation and Development (OECD, 2019), the

level of labor productivity in Russia in 2019 was

$ 30.5 per hour. Despite the progressive growth over

the past five years, this indicator is still significantly

lower than the level of labor productivity in the

Eurozone ($ 66.8 per hour), as well as in a number of

countries of the former USSR and Eastern Europe:

Slovenia – $ 51.3; Lithuania – $ 47.8; Czech Republic

– $ 47.4; Estonia – $ 45.8; Poland – $ 43.9; Slovakia

– 42.9; Latvia – $ 41.1; Hungary – $ 40.9 per hour.

Low productivity index negatively affects the

development of the country's economy and is

reflected in the standard of living and well-being of

the population.

In accordance with the Passport of the National

Project "Labor productivity and employment

support", implemented in the Russian Federation

since 2019, labor productivity is a determinant of the

standard of living of the population. On the one hand,

this thesis is obvious, because highly productive work

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should be well paid, and the income of the employed

population is the most important characteristic of the

standard of living. Also, the presence of highly

efficient enterprises on the territory of the region

increases the opportunities for the implementation of

social programs and additional support for citizens

with low income through tax and other deductions.

On the other hand, increasing labor productivity is

one of the commercial tasks of business and does not

always correspond to the public interests presented by

the state and the population. Job cuts, even with the

aim of increasing labor productivity, are not always

assessed positively.

Nevertheless, at all levels of the Russian state

there is an understanding that increasing labor

productivity is one of the main imperatives for the

development of the economy of the country and its

regions.

The purpose of the study is to investigate the

impact of labor productivity on the standard of living

in Russian regions in the context of the

implementation of the National Project “Labor

productivity and employment support”.

Panshin, I., Yares, O. and Markhaichuk, M.

The Impact of Labor Productivity on the Standard of Living of the Population of Russian Regions in the Context of the Implementation of the National Project "Labor Productivity and

Employment Support".

DOI: 10.5220/0010666100003223

In Proceedings of the 1st International Scientiﬁc Forum on Sustainable Development of Socio-economic Systems (WFSDS 2021), pages 197-205

ISBN: 978-989-758-597-5

197

The objects of the study are the regions of the

Russian Federation.

2 METHODOLOGY

The standard of living of the population of the region

is a complex multifactorial socio-economic category

that characterizes the provision of a person living in

the region with economic benefits to meet his

material and spiritual needs. The standard of living of

the population is the result of the functioning of the

entire socio-economic system of the territory. The

higher its efficiency, the more economic resources

and created benefits become available to the

population.

Until now, no unambiguous and recognized set of

indicators has been formed to assess the standard of

living of the population of the territory. The most

widespread system of indicators for assessing the

progress of economic reform in the republics of the

Russian Federation, territories, regions, autonomous

formations, cities of Moscow and St. Petersburg, is

the system approved by the Order of the Government

of the Russian Federation of 03/15/1993 N 426-r. In

this document, the indicators of living standards are

devoted to subsection 10.3 (figure 1). Seven of the

twelve indicators (Alexandrova, 2020; Molokanov,

2019; Simachev et al., 2020; Chernysheva and

Il'yanov, 2019) are associated with wages and

average per capita incomes of the region's population,

which confirms the thesis that the standard of living

directly depends on what income the economy of the

territory receives, how many goods, jobs, services it

produces.

The Federal Service for State Statistics of the

Russian Federation (Rosstat) is currently forming the

section "Living standards" from the following blocks

of indicators:

 income, expenses and savings of the

population;

 social security and social assistance;

 distribution of income of the population;

 living wage;

 the level of poverty;

 income, expenses and living conditions of

households;

 consumer expectations of the population.

In the methods of Rosstat, the bulk of statistical

data on the standard of living of the population is also,

to one degree or another, characterized by the level of

per capita income and their subsequent use.

According to Rosstat data on the structure of

monetary incomes of the population of the Russian

Federation by sources of income for 2020, the share

of labor income was 63.7% (wages of employees –

58.5%, income from entrepreneurial and other

production activities – 5.2%). The rest of 36.3% was

formed at the expense of social payments – 20.8%,

income from property – 4.4% and other cash receipts

– 11.1% (Rosstat). Not being able to analyze the

structure of other monetary receipts, but being sure

that a large part of them is formed by the income of

self-employed and other forms of labor activity that

did not fall into official statistics, we can say that at

least two-thirds of the volume of monetary income of

the population is the direct results of their labor

activities.

By adjusting the total size of the region's income

by the cost of material resources consumed by the

economy, we will receive the added value or gross

regional product (GRP). And although there are many

publications in scientific periodicals that cast doubt

on the direct impact of GDP (GRP) on the standard of

living of the population (Aseev et al., 2019;

Molokanov, 2019), the main part in the structure of

value added is wages with deductions for social

needs. Thus, the level of GRP and average wages are

directly dependent on each other. The influence of

GRP on the standard of living of the non-working

population is indirect, but it is also significant. We

find that the most important factor determining the

standard of living of the population of the territory is

the GRP per capita of the region. The possibilities of

the regional economy to finance the wages of the

economically active population (labor force) and

providing social support to non-working citizens

through fiscal mechanisms depend on it.

Taking into account the fact that the volume of

GRP is the result of the use of the labor force involved

in the economy of the region, the issues of labor

productivity as the main indicator of efficiency come

to the fore.

Within the framework of the National Project

"Labor productivity and employment support",

implemented in the Russian Federation since 2019,

labor productivity is a determinant of the standard of

living of the population and is considered as the ratio

of value added to the number of employees. The

added value on a national scale takes the form of gross

domestic product (GDP), at the level of a constituent

entity of the Russian Federation - gross regional

product (GRP), and at the level of an individual

enterprise as the sum of profit from the sale of goods,

performance of work or provision of services,

remuneration of employees, and insurance premiums,

as well as property tax included in the cost.

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

198

Figure 1: Indicators of the standard of living of the population of the constituent entities of the Russian Federation, approved

by the order of the Government of the Russian Federation of 03/15/1993 N 426-r.

In accordance with the applied method of

calculating value added and taking into account the

fact that in its structure the dominant part is the wages

of workers with deductions for social needs, the

objective relationship of labor productivity and the

standard of living of the population becomes clear.

The higher labor productivity, the more funds the

employer can use to finance the labor activity of

personnel. The resulting profit with its capitalization

in the assets of companies increases the capital-labor

ratio and, as a result, creates the preconditions for

increasing productivity.

Issues of the ratio of labor productivity and living

standards of the population continue to arouse the

interest of scientists and practitioners, such as

Elovikov & Petrunina (2004), Zaitsev (2014),

Chemidova (2019). The study of Chernysheva &

Il'yanov (2019) is devoted to identifying possible

ways to increase the level of labor productivity in the

Russian Federation to ensure sustainable

development of the country. Zaitsev (2014) believes

that GDP per capita and labor productivity are very

close indicators, the dynamics of changes in which is

unidirectional, but has different intensity during

periods of economic recession and recovery. The

design mechanisms for managing the growth of labor

productivity in a specific region are considered in the

studies of Alexandrova (2020).

In the foreign economic and specialized literature,

the works of Broadberry & Burhop (2010), Backman

& Gainsbrugh (1949), Djido & Shiferaw (2018),

Fedulova et al. (2019), Gibson & Shrader (2018),

Hatcher (2018), Samargandi (2018), Trenovski &

Kozeski (2020) are devoted to the study of the

relationship between labor productivity and the

standard of living of the population.

Summarizing the studies of Russian and foreign

scholars, as well as taking into account the initial

experience of the regions in the implementation of the

National Project "Labor productivity and

employment support" in 2019-2020 (report of the

Accounts Chamber of the Russian Federation), we

highlight the following features of the impact of labor

productivity on the standard of living in Russian

regions:

1. The growth of labor productivity increases the

efficiency of economic activity of economic entities,

which creates opportunities for increasing the wages

of workers, directing profits to re-equipping jobs and,

as a result, an increase in the capital-labor ratio.

1. Average wages of

employees in enterprises,

institutions and

organizations of various

forms of ownership

2. The purchasing power of

the working population and

retirees

3. Minimum consumer

budget for the main socio-

demographic groups of the

population

4. Living wage for the main

socio-demographic groups of

the population

5. The number and share of

the population with average

per capita incomes below the

minimum consumer budget

and the subsistence level

6. Food consumption in

families with different levels

of per capita income

7. Cash income and

expenses of certain socio-

demographic groups of the

population

8. Indicators of income

differentiation of the

population

9. Ratio of average per

capita incomes of 10% of the

richest population and 10%

of the poorest population

10. Income Concentration

Index (Gini Index)

11. The structure of

consumer spending of

various socio-demographic

groups of the population

12. Population distribution

by average per capita income

The Impact of Labor Productivity on the Standard of Living of the Population of Russian Regions in the Context of the Implementation of

the National Project "Labor Productivity and Employment Support"

199

However, the owner of a commercial organization or

an entrepreneur may not do this, maximizing the

amount of net profit distributed among the founders.

In order for business to contribute to an increase in

the living standards of the population in the regions,

systemic measures should be taken to promote the

interest of campaigns in the creation of new highly

productive jobs. In particular, such a system of

measures is the ongoing National Project “Labor

productivity and employment support”.

2. An increase in labor productivity can occur in

both extensive and intensive forms. The decline in the

number of employed people has a negative impact on

the average per capita income and the average

standard of living of the population, but, based on the

calculation methodology, it can have a positive effect

on the calculated values of labor productivity. This

extensive form does not lead to an increase in the

region's GRP both in absolute terms and per capita.

The use of such a model for increasing labor

productivity on the part of business should not meet

with support from the state and regional authorities.

The replacement of low-productivity jobs with

high-productivity jobs, which ensures an increase in

the volume of production (work, services), should be

recognized as an intensive form of increasing labor

productivity. This model is more costly than the first,

requires capital investments, but ultimately brings a

higher economic result to both the enterprise and the

region. In this case, regional authorities and support

institutions can and should use all mechanisms of

economic assistance to business. Here we can single

out financing of programs for advanced training of

retraining of personnel, and compensation for a part

of the interest rate on a loan for the re-equipment of

production, and assistance in obtaining new large

orders, including export ones.

3. A high level of labor productivity has a positive

effect on labor migration and the level of professional

training of the region's population. Indeed, the

availability of high-performance vacancies at

regional enterprises places high demands on the level

of training of specialists. And this contributes to the

development of educational institutions in the region

and, as a result, has a positive effect on the standard

of living.

To confirm the impact of labor productivity on the

standard of living of the population in the regions of

the Russian Federation, an analysis of statistical data

was carried out, the results of which are presented in

the next section.

3 RESULTS

The Russian Federation is characterized by a high

degree of differentiation of the level of socio-

economic development of its regions. And if the

social security of citizens throughout the territory

within the framework of federal guarantees and

programs being implemented is approximately

comparable, then the regional opportunities for

supporting the population differ significantly. The

same applies to the level of development of the real

sector of the economy.

Thus, in various constituent entities of the Russian

Federation, the impact of labor productivity on the

standard of living of the population will be noticeably

different. This is primarily due to the structure and

economic activity of the population (Figure 2). So, on

average in Russia in 2020, according to Rosstat, the

share of the labor force (74,922.7 thousand people) in

the resident population (146459.8 thousand people)

was 51.16%. In most constituent entities of the

Russian Federation, the value of this indicator is

comparable to the average Russian level and

fluctuates in the range from 45 to 55%, which

indicates a commensurate level of influence of the

growth of labor productivity on the standard of living

of the population with some assumptions.

Sixteen regions of the country, the data of which

are presented in Figure 2, were not included in this

average range. Eight constituent entities of the

Russian Federation have a percentage of the

economically active population above 55%: from the

level of the Khabarovsk Territory – 55.13% to a

maximum value of 62.15% in the Chukotka

Autonomous Okrug. In these regions, the impact of

growth in labor productivity on the standard of living

of the population will be greatest due to the following

circumstances:

 the labor force itself, being a part of the

population of the region, to the greatest extent

feels the effects of the growth of labor

productivity on the quality of its life. These

effects are manifested in an increase in the

average wage included in the added value, an

increase in the level of equipping of workplaces

due to an increase in the capital-labor ratio of

labor, as well as an improvement in social

security both due to an increase in compulsory

social contributions and due to the support of

employees from the employer;

 an insignificant share of the economically

inactive population (for example, in the

Chukotka Autonomous Okrug 37.85%) will

create the least social burden on the regional

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

200

Source: Rosstat, calculated by the authors.

Figure 2: The share of the economically active population (labor force) in the resident population of the regions of the Russian

Federation in 2020, %.

and municipal budgets. It turns out that the aggregate

regional economic result from the growth of labor

productivity will be least spent on unproductive

purposes, which will ensure the further sustainable

development of the territory.

Eight more constituent entities of the Russian

Federation at the end of 2020 showed the share of the

economically active population of its total number

below 45%: from the level of the Altai Republic -

44.72% to a minimum value of 39.76% in the

Republic of Tyva. Of course, any positive changes in

labor productivity in these regions will also have a

positive effect on regional productive forces and

contribute to economic growth, but their impact on

the standard of living of the population of the territory

as a whole will be the least noticeable. Indeed, less

than 40% of the economically active population of the

Tyva Republic will find it more difficult to improve

not only their standard of living, but also the

remaining 60% of the economically inactive

population.

Let's analyze labor productivity in the regions of

the Russian Federation. At the time of the study,

statistical data on GRP for 2019 were available, so the

calculation was made based on this year's data. Labor

productivity was calculated as the ratio of GRP to the

number of employed population (Figure 3). For

clarity of presentation of information and

demonstration of a high level of labor productivity

differentiation between the constituent entities of the

Russian Federation, the graph shows 20 leading and

20 lagging regions for this indicator.

As can be seen from the graph, labor productivity

in the Tyumen and Sakhalin regions is an order of

magnitude higher than in the Chechen, Kabardino-

Balkarian republics, and Ingushetia. On average,

labor productivity of Russia's leading regions in terms

of this indicator is 3.5 times higher than the level of

20 outsider regions.

Now let's see what the situation is with the

average per capita income of the population in the

regions over the same period (Figure 4). The graph,

similarly to the previous one, shows the data of 20

leading subjects of the Russian Federation and 20

subjects with the lowest level of average per capita

income of the population.

In contrast to the situation with labor productivity,

the level of differentiation of Russian regions by the

level of per capita income is not so significant. There

is a variation of about 5 times between the indicator

of the Chukotka Autonomous Okrug and the level of

the Republics of Tyva and Ingushetia.

51,16

62,15

61,55

58,12

57,81

57,45

56,63

55,69

55,13

44,72

43,91

43,86

43,53

43,32

41,22

41,03

39,76

0 10203040506070

Russian Federation

Chukotka Autonomous Okrug

Magadan Region

Kamchatka Krai

Moscow

Saint Petersburg

Sakhalin Region

Murmansk region

Khabarovsk region

Altai Republic

Karachay-Cherkess Republic

Chechen Republic

Republic of Adygea

The Republic of Buryatia

The Republic of Dagestan

Republic of North Ossetia - Alania

Tyva Republic

The Impact of Labor Productivity on the Standard of Living of the Population of Russian Regions in the Context of the Implementation of

the National Project "Labor Productivity and Employment Support"

201

Source: Rosstat, calculated by the authors.

Figure 3: Labor productivity in Russian regions in 2019 (GRP per employee, 20 leading regions and 20 outsider regions),

thousand rubles / person.

On average, the level of the twenty leading

regions of Russia in terms of this indicator is only 2.2

times higher than the level of 20 outsider regions.

This is not surprising, since in addition to wages in

the composition of the average per capita income of

the population, there are social payments, the level of

which, within the framework of federal legislation, is

approximately equal in all regions of the country.

However, in the structure of average per capita

incomes of the bottom twenty regions, social

payments will make up a significantly higher share

than in other constituent entities of the Russian

Federation.

If we compare the data of the diagrams in Figures

3 and 4, we get the following picture. Fourteen

regions out of twenty leading in terms of labor

productivity have a high level of per capita incomes

of the population. This confirms the thesis that an

increase in labor productivity through an increase in

the level of wages of the employed population by an

average of two-thirds ensures a high level of average

per capita income of the population. Moreover, all

eight leading regions in terms of the share of the

economically active population (Figure 2) were

included in the top twenty in terms of per capita

income of the population, which also confirms the

4696,0

4507,5

3167,3

2729,2

2613,1

2610,1

1902,6

1807,2

1701,2

1690,8

1599,7

1548,6

1419,5

1417,8

1314,1

1286,8

1286,1

1258,4

1245,6

1242,9

697,5

694,6

693,5

682,9

656,3

641,5

641,3

634,0

628,6

628,4

610,8

597,4

587,5

585,8

541,5

511,7

502,3

440,5

429,1

384,4

0,0 500,0 1000,0 1500,0 2000,0 2500,0 3000,0 3500,0 4000,0 4500,0 5000,0

Tyumenregion

ChukotkaAutonomousDistrict

TheRepublicofSakha(Yakutia)

Krasnoyarskregion

Arkhangelskregion

KamchatkaKrai

RepublicofTatarstan

Leningradregion

Astrakhanregion

Orenburgregion

AltaiRepublic

Kurganregion

Pskovregion

MariElRepublic

Stavropolregion

Kirovregion

Altairegion

RepublicofCrimea

Ivanovoregion

Kabardino‐BalkarRepublic

WFSDS 2021 - INTERNATIONAL SCIENTIFIC FORUM ON SUSTAINABLE DEVELOPMENT OF SOCIO-ECONOMIC SYSTEMS

202

Source: Rosstat, calculated by the authors.

Figure 4: Average per capita incomes of the population in Russian regions in 2019 (20 leading regions and 20 outsider

regions), thousand rubles / person in year.

significant role of employment in ensuring a high

standard of living.

In regions that are outsiders in terms of average

per capita income of the population, the correlation

with the level of labor productivity is not much lower

than among the leaders. Thirteen out of twenty

subjects of the Russian Federation (approximately the

same two-thirds) have both a comparatively low level

of average per capita income of the population and a

low level of labor productivity. The remaining seven

regions: Volgograd, Ulyanovsk, Penza and Saratov

regions, as well as the republics of Khakassia,

Kalmykia and Tyva, having a relatively low level of

per capita income of the population, showed the level

of labor productivity closer to the average Russian

values. As the reason for such a picture, one can

suggest the discrepancy between the time of the rise

in the standard of living of the population and the

period in which the increase in labor productivity

occurs. Indeed, decisions on increasing wages and

investing in the modernization of jobs can be made

both before and after the implementation of measures

to increase labor productivity.

1000,6

901,0

784,3

708,2

632,1

580,0

566,4

566,0

545,5

530,8

497,5

469,1

442,6

428,5

428,3

428,1

424,3

405,8

399,6

389,7

292,4

289,9

289,7

287,2

284,4

283,2

275,6

273,1

272,3

268,4

257,7

255,6

250,4

243,1

241,9

237,0

225,9

222,1

199,4

0 200 400 600 800 1000 1200

ChukotkaAutonomousDistrict

MagadanRegion

KamchatkaKrai

Moscowregion

TheRepublicofSakha(Yakutia)

Khabarovskregion

PrimorskyKrai

Arkhangelskregion

KomiRepublic

Amurregion

Stavropolregion

ChechenRepublic

Ulyanovskregion

Penzaregion

TheRepublicofKhakassia

Kabardino‐BalkarRepublic

MariElRepublic

ChuvashRepublic

Karachay‐CherkessRepublic

TyvaRepublic

The Impact of Labor Productivity on the Standard of Living of the Population of Russian Regions in the Context of the Implementation of

the National Project "Labor Productivity and Employment Support"

203

4 CONCLUSIONS

In general, according to the results of the study, it can

be noted that labor productivity has a significant

impact on the standard of living of the population in

the constituent entities of the Russian Federation.

Labor productivity in the region directly

determines the level of income of the economically

active population and indirectly affects the income of

non-working citizens living in the region. The income

of the population is the main indicator of the standard

of living, which directly links it with labor

productivity.

When setting the goals of regional development,

traditionally aimed at improving the standard of

living of the population, it is necessary, in addition to

social tasks, to set guidelines for increasing labor

productivity. The regions of the Russian Federation,

which actively participated in the implementation of

the national project "Labor productivity and

employment support", received additional

opportunities not only to support enterprises located

on their territory, but also to improve the standard of

living of the population as a whole.

Currently, there is a high differentiation of regions

in terms of labor productivity. The participation of

outsider regions in the national project can reduce the

scale of interregional polarization in terms of both

labor productivity and the standard of living of the

population.

The complexity and multifactorial nature of the

impact of labor productivity on various aspects of

regional development requires additional analysis,

which may become the subject of separate economic

studies.

ACKNOWLEDGEMENTS

The reported study was funded by RFBR, project

number 20-010-00877.

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