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Hard constraints of the federal budget, coupled with losses of important foreign markets for Russian-made weaponry, put into question the mere existence of numerous military enterprises, and with this, the jobs of their employees. To exacerbate the problem, in the last few years the civilian part of Russia's military industrial complex has been confronted with a problem of falling effective demand for its goods and services due to decreased living standards and competition from better quality imports.
Obviously, those developments could not but have important social and human implications. The most immediate and painful effect of the new conversion realities was reflected in the area of employment. In 1992-1995, job losses in defence industry totaled more than 2 million, accounting for about 50% of the respective number world-wide.
The rise of unemployment was compounded at local and regional levels because of the high concentration of defence-related production in certain cities and areas where that production was practically the sole source of employment. Therefore, if at the global level, conversion demonstrated itself basically as an industrial restructuring problem, at the local level it turned out to be essentially one of creating alternative sources of employment, in a context of low mobility of the workforce.
Another social aspect of conversion is related to wages and salaries. It is a well-known fact that the labour force in Russia's defence-related industries has always been rightly considered as the "creme de la creme" of national industrial labour. Those highly qualified workers and specialists were accustomed to challenging conditions of work, due to the specific character of their jobs involving urgency and secrecy of military contracts, unique high-tech products, strict quality control, overtime, sometimes unhealthy working environments, limitations on travel abroad for security reasons, etc.
Those demanding conditions commanded superior pay and bonuses, to say nothing of social prestige associated with work in defence-related industries. Over the last few years, things have changed drastically. By now, the military industrial complex in Russia has largely lost its former undisputed priority in obtaining material and financial resources. Correspondingly, its current level of pay is in many cases lower than the average in the industrial sector as a whole. The resulting exodus of many qualified workers and specialists has posed serious problems in terms of maintaining the immense technological and human potential accumulated by the defence-related industries during the years of the former Soviet Union.
Besides purely material factors, conversion undertakings have also had important psychological effects for both blue and white collar workers in Russia. Previously, the labour force in defence-related industries had been one of the best protected from a social point of view. Those employees enjoyed a rather wide range of privileges and perks, having assured and well-subsidised access to numerous cultural, health and restoration facilities. They felt secure about their jobs and had a reassuring prospect of decent and respected retirement. Dire financial straits, in which many defence enterprises have found themselves, have substantially eroded that social safety net, raising concerns about social security of their employees.
Another notable psychological aspect of the issues stems from the nature of work in the military industrial complex. The labour force there is engaged in production of highly complex products, in which considerable human knowledge and skill have been invested. Despite their potentially lethal character, such products were objects of pride for those involved in their creation. Naturally, transfer from prestigious high priority military production to 'ordinary' civilian work did not boost the morale of the workers.
So far, retraining and adjustments in employment profiles for some groups of defence production workers have proved rather effective. However, arrangements for re-employment for other categories of manpower, in particular military R and D personnel, turned out to be more difficult. Many scientists and technologists engaged in military R and D have skills and experience with limited alternative use. Retraining mechanisms aiming at enabling them to maintain their previous standard of living by working in civilian areas are costly and time-consuming.
Available evidence suggests that, faced with a meltdown of many scientific and research institutions resulting from abrupt cuts in military R and D funding, some people of this kind may opt to pursue their career, i.e. to continue military R and D in another country. Clearly, apart from the well known negative effects of a brain-drain, such a course of action has serious proliferation implications.
Well aware of the immense social challenges posed by conversion, Russian authorities have been paying special attention to its human dimension from the very inception of the conversion programme. In 1992, the Russian parliament adopted a Law on Conversion, whose provisions directly address numerous issues of social protection, rights and guarantees. Inter alia, it stipulates that conversion plans and programmes of various enterprises and R and D centres should be implemented with strict observation of all applicable norms and regulations relating to social protection of the labour force.
The law also envisages various mechanisms of retraining surplus labour for alternative employment, both within and outside enterprises under conversion. Its other important provisions relate to state defence procurement orders, whose basic parameters should be made known to every enterprise slated for conversion not later than two years prior to actual restructuring. All losses sustained by enterprises as a result of violation of that procedure by the state are to be covered by the federal budget.
According to the law, displaced employees with not less than 15 years of work at an enterprise under conversion retain their right to use its social facilities (medical, restoration, etc.) and get a number of privileges relating to housing. Cities and towns with a share of population laid-off by conversion exceeding 20% acquire special status of priority development territories.
Besides the legislative framework, last year the Russian government adopted a second Federal Targeted Programme of Defence Industry Conversion for the period of 1995-1997. Its major objective is to ensure that policies designed to promote conversion are consistent with structural reforms aimed at developing the market mechanisms and institutions which condition the efficiency of the resource allocation process. Social and human aspects of conversion figure prominently in the document.
First of all, it sets out an important target of creating more than 400,000 new jobs for the employees of defence related enterprises displaced by conversion. Over the three years of its duration, the programme envisages production of high-quality consumer goods to the value of 8.5 billion US dollars. In comparison, the budget for the programme is set at 3.9 billion US dollars.
This document contains concrete production targets for a wide range of civil products to be produced by enterprises under conversion. They include various types of transport, communications, agricultural and medical equipment, durable consumer goods, etc. As a result, by 1997 the share of civil production in the total output of the defence sector is expected to reach 87%.
In order to assure adequate financing of these conversion efforts, the programme envisages establishment of a State Conversion Fund. The latter is designed to act as a principal financial vehicle of conversion, drawing from both budgetary and extrabudgetary sources.
It is expected that these measures will be instrumental in promoting defence conversion in Russia and addressing adequately the numerous social and human issues associated with it.
Footnotes
The views expressed in this paper are those of the author and do not necessarily relfect the opinion of the Ministry of Foreign Affairs of the Russian Federation.
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