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LOOKING AHEAD
21.10.2008

October 15, 2008 (the date of publication in Russian)

Marine Voskanyan

CRISIS AND HUMAN RESOURCES

"White collars" and "blue collars" may interchange positions in the social hierarchy

TIGHTEN THE BELTS!

Weeks after the global financial crisis swept hundreds of billions from the accounts of major international investment banks, mass media reported about the inevitable impact on the real economy, especially in the United States and Britain, where the asset bubble gave a leak in the overheated mortgage sector. Simultaneously, reports about massive layoffs flooded mass media.

Naturally, jobs shrunk primarily in the financial sector. Citigroup has got rid of 15900, Bear Stearns of 9159, Royal Bank of Scotland – of 7200, UBS Ц of 7000, and Lehman Brothers Ц of 6300 employees. Construction and retail, the two spheres that most sensitively depend both on loans and the consumer demand, are going to be the next to cut jobs.

The generally accepted assumption that the Russian market is relatively immune to the global shakeup appears incorrect. Unemployment among financial analysts was visible in Moscow already in September, while the number of vacancies of banking specialists reduced by one half. Vedomosti's authors report that the demand for financial managers has collapsed by 43%. Private sources foresee cuts of 50% of the personnel in medium banks and 20% in major banks. Layoffs are going to affect the sphere of mass media as well. RBC Holding, the major Russian business media corporation, has already dismissed 5% of its journalists.

Vagif Guseinov, Director of the Moscow-based Institute for Strategic Estimation and Analysis, reminds that during the Russian financial crisis of 1998, layoffs took place mostly in companies servicing the financial markets. Today, he expects that jobs will be cut in a lot of construction companies and retail networks. He believes that the crisis will most painfully affect the middle class. The poorest population has got not much to lose, and the state is likely to assist them for obvious reasons, the rich have got a "safety cushion", while the middle class, most of which has been lately borrowing from banks and investing into stocks, will feel sour. The middle class will be also mostly affected with layoffs due to the slowdown of economic life. It will have to forget about affordable mortgage. Those who will not be fired will face reduction of salaries and bonuses, as most companies are likely to save costs in this way even in case their situation is not critical. The fact of the global crisis is likely to be used as a universal pretext for any unpopular cadre decisions. In the next year, the implications are likely to encompass the whole of the office personnel, as the crisis is going to spiral down also into the spheres not directly linked to financial markets.

 

PROFESSIONALS ARE IN NEED

On this background, Russia's Prime Minister Vladimir Putin articulates the necessity of increase of productivity in a number of branches of the real economy. In fact, the real sector has been experiencing a serious shortage of specialists during the last years Ц not "universal" managers but engineers, designers and qualified workers. A dozen years before, many of the generation of the age between thirty and forty had to give up their original profession and seek for job in offices, or try to launch their own business. They were replaced mostly by pensioners or postgraduates. Both have their weak points: elderly specialists cannot efficiently adapt to advanced technologies while youngsters lack experience. Working and designing dynasties and scientific schools have thus been disrupted.

High schools have been facing an increased demand in (mostly extramural) education, due to shortage of young cadres that results particularly from demographic problems. Industrial companies lack those who were unborn in the hard period of 1990s when lots of families could not afford parenthood. The high demand in cadres in industry elevates salaries, and already before the crisis, an average "office worker" perceived a "blue collar" or engineer without the feeling of superiority. Qualified workers in some industries already outpaced employees in salaries.

The crisis is creating an oversupply in some spheres, while in others, the demand remains high. However, the overflow of cadres among these spheres is not going to be as easy as it was in early 1990s. An engineer can re-educate into a sales manager, but the reverse re-education is more problematic. The permanently induced assumption that a real career and a decent income is available only in office work, as well as proliferation of faculties of economics, management and marketing in high schools of all kinds of specialization, has created a whole layers of people whose "general capitalist education" is of demand only in a rapidly rising economy with a high share of additional services like marketing, advertising, sales management, etc.

However, the unfolding crisis challenges these professions with most serious problems. Therefore, graduates are to seriously assess their professional future Ц and thus maybe luckily avoid the mistake of the earlier generation that chose a hated but lucrative job, and now facing the loss of the only justifying argument for this decision.

 

A HAVEN OF REFUGE

The person who had not given up his beloved calling is now more psychologically protected. His incomes may also reduce but he will not face a fatal feeling of having taken the wrong train. Average office employees have dreamed of a better job with a more meaningful destination. Any tourist trip reminds them of a different way of life, of the fact that prestige and calling often contradict to one another.

For many citizens of metropolises, choked with traffic jams, a job in a small town or any employment, not associated with corporate discipline, is a nice dream: they would gladly exchange their office working place for a small cafe, a neat flower shop, a private workshop, a job of a guide or a trainer in diving. Not all of them are fascinated with aggressive career-making in a huge corporation.

However, a quiet life in a humble profession, associated with "real" business is available only in secure and diversified social conditions. That is why most of Russian "downshifters" associate this dream with foreign countries, though not necessarily in the West: emigration to South-Eastern Asia or to a remote ocean island is a really attractive exchange for the life in a megalopolis with its wearisome traffic jams or tedious everyday trips in crowded public transport, enormous rent prices and mostly unrealistic life plans to purchase a more than 2-room flat in remote outskirts.

In theory, Russians, fatigued by urban life, would be glad to move to a "low-rise Russia" that state officials promise to build for them. But in practice, this means a high risk of unemployment, combined with underdevelopment of local health care and education, along with arbitrary rule of regional powers. Therefore, a lot of such potential "downshifters" prefer not to change anything in their life, or to emigrate Ц though this very resource would be most essential for development of small business, social sphere, and cultural projects.

The current financial crisis is likely to introduce a change in this situation, increasing interest towards professions in the real sector of economy. This does not mean that millions of office workers will rush to change their professions and jobs. However, the very situation of layoffs in corporate business (especially in office staff), the reduction of consumption level with hardening working conditions, as well as the collapse of the financial bubble as such, are likely to spark a revelation in many souls. Ordinary citizens will have to revise their principles of "local economics" on the level of households and jobs, in the same way as the leaderships of countries, affected with the crisis, are now trying to formulate new principles and find a new recipe to support their economies. In the long run, this reassessment may bring promising results.


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