Economy Politics 3 May 2021

Russia goes on vacation — again

When the government ordered companies to send staff home on full pay amid the onset of the pandemic last year, many quipped that President Vladimir Putin had gone into someone else’s bar and announced: ‘the drinks are on the house!’. Now, the same gag is back. Putin revealed on April 23 that Russians will get an extended May holiday (from May Day through to the Victory Day celebrations — a total of ten consecutive days). The businesses that will have to pay for Putin’s generosity are less than thrilled.

  • Russians already get more vacation than citizens of any other developed nation. For example, in 2019, Russians had 42 non-working days (state holidays and official annual leave allowance), plus regular weekends. That’s four times more than Americans. In particular, Russians enjoy a 10-day ‘New Year vacation at the start of January.
  • Having said that, productivity differences mean that the economic impact of a non-working day in the U.S. is far higher than in Russia. The average Russian generates just $26.40 in an hour’s work, while his U.S. counterpart produces $71.80, according to OECD data from 2019.
  • Economists surveyed by The Bell agreed that the extended May holidays will not have much impact on the Russian economy. But this isn’t exactly good news: it’s more a case of ‘so bad, it’s good’. For one thing, even without the extra holiday, the Russian economy usually grinds to a halt in early May: activity slows and many treat the gap between official holidays as de facto time off. For another, economic growth is almost non-existent. Over the last five years, the best annual figure has been 3 percent growth (and there have also been year-on-year contractions). Finally, unlike last year’s enforced holiday period, there is no national lockdown. This means the hospitality sector will be working flat out and can compensate for some of the losses elsewhere.
  • It’s unclear exactly how holidays and GDP growth are connected. In Hong Kong, 2008 research showed one additional holiday every three months stimulated so much consumption that GDP rose 0.34 percent. However, the experience of Malaysia shows the “sudden announcement of public holidays” can damage the economy.
  • The Russian companies footing the bill for Putin’s ‘gift’ aren’t happy. The Bell spoke to about a dozen small and medium-sized businesses and they all said the biggest problem was that the new holidays were unexpected. It’s not just that companies will have to pay for staff who won’t be working —  but that staffing schedules need to be changed at the last minute, and financial planning will be thrown off (working days and holidays generate different revenue).
  • Meanwhile, judging by a survey on SuperJob (an employment website), almost half of employers have decided to sabotage the long holiday and are asking staff to come into work. This approach is most common in banks, manufacturing and the service sector.
  • Many business people believe these holidays are simply a disguise for a mini-lockdown (coronavirus infections are currently increasing in Moscow). Last May, and during the New Year holidays, infection rates dropped even though the hospitality and entertainment sectors remained open for business. And it’s hard to argue with this assumption: the formal request for Putin to extend the holiday came from health watchdog Rospotrebnadzor, the agency coordinating Russia’s pandemic response. Putin simply announced the decision.

Why the world should care

If you work with Russian colleagues, you’ll be used to the total shutdown in business activity that takes place after New Year. Now, you need to get used to the same thing happening at the start of May.