Real Wage Adjustment in the Former Soviet Union: 93

The wage reforms sought to remove these wage practices and offer an efficient financial incentive to Soviet workers by standardising wages and reducing the dependence on overtime or bonus payments. However, industrial managers were often unwilling to take actions that would effectively reduce workers' wages and frequently ignored the directives they were given, continuing to pay workers high overtime rates.

Industrial materials were frequently in short supply, and production needed to be carried out as quickly as possible once materials were available—a practice known as "storming". The prevalence of storming meant that the ability to offer bonus payments was vital to the everyday operation of Soviet industry, and as a result the reforms ultimately failed to create a more efficient system.

During the period of Stalinism , the Soviet Union attempted to achieve economic growth through increased industrial production. Frantically rushed production was very common in Soviet industry, and in particular a process known as "storming" Russian: Workers then worked as many hours as possible to meet monthly quotas in time; this exhausted them and left them unable to work at the beginning of the next month although lack of raw materials meant there would have been very little for them to produce at this point anyway.

To encourage individual workers to work hard and produce as much as they possibly could, most workers in Soviet industry were paid on a piece-rate ; their wage payments depended upon how much work they personally completed. Soviet workers were given individual quotas for the amount of work they should personally deliver and would earn a basic wage stavka by fulfilling percent of their quota. The wage rate for work would grow as production over this level increased.

If a worker produced percent of his own personal quota for the month for example, if he was supposed to produce 1, items, but actually produced 1, he would receive his basic wage for the first percent, a higher rate for the first 10 percent of over production and an even higher rate for the next 10 percent. Soviet authorities hoped that this would encourage a Stakhanovite spirit of overfulfillment of quotas among the Soviet workforce. In , approximately 75 percent of Soviet workers were paid under such a piece-rate system, [5] so the majority of Soviet workers could significantly boost their earnings by increasing their output.

Average wage rates in the Soviet Union were published relatively rarely. Some academics in the West believed this was because the Soviet government wanted to conceal low average earnings. Alec Nove wrote in when wage statistics were published for the first time since the Second World War that the lack of transparency surrounding average wages was intended to prevent Soviet workers from discovering the huge disparities that existed between wages in different sectors of the Soviet economy. The piece-rate approach to wages had been introduced in the first Five-Year Plan in and had changed very little since then.

In practice the piece-rate system led to many inefficiencies in Soviet industry. Each Soviet ministry or government department would set its own rates and wage scales for work in the factories or enterprises for which they were responsible. Within one ministry there could be great variation in pay rates for jobs requiring largely identical responsibilities and skills, based on what the factory was producing, the location of the factory and other factors that Moscow considered important.

Historian Donald Filtzer wrote of one s machinist who in one month completed 1, individual pieces of work. Amongst these had been differing tasks, all of which had been assigned a basic individual payment rate of between 3 and 50 kopeks each 1 ruble was equal to kopeks. Time workers—workers who were paid for the time they spent working rather than by how much they individually produced—also received bonuses based on performance.

Factory managers, who did not want these workers to lose out to their piece-rate colleagues, often manipulated output figures to ensure that they would on paper overfulfill their targets and therefore receive their bonuses. The erratic and seemingly arbitrary way that quotas had been set across different industries led to a high level of uncompleted production in industries where it was more difficult to overfulfill production quotas. Even without managerial manipulation, quotas were very often low and easy to overfulfill. Quotas had been lowered during the Second World War so that new workers would be able to fulfill their output expectations; in industries such as engineering, it was common for workers to double their basic pay through bonuses.

After the death of Stalin, the Soviet Union went through a process of moving away from Stalinist policies known as de-Stalinization. The purpose of de-Stalinization included not only ending the use of terror and the Gulag system that had existed under Stalin, but also reforming the economic policies of the Soviet Union. Firstly, basic wages were increased so that there would be less pressure to overfulfill quotas, and therefore less pressure to manipulate or distort results. It was also hoped that wage rises for lower paid jobs would encourage more women to enter industry and that freezes on higher paid jobs would deter people from leaving employment.

Secondly, quotas were raised to limit the ability of workers to overfulfill targets. In the case of time workers, this was sometimes done by keeping quotas the same but reducing hours; for example, coal miners saw their working day shortened to six hours. The number of wage rates and wage scales was drastically reduced; this not only cut bureaucracy, but also ensured that workers would be more eager to take on a wider range of tasks. Fiscal Accounting of Bank Restructuring. Crisis Management and Resolution: Early Lessons from the Financial Crisis.

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Wage reform in the Soviet Union, – - Wikipedia

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You submitted the following rating and review. We'll publish them on our site once we've reviewed them. Item s unavailable for purchase. Please review your cart. A major strength of the Soviet economy was its enormous supply of oil and gas, which became much more valuable as exports after the world price of oil skyrocketed in the s.

As Daniel Yergin notes, the Soviet economy in its final decades was "heavily dependent on vast natural resources—oil and gas in particular". However, Yergin goes on by saying that world oil prices collapsed in , putting heavy pressure on the economy. The complex demands of the modern economy somewhat constrained the central planners. Corruption and data fiddling became common practice among the bureaucracy by reporting fulfilled targets and quotas, thus entrenching the crisis. From the Stalin-era to the early Brezhnev-era , the Soviet economy grew much slower than Japan and slightly faster than the United States.

Agriculture was the predominant occupation in the Soviet Union before the massive industrialization under Joseph Stalin. The service sector was of low importance in the Soviet Union, with the majority of the labor force employed in the industrial sector. The labor force totaled Major industrial products included petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, lumber, mining and defense industry.

Beginning in , the economy was directed by a series of five-year plans , with a brief attempt at seven-year planning. For every enterprise, planning ministries also known as the "fund holders" or fondoderzhateli defined the mix of economic inputs e. The planning process was based around material balances —balancing economic inputs with planned output targets for the planning period. From until the late s, the range of mathematics used to assist economic decision-making was, for ideological reasons, extremely restricted.

Industry was long concentrated after on the production of capital goods through metallurgy , machine manufacture, and chemical industry. In Soviet terminology, goods were known as capital. This emphasis was based on the perceived necessity for a very fast industrialization and modernization of the Soviet Union.

After the death of Joseph Stalin in , consumer goods group B goods received somewhat more emphasis due to efforts of Malenkov. However, when Nikita Khrushchev consolidated his power by sacking Georgy Malenkov , one of the accusations against Malenkov was that he permitted "theoretically incorrect and politically harmful opposition to the rate of development of heavy industry in favor of the rate of development of light and food industry". Most information in the Soviet economy flowed from the top down.

There were several mechanisms in place for producers and consumers to provide input and information that would help in the drafting of economic plans as detailed below , but the political climate was such that few people ever provided negative input or criticism of the plan and thus Soviet planners had very little reliable feedback that they could use to determine the success of their plans. This meant that economic planning was often done based on faulty or outdated information, particularly in sectors with large numbers of consumers.

As a result, some goods tended to be underproduced and led to shortages while other goods were overproduced and accumulated in storage. Low-level managers often did not report such problems to their superiors, relying instead on each other for support. Some factories developed a system of barter and either exchanged or shared raw materials and parts without the knowledge of the authorities and outside the parameters of the economic plan.

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Heavy industry was always the focus of the Soviet economy even in its later years. The fact that it received special attention from the planners, combined with the fact that industrial production was relatively easy to plan even without minute feedback, led to significant growth in that sector. The Soviet Union became one of the leading industrial nations of the world. Industrial production was disproportionately high in the Soviet Union compared to Western economies. However, the production of consumer goods was disproportionately low.

Economic planners made little effort to determine the wishes of household consumers, resulting in severe shortages of many consumer goods. Whenever these consumer goods would become available on the market, consumers routinely had to stand in long lines queues to buy them. Under Joseph Stalin 's tutelage, a complex system of planning arrangements had developed since the introduction of the first five-year plan in Until the late s and early s, when economic reforms backed by Soviet leader Mikhail Gorbachev introduced significant changes in the traditional system see perestroika.

From the Stalin era through the late s, the five-year plan integrated short-range planning into a longer time frame. It delineated the chief thrust of the country's economic development and specified the way the economy could meet the desired goals of the Communist Party of the Soviet Union. Although the five-year plan was enacted into law, it contained a series of guidelines rather than a set of direct orders. At each CPSU Congress, the party leadership presented the targets for the next five-year plan, therefore each plan had the approval of the most authoritative body of the country's leading political institution.

The Politburo determined the general direction of the economy via control figures preliminary plan targets , major investment projects capacity creation and general economic policies.

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After the approval at the congress, the list of priorities for the five-year plan was processed by the Council of Ministers , which constituted the government of the Soviet Union. The Council of Ministers was composed of industrial ministers, chairmen of various state committees and chairmen of agencies with ministerial status. This committee stood at the apex of the vast economic administration, including the state planning apparatus, the industrial ministries, the trusts the intermediate level between the ministries and the enterprises and finally the state enterprises.

The Council of Ministers elaborated on Politburo plan targets and sent them to Gosplan, which gathered data on plan fulfillment. Combining the broad goals laid out by the Council of Ministers with data supplied by lower administrative levels regarding the current state of the economy, Gosplan worked out through trial and error a set of preliminary plan targets.

Among more than twenty state committees, Gosplan headed the government's planning apparatus and was by far the most important agency in the economic administration. The task of planners was to balance resources and requirements to ensure that the necessary inputs were provided for the planned output.

The planning apparatus alone was a vast organizational arrangement consisting of councils, commissions, governmental officials, specialists and so on charged with executing and monitoring economic policy. The state planning agency was subdivided into its own industrial departments, such as coal , iron and machine building. It also had summary departments such as finance , dealing with issues that crossed functional boundaries.

With the exception of a brief experiment with regional planning during the Khrushchev era in the s, Soviet planning was done on a sectoral basis rather than on a regional basis. The departments of the state planning agency aided the agency's development of a full set of plan targets along with input requirements, a process involving bargaining between the ministries and their superiors. Economic ministries performed key roles in the Soviet organizational structure.

When the planning goals had been established by Gosplan, economic ministries drafted plans within their jurisdictions and disseminated planning data to the subordinate enterprises. The planning data were sent downward through the planning hierarchy for progressively more detailed elaboration. The ministry received its control targets, which were then disaggregated by branches within the ministry, then by lower units, eventually until each enterprise received its own control figures production targets.

Enterprises were called upon to develop in the final period of state planning in the late s and early s even though such participation was mostly limited to a rubber-stamping of prepared statements during huge pre-staged meetings. The enterprises' draft plans were then sent back up through the planning ministries for review.

This process entailed intensive bargaining, with all parties seeking the target levels and input figures that best suited their interests. After this bargaining process, Gosplan received the revised estimates and re-aggregated them as it saw fit.

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The redrafted plan was then sent to the Council of Ministers and the party's Politburo and Central Committee Secretariat for approval. The Council of Ministers submitted the plan to the Supreme Soviet of the Soviet Union and the Central Committee submitted the plan to the party congress, both for rubber stamp approval. By this time, the process had been completed and the plan became law.

The review, revision and approval of the five-year plan were followed by another downward flow of information, this time with the amended and final plans containing the specific targets for each sector of the economy. Implementation began at this point and was largely the responsibility of enterprise managers. The national state budget was prepared by the Ministry of Finance of the Soviet Union by negotiating with its all-Union local organizations.

If the state budget was accepted by the Soviet Union, it was then adopted.

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Agriculture was organized into a system of collective farms kolkhozes and state farms sovkhozes. Organized on a large scale and highly mechanized, the Soviet Union was one of the world's leading producers of cereals, although bad harvests as in and necessitated imports and slowed the economy. The — five-year plan shifted resources to agriculture and saw a record harvest followed by another drop in overall production in and back to levels attained in Cotton , sugar beets , potatoes and flax were also major crops.

However, despite immense land resources, extensive machinery and chemical industries and a large rural work force, Soviet agriculture was relatively unproductive, [ original research? Largely self-sufficient, the Soviet Union traded little in comparison to its economic strength. However, trade with noncommunist countries increased in the s as the government sought to compensate gaps in domestic production with imports.

In general, fuels , metals and timber were exported. Machinery , consumer goods and sometimes grain were imported.

The Soviet currency ruble was non-convertible after when trade in gold-convertible chervonets , introduced by Lenin in the New Economic Policy years, was suspended until the late s.