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Moscow Times
August 24, 2004
Report Warns of Crisis in Workforce
By Simon Ostrovsky
Staff Writer

The country's workforce is shrinking at twice the rate of the general population due to a decrepit healthcare system and dangerous working conditions that have remained unchanged for the past century, an internal government report warns.

Moreover, the factors leading to a looming demographic crisis are already costing the economy tens of billions of dollars every year, says the report, which apparently is a legislative request to boost healthcare spending.

The undated document, a copy of which was obtained by The Moscow Times, is causing something of a stir in government circles.

Drafted by the Health and Social Development Ministry and two other organizations, it was given to the Federation Council for consideration as a bill, an Economic Development and Trade Ministry representative said.

The council passed it over to the Cabinet. When it reached the Economic Development and Trade Ministry, bureaucrats there were less than impressed.

"Anyone can write something up and then ask for money," said the ministry representative, who asked not to be identified because she did not want her name associated with a document not meant for public consumption.

The government has earmarked 44 billion rubles ($1.5 billion) for healthcare and health regulatory bodies this year, the equivalent of just over $10 for every Russian citizen. Although this is 8 billion rubles more than the amount allocated to healthcare last year, it is still a pittance compared to the $289 that Poland spent on each citizen in 2001, according to the World Health Organization's latest figures.

Much of the information contained in the internal government report is supported by previous studies -- the Federal Statistics Agency itself says the current population of 143.8 million people is shrinking by 1 million people per year.

But the internal report goes a step further by painting a doomsday scenario that the statistics agency and an economist not connected to the government said might be stretching the truth a bit.

The report says that the country's population will halve in 60 years and "very soon, Russia will not have enough soldiers and workers."

Ten million workers, or about 1 million people per year, will die from 2006 to 2015. While "in the last 12 years, the country's population has fallen by 5 million, at the same time, the working population fell by more than 12 million," the report says.

Work-related illnesses, injuries and deaths cost the economy $65 billion in 1999 alone, the report adds, citing figures from the Federal Statistics Agency and the Economic Development and Trade Ministry.

The report says accidents and a toxic working environment have meant workers in industries like coal, power, machinery construction and metallurgy have a mortality rate more than twice that in industrialized nations and higher than in many developing countries.

"Unnatural death in the working-age population -- from accidents, poisonings and injuries in manufacturing -- is now at the same level it was in Russia 100 years ago," the report says, without providing any comparative figures.

"Very soon the medical and demographic situation will lead to a serious deficit in labor resources, which will in turn impede ... the economic development of the country and economic growth," the report says, calling for a drastic improvement in healthcare services.

A recent demographics study by the Aton Capital investment bank indicates that the population could halve by 2050, as the government report warns. Aton estimates that the population will drop to 130 million by 2015 and down to 75 million to 117 million by 2050.

Olga Antonova, deputy head of the Federal Statistics Agency's demographics department, responded Monday by saying that even though state statistics show the population is shrinking, demographers rarely attempt to predict beyond one generation into the future.

"People born after 1990 will start joining the workforce in 2006, but because fewer people were born during the '90s, there will be fewer workers available from that point on," Antonova said, referring to a drop in the birthrate after the Soviet collapse and the ensuing economic chaos.

"But it won't be a 'wham-bam' slump," Antonova said. "It will be gradual."

The authors of the internal report -- which in addition to the Health and Social Development Ministry are the Social Insurance Fund and the Health of the Workforce -- blame the poor health of workers on greedy industrialists whose only objective is to "get fast profits." They also fault "ineffective" government regulatory agencies.

A spokesman for the Social Insurance Fund, a federal body responsible for making social benefits payments, seemed irritated when the Economic Development and Trade Ministry was mentioned in a telephone interview. "If they are angry with us, we want to hear it from their lips, but you don't see us getting into their business," said the spokesman, who only identified himself as Grigory. He declined further comment.

The Health and Social Development Ministry referred all questions to the director of the Russian Academy of Sciences' Labor Medicine Institute, Nikolai Izmerov, who it said authored the report on its behalf. A secretary at the institute said Izmerov was on vacation and unavailable for phone calls.

Contact information could not be found for the Health of the Workforce, a nonprofit nongovernmental organization that appears to have been created specifically to co-author the report.

Peter Westin, an economist at Aton who wrote the bank's demographics report, said the authors of the government report are using "scare tactics."

"Russia has one of the highest death rates in the world, but also the birthrate has picked up -- we're in the middle of a baby boom," he said.

Nevertheless, a confluence of a number of demographic factors could prove detrimental to the economy, he said.

"The economic implication of a shrinking labor force is that Russia will have to drastically improve workers' productivity to maintain GDP," he said. "It will need to downsize the state sector and fight an AIDS epidemic that is largely being ignored by the government."

He added that the government's immigration policies -- which discourage dark-skinned workers from southern former Soviet republics as well as China and Southeast Asia from seeking jobs -- are doing nothing to balance the demographic scales.

The Federal Statistics Agency countered that the government is working to liberalize immigration laws. "It's not like they're ignoring this problem. There has been progress," Antonova said.

The World Bank warned last year that the rapid spread of tuberculosis and HIV/AIDS "poses daunting challenges to the country's social and economic development." It said HIV/AIDS might shave half a percentage point off annual growth starting in 2010.

President Vladimir Putin has set a goal of doubling the economy by 2012.

Russia is not alone in its shrinking birthrate; statistics in Western Europe show that fewer people are having children. The difference is a staggeringly high death rate here that has been growing due to infectious illnesses, including tuberculosis and cardiovascular, respiratory and stomach diseases. Combined with low-quality medical treatment, the male population has been left especially vulnerable, according to the Independent Institute of Social Policy.

The 2002 national census, the first since Soviet times, indicates that men make up 46.5 percent of the population, with women outnumbering men by 10.1 million.

Women's average life expectancy is 13 years higher than men's at 72 years, according to official statistics.

Only eight countries have a life expectancy difference of more than 10 years, and seven of them are in the former Soviet Union, Westin said. "Alcoholism and bad working conditions are the main reason why men are dying. Women will have to take a more predominant role in the labor force soon," he said.