The stabilisation of the process towards a market economy cannot be a spontaneous and self-enforcing process without State regulation, nor a purely constructionist process conducted by enlightened elites. It cannot merely result from attempts to stabilize economic or politic processes. The stabilisation of transition entails the control of the partly spontaneous economic, institutional and political dynamics, in order to ensure positive evolution of each one by making them consistent with each other (Samson, 1994). There is a strong interdependency between the three innovative dynamics. The positive dynamic of profits and growth is a major condition for the success of political dynamics, i.e. the enforcement of democratic and political legitimacy. In turn, the strength of central power is the main prerequisite for a successful evolution of the institutional set that is a condition of a spontaneous self-enforcing economic process. Each country will find its own way to stabilize a virtuous dynamic circle. The stabilisation of transition is thus a double process of:

The dynamics of institutional change form the key element of the transformation process in post-communist economies, as expressed within the “post-Washington” consensus (Stiglitz, 2003). It is well established that this process is both a spontaneous and a voluntary phenomenon (Samson, 1994; Jordan, Samson, 2000). However the institutional change process is still not a well-defined category, both in general and as applied to transition. The most interesting studies refer to the approach of Douglass North, understanding the institutions as the constraints created by the people, the rule structure of the day-to-day economic activity (North, 1990). However this approach carries some weaknesses that prevent our understanding of why people adopt new institutions (Ternaux, 2007).

Answering these questions requires a twofold methodological shift. The first one is a development of the understanding of institutions as both constraints and resources. The resource is the reduction of uncertainty provided by the use of concrete common rules, and the pre-visibility of economic behaviour it allows. Such a resource is a precondition for economic anticipation, investment and growth. This approach represents a comeback of the basic intuitions of Veblen and Commons, and has recently been developed by Bernard Billaudot (2001) using the idea of Antony Giddens of convertibility between rules and resources of structural ensembles (or institutions in the broad sense) (Giddens, 1987). The introduction of the resource dimension of institutions is highly important, because it enables the reintroduction of economic actors’ behaviour in the process of institutional change (Ternaux, Pecqueur, 2008). If institutions are also resources, it explains why actors enter the institutions or activate them by choosing definite rules of behaviour. This enables us to understand institutional change not only from the top (State) but jointly from the top and the bottom (economic actors).

Transition, like any situation of change, is a combination of ruptures and continuities. Trajectories are tools suited for describing this phenomenon. They are vehicles for the continuity of the change, and may suffer from ruptures, ex: the situation if chaos happens when old trajectories stop and new ones start. This draws a paradigm of institutional change as a dissemination process of new norms and habits. Evolutionary theory defines the analytical tools of technological trajectory as follows (David, 1985; Arthur, 1989; Dosi, Nelson, 1994):

If we go back to the latest institutionalist theory, it is important to understand that the structural ensemble has two containers: territory and organisation (Billaudot, 2004). The organisations are to be understood both as vertical hierarchical organisations and as horizontal networks of individuals or organisations. Each of them is composed of resources representing the public patrimony for territories and the private patrimony for organisations, and by rules, institutions connected to the space of the territory (for example money for a State), or private rules managing the resources of organisations. Any organisation is located in a territory, and a territory may host several organisations.

The economic and social problems in Russia are much deeper than in the CEE post-communist countries. This is typically observable when considering the labour markets (OECD, 2001). However empirical evidence also describes a puzzling situation which requires further interpretation (see below part 3).

These adjustments are accompanied by growing inequalities and mismatches. The scale of wages is widening during transition, inevitably given the traditional egalitarian distribution in the communist system. The relation between the highest and lowest wages was 3.4 in the 80s, it became 10 in 1997 (Kolev, 1999; Milanovic, 1999). From 1992 to 2000, the Gini concentration coefficient went from 0.439 to 0.464. This widening was mainly caused by the upward push of higher wages for young and urban people, well educated and working in the private sector. The losers were older, less skilled workers in rural areas and in the state sector, which hardly realised any increase in real wages.

Besides this, tendencies can be observed on the Russian labour markets that are typically close to those found in developed market economies. Three such tendencies can be mentioned, all of them well identified. The first one is that wages increasingly take into account education levels: “the wage premium” provided by one additional year of education doubled between 1992 and 2000, when it reached 7.6% of the wage. In turn, a former employment during the communist era plays negatively on wages: the former experience is not judged adequate in the new environment.

This increasing flexibility and mobility goes along with a number of strategies developed by small groups because of the existence of privileges, corruption or informal activities: these strategies aim at survival, or staying in jobs, personal enrichment, or diversification. Individuals try to adjust to the severe drop in incomes by using several resources, and with some success. This causes a high differentiation between individual situations according to age, gender, education and region, etc. All of this makes the labour market difficult to read (Najman, Pailhé, 2001). Quite often there are moves away from the situation of wage earner towards the use of land allotments to grow vegetables like potatoes and cabbages.

If the Russian labour markets show some degree of flexibility, one should not forget that they are mainly the product of survival or status quo strategies, without future (Maurel, 2001). Actually, the labour markets are far from the typical OECD norms, both formal and private. Formal employment is weak and decreasing, and the State remains the main employer (although its share is decreasing). From 1994 to 2000 the share of the state fell from 75% to 60% (or 40% by other definitions), while the private sector grew from 13% to 22% (or 22% to 33% by other definitions); the foreign share rose from 4% to 5%, and the mixed sector from 7% to 13%. As a comparison, in Poland in 1996, the private share was already 60% (The World Bank, 2003).

Despite progress in the market determination of wages, non market forces (e.g. wage arrears, inappropriate fringe benefits and in-kind substitutes) remain important. The most debated are wage arrears, which are forms of barter applied to labour services. These arrears increased typically from 50% of wages in 1992 to nearly 450% in 1998, and decreased subsequently back to the level of 1995, ie 100%. The decrease in wage arrears is explained firstly by a decree by the government criminalizing this practice, secondly by positive macroeconomic trends and also by a spontaneous trend towards reduction of barter in the economy after 1998. However the average amount of wage arrears for those who continued to face them changed relatively little between 1998 and 2000 (The World Bank, 2003). Wage arrears still persist for certain categories of individuals (less educated, with longer job tenure), regions (rural), occupations (ex: the military), and sectors (agriculture). These wage arrears are not caused by contract renegotiations or wage flexibility, but they are imposed by employers on the workers.

Attention has been drawn to the practices of administrative unpaid leaves and short-time work in Russia. These practices are not to be considered as hidden unemployment; they reflect the nature of employees’ professional competencies (Koumakhov, Najman, 2001). Unpaid leave concerns primarily employees with firm-specific knowledge, while short-time work strongly affects unskilled workers. External mobility is mostly related to young people and unskilled blue-collar workers, while employees with specific competencies do not change jobs so much. The former suffer more from unemployment than the latter, but their perception of the risk of unemployment is lower than for the latter with specific competencies, who are inherently less mobile. Women and people living in large cities are hit more by unpaid leave: these skilled and non-skilled workers have increasingly obsolete and firm-specific competencies, not recognised by the market that makes them attached to the firm.

Furthermore, labour market regulatory institutions have not evolved significantly since the socialist era, and remain very ineffective. The institutional environment for employers is not uniform, and quite often they use unfair competition methods: some employers suffer from very hard budget constraints while others accumulate losses; some pay their service invoices, others not; some pay taxes and social contributions in cash, whereas others pay in kind or not at all (OECD, 2001). The legal framework in Russia has been geared heavily towards formal, permanent, open ended contracts. There are numerous restrictions on the use of fixed term contracts. These restrictions induce employers to engage in contracting practices that are in violation of the labour law. According to OECD data, excessive restrictions can also hurt vulnerable groups, such as women and the young. The new Labour Code takes some promising steps to introduce more flexible contracting practices; however, the Code does not offer any marked improvements in either the deployment of labour or in reducing the excessive protection accorded to certain categories of workers, including women (The World Bank, 2003).

Interpreting the above evidence requires firstly discussion of the two major tools for interpreting the institutionalisation of the Russian labour market. The first such tool is the theory of the segmentation of labour market developed by M. Piore and P. Doeringer (1971) which seems close to some of the empirical evidence mentioned above. Then there is for example the analysis of Kumakhov and Najman (2001). Such an analysis seems relevant for Russia, where any institutional form suffers from the lack of unification of the economic space. The same is very true for the labour markets that cannot integrate into a unique market. There are segmentation forms according to regions, for public or private property, for obsolete and non obsolete skills, for education, gender, etc. However this theory fits only imperfectly to Russia. Firstly because its dichotomy (primary and secondary segments) cannot capture the numerous differentiations that can be observed among workers; secondly because several phenomena, from over-manning to administrative management of labour and informal survival of self-employment, are far from what a market should be, and thus require other conceptual categories.

In any case, as the starting point for consideration of the slow reform of the labour market in Russia, the theory of the shift from internal labour market to external labour market must be taken into account (Piore, Doeringer, 1971). An internal market is a process of allocation and remuneration of workers within firms relying on internal rules more or less formal, impersonal, and disconnected from the fluctuations of the labour market. This seems somewhat close to the former communist system, but also to the current situation, where over-manning and attachment strategies prevail, ensuring that many of the adjustments take place within the firm. Mobility within the firm however is still very low. The scheme according to which unskilled workers work part-time and company-specific workers have unpaid leave seems to fit with this approach. Nevertheless we are facing a disappearance of internal markets due to more and more obsolete skills, and administrative moves lying outside recognizable market forms. Moreover, all the obstacles to external mobility also constrain internal mobility. Lastly, a genuine internal labour market cannot be built on impoverished workers. Given the overall under-development of a unified economic market for goods and services in Russia, the obstacles to the birth of genuine labour markets and the inadequacy of the standard analytical tools, there is a need for investigation of the current evolution in Russia, in particular attempts of employers to set up and retain alternative and unconventional forms of allocation of employees.

Despite this, in the Soviet Union, such a situation was impossible both in theory and in practice (URGENSE, 1982). The right to work was granted in the Constitution, but the Constitution also granted an obligation to work. These rules were supported by the Marxist ideology widespread in the country according to which “parasitism” could not be accepted by society because people living without working were living off the work of others, ie were exploiters. Specifically, if in one year a worker had no employment during four months, he received from the State an injunction to get a job and even some proposals (due to over-accumulation of staff within working places, there was a shortage of employees and it was not difficult to get a job). If this situation lasted two further months, the potential “parasite” was “invited” to visit the Gulag that originally was an instrument for the regulation of employment. In such case the constraint to obtain salaried work was at least as administrative as economic: wage constraint was soft in the Soviet Union. This partial or sometimes fully administrative labour “market” in the Soviet Union explains the difficulties in setting up genuine labour markets in Russia, and the persistence of administrative forms of adjustment. This phenomenon is complemented by another peculiarity of the Soviet Union: the quasi-absence of money in relations between State firms, whereas in the CEE communist countries, bank and credit financing of combines and unions were widespread (Samson, 1999). This explains the facility for economic agents in Russia, particularly firms but also workers, to escape from money transactions.

Mobility appears to be a key criterion of the differentiation of labour markets in Russia. We speak here mainly about the mobility from and to firms that traditionally reflects the dynamism of the labour market, and which is usually analysed by the relations between external and internal markets. This distinction is not relevant in Russia for several reasons. Firstly we have the coexistence of two opposite mobility schemes. The first is totally non market-oriented: it is the situation when firm-specific qualified workers are not mobile because of attachment strategies of directors, while old and obsolete workers leave their job for individual survival strategies. The second is half market-driven: it is the situation where young unskilled workers – with low unemployment – actively enter and leave firms with part-time contracts (the same sometimes applies even to skilled workers according to new standards), while old, badly educated or obsolete workers remain at jobs in a poverty situation.

The foregoing explains also why segmentation and internal/external market theories are not applicable to Russia because we have firms existing outside true labour markets, or sectoral or geographical “segments” also outside labour markets, more or les connected with firms, and “segments” where market norms start to organise employment and labour. Currently, besides a process of vertical clustering of labour schemes, we have in Russia a process of horizontal splitting of the functions of employment that are typical of labour adjustment in Russia. In a developed market economy, a job has three functions: to ensure a fair remuneration for the skills used and the tasks implemented, to ensure the access to indirect salary benefits, and to ensure the right to subsistence (unemployment benefits, minimum resource, etc.).