(SANITIZED) IMPLICATIONS OF THE NEW SOVIET LABOR CODE

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700010001-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: February 1, 2010
• Sequence Number: 1
• Publication Date: March 1, 1971
• Content Type: IM

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Confidential
DOCMNT r ~.' :
D0 1101 DESTROY
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
The Implications Of The New Soviet Labor Code
Confidential
ER IM 71-50
March 1971
Copy No.
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~Yal
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WARNING
This document contains information affecting the national
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Its transmission or revelation of its contents to or re-
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GROUP I
C~duded bon, nO.-Itc
ding and
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
March 1971
INTELLIGENCE MEMORANDUM
The Implications Of The New Soviet Labor Code
Introduction
With appropriate fanfare, a new labor code be-
came effective in the Soviet Union on 1 January 1971.
This code, officially known as the Principles of
Labor Legislation, is the basic law regulating all
aspects of the labor market -- hours, wages, pro-
duction norms, working conditions, trade unions,
social insurance, collective agreements, training,
and the obligations of workers. Thus, to a certain
degree, the code allegedly determines the effective-
ness of the labor market, the efficiency of the use
of labor, and, indirectly, the pace of economic
growth. The previous code was promulgated in 1922
and had become increasingly obsolete. The new labor
code represents the latest Soviet effort to provide
a juridical setting for affecting an improvement
in the efficiency of labor. Like other recent labor
reforms, such as the Shchekino experiment, however,
the new labor code is more of a change in form than
in substance, emphasizing procedural modifications
rather than fundamental changes in the operation of
the labor market. As a consequence, the new code
is not likely to be the panacea for which the regime
has been searching.
This memorandum will (a) briefly discuss the role
and content of the labor code and an aborted 1959
revision; (b) outline the changes in the new code
and the labor problems causing these revisions; and
(c) consider the labor problems not addressed by the
revisions and the likely impact of the new code on
the labor market and on economic growth.
Note: This memorandum was prepared by the Office
of Economic Research.
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The Role and Content of the Labor Code
1. The revised labor code replaces the RSFSR
code of 1922 as the fundamental legislation governing
all aspects of the labor market in the USSR. The
1922 code contained the laws regarding the rights
and obligations of workers, trade union's duties,
and rules on wages, bonuses, production norms, work-
ing conditions, social insurance, collective agree-
ments, and training.* The basic code -- virtually
identical in all republics -- has been amended since
1922 by laws passed by the Supreme Soviet and by the
decrees and orders issued by various governmental
agencies. All of these laws, decrees, and instruc-
tions are designed to regulate the conditions of
work for every person employed in a state enterprise
or institution.**
2. The 1922. labor code not only contained
specific workers' rights -- such as the right to
work, to union membership, to retirement, to medical
care, and to training -- but also cited detailed
obligations. These obligations have been used by
subsequent regimes to effect absolute control over
the labor force and to impose centrally determined
priorities irrespective of popular choice. More-
over, workers' rights, although specifically de-
fined, have been virtually meaningless because of
the lack of independent judiciary and trade union
systems. In other words, power has resided not in
the document but with those who have enforced it.
The lack of independent enforcement machinery makes
documents such as the labor code malleable. Thus
Soviet regimes have found the labor code and its
supplemental legislation equally appropriate during
the period of severe repression in the 1930s and
1940s as well as in the periods before and after
when a less restricted labor market existed.
* Principal Current Soviet Labor Legislation,
Bureau of Labor Statistics Report No. 210, United
States Departmeflt of Labor, January 1962.
** Collective formers are not covered by these
laws but are subject to rules and regulations pre-
scribed in the collective farm charter. The current
charter, accepted in November 1969, replaced the
charter which had been in effect since 1935.
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3. Although the basic rights and obligations
in the 1922 code remained largely unchanged during
these periods, those articles dealing with day-to-
day employment issues -- such as wages, vacations,
hours, and so forth -- underwent constant revision.
These articles, therefore, became increasingly
obsolete and difficult to interpret, leading to
widespread illegal practices by management with
subsequent negative effects on worker morale.
Finally, the wholesale revision in the mid-1950s of
laws pertaining to hours, wages, and fringe bene-
fits made recodification of the labor laws necessary
if the labor code was to serve as a credible piece
of legislation governing work practices.
4. A draft of a revised labor code was published
in October 1959, and, after a period of discussion,
it was to be introduced in the Supreme Soviet for
consideration and approval.* Ratification never
materialized, however, and the revised code was
ushered into oblivion without comment. Speculation
concerning the revised code's demise centers around
the draft provision dealing with the length of the
workweek. In 1956 the Khrushchev regime reduced
the workweek for all state workers from 48 to 46
hours and announced plans, later included in the
1959-65 Seven-Year Plan, for a further gradual
reduction to 41 hours by the end of 1960. Accord-
ing to an official Soviet announcement, this goal
was completed on schedule, with most Soviet workers
on a six-day, 41-hour workweek. The draft of the
revised labor code, in conjunction with Khrushchev's
Seven-Year Plan, specified that an additional hour
would be cut from the workweek by 1962. Following
the publication of the labor code draft in late
1959, however, Soviet economists -- at a time when
the rate of economic growth was falling for other
reasons -- became concerned with the costliness,
in terms of forgone output, of further reductions
in worktime per man. Undoubtedly, this concern
was reflected in the leadership's decision to shelve
the scheduled reduction in worktime and, therefore,
the draft of the new labor code. Instead of putting
* Sovetskiye profsoyuzy, 19 October 1959, p. 6-16.
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their emphasis on shortening hours of work, Soviet
economists began to direct their writings more to the
optimal length of the workday and the optimal schedul-
ing of worktime. Hence, in March 1967 the nonfarm
labor force of the USSR shifted from a six-day to a
five-day workweek, but the length of the workweek --
41 hours -- was maintained. The ill-fated 1959 draft
received no further publicity, and codification of
labor legislation lapsed until 15 July 1970 when
the present all-union code was approved by the
Supreme Soviet.*
The Revised Code**
5. Basic rights and obligations of workers under
the new code differ little in spirit or content from
the former code. More importantly, failure to pro-
vide adequate enforcement machinery again foredooms
the efficacy of the code as an instrument to protect
workers' rights. More than before, the code stresses
both rights and obligations of workers, adding to the
number of inconsistencies in the code. For example,
the 1970 code "guarantees" workers the right to work,
to vocational training, to safe working conditions,
and to participate in the management of production.
This last provision serves to illustrate one of the
many inconsistencies in the code. The workers'
right to participate in management is directly
opposed by the longstanding Soviet insistence "...
that workers be absolutely subordinated to the single
will of the enterprise manager."*** The latter con-
cept has prevailed historically and has been recon-
firmed by the post-Khrushchev leadership. Moreover,
the code's vague wording and failure to provide
specific machinery to effect worker participation
in management is likely to ensure that this right
will continue to be without meaning.
* Although the .1970 revision of the labor code is
an all-union decree, Union republics, within the
limits fixed by Soviet legislation, are allowed to
legislate regarding contingencies such as t;te follow-
ing: additional reasons for annulling the labor
contracts of certain categories of workers and
salaried persons, payment of rewards for annual work
results, model output standards, and a procedure for
issuing special clothing and "health giving" food.
Pravda, 17 July .1970, p. 2-4.
*** Kommuni s t vooru z hennykh s i l, ho. 18, September
1970, p. 85.
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6. Another inconsistency in the 1970 code is
engendered by the guarantee that applications for
employment cannot be rejected without good cause.
Discrimination in hiring based on sex, race,
nationality, or religious attitude is forbidden.
This prohibition, which was not included in the
1922 code, was presumably added for its propaganda
appeal and to discourage -- among other things --
the practice of discriminating against women. How-
ever, the new code also purports to guarantee in-
creased benefits to women. In addition to providing
almost four months of paid maternity leave, the code
obligates managers to hold jobs open for nearly a
year for women requesting unpaid maternity leave.
Also, pregnant women and mothers with young children
must be transferred to lighter work at the same pay
when necessary and do not have to work at night,
on holidays, or overtime. All women are prohibited,
as before, from working underground or doing other
arduous work. Even though regulations such as
these are often ill observed, these benefits tend
to raise the cost of hiring women relative to the
cost of employing men. In the past, the regimes'
failure to aid enterprise managers in covering these
additional costs led to widespread discrimination
in the hiring of women. The new code, by increas-
ing the benefits cited in the 1922 code, may actually
exacerbate rather than alleviate the situation.
7. The cost of hiring young workers is also
increased by the benefits granted in the new code.
The type of work young people are allowed to do is
restricted, as are the permissible hours of work.
Although the higher costs of employing youths has
led to extensive discrimination, the 1970 code does
not prohibit discrimination on the basis or age.
As a. result, the new code is unlikely to eliminate
the anti-youth discrimination practiced in the past
when alternative sources of labor were available.
8. While "guaranteeing" workers' rights, the
code has been modified to facilitate implementation
of the economic reform pursued since 1965. This is
the basis for yet another inconsistency. By adding
to management prerogatives in matters of hiring,
firing, and wages, the reform has tended to diminish
the rights guaranteed workers in the labor code.
For example, a part of the reform is a program de-
signe" to increase output while using fewer workers.
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This scheme, known as the "Shchekino experiment,"
consists of ministries ordering certain enterprises
to cut their work forces by specified numbers of
workers while meeting higher production targets
through increased efficiency. The measures of the
experiment were at variance with existing provisions
in the code on the right to work, grounds for dis-
missal, work norms, and pay adjustments. Although
legal limitations proved no obstacle to ministries
bent on reforms, the new code broadens the rights
of managers, thus facilitating implementation of the
experiment, and gives the experiment a sounder legal
basis.*
9. Support of the methods used in the Shchekino
experiment is given in several parts of the 1970
code. Enterprises may cancel a worker's labor con-
tract not only in cases where the enterprise is
liquidated or its workload is reduced, but also in
the event that the number of workers on the official
roster is reduced. In this respect, therefore,
enterprise managers are granted more latitude than
in the 1922 code. In addition, output norms or
standards are subject to upward adjustment as techni-
cal, economic, and organizational measures designed
to raise labor productivity are introduced.
10. But the code also contains provisions that
are at odds with the Shchekino experiment. For
example, a reduction in the size of an enterprise's
roster often makes it necessary for enterprise
managers to reassign at least some workers. The new
code, however, prohibits the transfer of skilled
workers to jobs requiring less skill, even if a
work stoppage occurs or if a worker who is absent
must be replaced temporarily. Other types of trans-
fers are also limited. The code further stipulates
that a worker cannot be permanently transferred to
other work or to other enterprises for periods longer
than one month without his consent -- although re-
fusal to give this consent may be grounds for
* Before 1971 a number of workers dismissed under
the Shchekino experiment brought suits against
management for illegal dismissal. The courts ruled
against the workers, illustrating the fragility of
the "guarantees" in ti" code.
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dismissal. With the present emphasis on increasing
productivity and supporting the Shchekino experi-
ment, it seems probable that the inconsistency
between workers' rights and the economic reform will
be resolved in favor of the enterprise manager and
not the worker.
11. In addition to establishing the basic rights
and obligations of workers and managers, the code
delineates the rules of employment. Although not
fraught with contradictions like the basic rights
and obligations, the rules of employment were, in
the past, loos9ly written, leading to widespread con-
fusion and discontent on the part of workers and
to exp1oital..j 1 by managers. in 1964, for example,
30% to 35% of all dismissed workers were reportedly
fired illegally. Moreover, a Soviet legal journal
complain,~!d in 1966 that " ... there were widespread
unlawful deductions from wages and use of disciplin-
ary actions not based on law -- fines, lowering of wage
grade, etc."* The article also pointed out that
apathetic prosecutors and judges caused these illegal
acts to go unpunished and uncorrected.
12. The new labor code has not corrected this
situation, but guidelines are provided on subjects
such as :
Contents of the labor contract.
At the time of emp oyment, each worker
signs a contract specifying the job
to be performed, the pay, the duration
of the contract, and other cond tions
such as housing, training, or special
clothing to be provided by the enter-
prise.
Worktime. Limits are established
on the scheduled length of the workweek,
on overtime, on youths' and women's
work schedules, on hours for hazardous
jobs, on the duration of night shifts,
and on the scheduling of days off, rest
breaks, and vacations.
Sots ialisticheskaya zakonnost', No. 3, 1966,
p. 11.
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The remuneration system. Guide-
lines cover pay schedules, pay for
overtime and for night shifts, with-
holdings, nonwage incentives, and
penalties, including grounds for
dismissal.
Labor safet( and worker
protection. This section includes
rues for the provioion of special
clothing and diets as well as
restrictions on the work of women
and youths.
Labor disputes. Rules regarding
reinstatement and pay for lost wages
are covered, and procedures are es-
tablished for settling disputes be-
tween workers and management.
Trade union. The "rights" and
obligations of the trade union are
detailed, and the state social in-
surance program that is administered
by the trade union system is described.
13. Although in most cases these rules do not
differ greatly from the former provisions, their
codification serves to tidy-up the rules governing
employment by bringing them together in one legis-
lative act. However, in one case -- rules govern-
ing the conduct of workers -- there has been a dis-
cernible strengthening of the provisions in the code,
consistent with the regime's current campaign to
tighten discipline.
14. At the December 1969 CPSU Central Committee
Plenum, Brezhnev attributed economic shortcomings
in part to complacency, insufficient exercise of
control at both party and government levels, abuse
of official privileges, and violat_ons of labor
discipline. Accordingly, a campaign for tightened
labor discipline was in evidence during 1970,
beginning in February with tougher "anti-parasite"
laws. The labor discipline section of the 1970
labor code is viewed as part of this campaign.
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The code stresses that the worker does not "benefit"
from the rights promised to him without incurring
obligations. The code stipulates that workers are
obliged to observe work discipline, to care for
public property, and to meet work quotas set by the
state with the help of the trade unions. In addition,
the 1970 all-union code -- unlike the former code --
contains a section devoted to the penalties for those
who fail to observe work discipline. The following
penalties are to be used: (a) reproof, (b) reprimand,
(c) severe reprimand, (d) transfer to lower paid
work for a period up to three months or demotion to
a lower position for the same period, and (e) dis-
missal -- on the grounds of the worker's systematic
and unjustified failure to perform his obligations
or an unjustified absence.
15. In addition, the stated grounds for dis-?
missal by the enterprise show a tightening of labor
discipline. Dismissal is allowed if the worker is
"incompatible" with his work, whereas the 1922 code
used the word "unfit" -- a somewhat narrower concept.
The grounds for dismissal listed in the new code
also support the regime's efforts to curb drunken-
ness. A longstanding Soviet problem, drunkenness
drastically affects labor prodr.ctivity and is a
topic of great concern. During 1970 the campaign
to curb drunkenness included measures such as restrict-
ing the hours allowed for the sale of liquor and
raising the prices for alcohol. Both the 1922 and
1970 codes have allowed unjustified absence as a
cause for dismissal. However, the 1970 code in-
cludes a parenthetical expression explaining that
unjustified absence includes "coming to work in an
intoxicated condition," thus supporting the regime's
anti-drunkenness campaign.
16. Another significant change in the rules
is the inclusion, for the first time, of a provision
for part-time employment. The encouragement of
part-time work reflects primarily the regime's ef-
forts to meet the rising need for workers in the
service sector at a time when more than 90% of the
working-age population already are employed or
attending school on a full-time basis. Rather
than adding to the total labor effort, however,
this provision may result in many women partially
withdrawing from the labor force. With labor force
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participation rates near their upper limit, few
persons rei:iain outside the labor force to be
attracted by the possibility of part-time employ-
ment. On the other hand, with the growth of in-
comes and savings far outpacing the rise of goods
and services during the past decade, many women may
elect to give up full-time jobs in favor of part-
time work and thus increase their leisure time while
still escaping the pressure to hold a job.
Impact of the New Code
17. The Soviet Union is entering the 1970s with
a rising concern about its manpower prospects.
Shortages of skilled workers and labor in large cities
have long been features of the Soviet labor scene,
but articles appeared in the press beginning in 1967
concerning a general, nationwide manpower shortage.
Recent articles suggest that there has been no eas-
ing of this tight labor market. during 1969 and 1970.
Moreover, the current situation of a generally tight
labor market is likely to prevail in the foreseeable
future.* Soviet plans for 1971-75 stipulate that
80% of future economic growth will come from in-
creased labor productivity, while only 20% will be
achieved by added workers to the labor force, as
shown in the table. The efficacy of the new labor
code, therefore, will be demonstrated in part by the
degree to which the Soviet Union is able to remove
the two key obstacles to improving the efficiency
of labor: (a) improving the allocation of labor, and
(b) raising the motivation, and thus productivity.
of workers.
18. The efficient allocation of labor has been a
longstanding Soviet problem, now made more important
by the dwindling reserves of underemployed labor in
agriculture. Moreover, the slower growth of pro-
ductivity and the rapid expansion of the labobor-in-
tensive servile sector aggravate the problem. The
task of allocating labor is also made more difficult
by greater specialization cif the production process
requiring a more exact placement of skilled workers
and placing more emphasis on education and training.
By broadening managerial prerogatives in the dis-
missal of workers, adjusting work norms and wages,
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Average Annual Rate of Growth of GNP and Labor in the USSR
1951-55
1956-60
1961-65
1966-70
1971-75 (Pl
)
an
Gross national
product a/
6.1
5.5
5.1
5.5
6.8
Labor force
1.5
1.5
2.0
1.5
1.4
Labor
productivity
4.6
4.0
3.1
4.0
5.4
Share of GNP growth
attributable to
increased labor
productivity 75 73 61 73 80
a. GNP for the period 1951-7-0 is based on a Western concept of
GNP. The planned growth of GNP for 1971-75 is based on a Marxist
concept which excludes the value of services and overstates the
contribution of industry by including all indirect taxes. In-
clusion of services would probably boost the planned rate of
growth of the tabor farce slightly.
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and, in general, facilitating the Shchekino
experiment, the new labor code represents an im-
provement over the old code in promoting the proper
allocation o:: labor. But these represent only pro-
cedural improvements. Managers still do not have
incentives to operate with the most efficient use
of labor. Moreover, the code does not solve the
problems of the subsequently dismissed workers.
Separated workers are without jobs on the average
for 24 days, yet until 1967 there were no labor
exchanges to hemp these workers find employment.
Even now these exchanges are found only in some of
the larger cities, and their effectiveness is
questionable. In 1468, for example, labor exchanges
helped to relocate less than 5% of the workers
separated from jobs. Therefore, although the ef-
ficient allocation of labor is becoming an increas-
ingly crucial problem, the 1970 labor code represents
only a partial answer.
19. Perhaps more important than improving 4he
allocation of labor, the Soviet Union must raise the
motivation and hence productivity, of workers if it
is to meet the current five-year plan goals. The
present low motivation is evidenced, in part, by
the fact that the labor force in the USSR is 50%
larger than that in the United States but produces
only about one-half the amount of goods and services.
In the past, both increased incentives and stronger
discipline have been applied in an attempt to improve
the performance of Soviet workers. Neither method
has overcome the apathy and cynicism characteristic
of the Soviet labor force. The shortage of workers
and availability of jobs have largely made ineffective
both labor discipline measures and threats of dis-
missal. And, too, the inability or unwillingness
of the regime to match rising wages with commensurate
consumer goods and services has largely nullified
the incentive aspect of higher earnings. A partly
analogous situation is found in the US auto industry,
where, despite relatively high pay, young auto workers
find job discipline harsh and uninspiring. Subse-
quently, they vent their feelings through absenteeism.
high turnover, shoddy work, and even sabotage.*
* Judson Gooding, "Blue Collar Blues on the
Assembly Line", Fortune, July 197G.
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20. Managers in the United States have found that
under these conditions the answer to the problem of
worker motivation lies in giving workers greater
responsibility, providing jobs with creative outlet,
and demonstrating concern for the worker's welfare
as well as his output. By failing to incorporate
into the new labor code measures that would improve
the lot of workers, the regime may have only en-
hanced the feeling of estrangement prevailing in the
Soviet labor force.
Conclusions
21. On 1 January 1971 a new, all-union labor
code -- the basic law regulating conditions in the
labor market -- came into effect in the Soviet Union.
The previous code had survived since 1922 but had
become increasingly obsolete. The new code repre-
sents the latest Soviet effort to provide a juridical
setting for improving the efficiency of labor. How-
ever, like other recent labor reforms, such as the
Shchekino experiment, the new labor code is more of
a change in form than in substance, emphasizing pro-
cedural modifications rather than fundamental changes
in the operation of the labor market.
22. The former code not only contained specific
workers' rights but also cited detailed obligations.
The incompatibility of these provisions created con-
tradications -- for example, workers were to partici-
pate in management, but the dominant authority of
the manager could not be questioned. The workers'
obligations were u--ed by subsequent regimes to effect
absolute control over the labor force and to impose
centrally determined priorities irrespective of
popular choice. Moreover, workers' rights, although
specifically defined, were virtually meaningless
because of the lack of independent judiciary and
trade union systems. The provisions in the new code
differ little in spirit or content from those in
the former code. Moreover, contradictions between
workers' rights and obligations still exist and are
even more prevalent. For example, increased
managerial rights in the disposition of the enter-
prise's work force conflict with strengthened pro-
visions in the new code limiting job transfers.
More importantly perhaps, the new code's failure to
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provide adequate enforcement machinery again fore-
dooms the efficacy of the code as an instrument to
protect workers' rights.
23. Besides establishing these rights and obli-
gations, t'ie code delineates rules of employment --
labor corcracts, worktime, remuneration, labor
safety, and labor disputes. In the past the rules
were loosely written and resulted in widespread
confusion and discontent among workers and illegal
practices by managers. Although the new code fails
to correct the former ambiguities cat,ed by the lack
of precise wording, the current recod.i.Lcation
serves to tidy-up somewhat the rules governing em-
ployment by bringing them together in one legisla-
tive act.
24. Soviet plans for 1971-75 stipulate that
80% of future economic growth will come from
increased labor productivity. The efficacy of
the new code, therefore, will be partly demon-
strated by the degree to which it promotes labor
efficiency. By broadening mangerial prerogatives
in the dismissal of workers, adjusting work norms
and wages, and, in general, facilitating the
Shchekino experiment, the new labor code represents
an improvement over the old code in promoting the
proper allocation of labor. But since managers
still do not have incentives to operate with a more
efficient use of labor, the new authority provided
in the code lacks operational content. In addition,
the code fails to remove the inequities that have
led to a labor force characterized by cynicism and
a lack of motivation.
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CONFIDENTIAL
Sanitized Copy Approved for Release 2010/02/02 : CIA-RDP85T00875R001700010001-8