Workers Of The World . . . Uninvite
Since my previous post on the expat exodus from Russia, I received some mail and insight into the phenomenon. I don’t use the word phenomenon lightly.
To add hard numbers, HVS, a global recruitment and consulting firm, recently completed its 2008 survey of managerial staff in Russia. The comparison with 2007 is dramatic.
In the hotel and leisure industry, just for example, the only posts steadily held by expats remain those of General Manager and Executive Chef. As the survey shows, in just one year, there’s an average 50% drop in foreign workers in almost every category.
If this is the decline at managerial level, you can just imagine what’s happening off the radar in less protected jobs.
HVS report suggests that a number of factors are simply coming together. It isn’t some kind of Kremlin conspiracy.
While Russian managers aren’t necessarily cheaper than expats in salary terms - Ruminator corrected me here - the total package will be less. Expats demand housing, school fees, medical insurance and all sorts of on-costs. HVS believes Russian companies are currently no more willing to pay these than are the parent companies of multinationals. Well, there is a recession in the US.
Lower down the pecking order, the changed business visa regulations since 2007 have really kicked in. Obviously, you can’t hold down a job if you can only be in Russia 180 out of 360 days. Companies who tried to shift people from business visas on to the work permit arrangement soon overfulfilled Russia’s work permit quota. So, bye bye short term contractors.
And then there’s the groundswell of feeling that Russians should take control of their local operations. Well, why not. It’s inevitable, even for reasons of national pride. Wayan Vota, who worked for the Peace Corps in Russia in the nineties, remembers a certain resentment of expats even then, when Westerners were otherwise treated as Rock Stars. ‘Hey, we don’t need you, we’re not some African country. We’re a Superpower.’
I have to admit, working in Europe, I’ve experienced the same frustrations as contemporary Russians. 20 years ago, every multinational ad agency in Europe had at least an American CEO and an American Creative Director. These were invariably guys who never learned the local language, had no apprehension of local markets and could hardly point to where they lived on a map.
Within the recent debate, Charles Ganske and Two Zero have identified other nails in the coffin of unsustainable, expat life in Russia.
But certainly, the accelerating force in this decline has been the sea change in visa regulations, which is all down to Russia’s difficult dialogue with the EU. Since it’s a complicated issue, and has much to do with the Kaliningrad question, I’ll make this a subject of a separate post.
Hat tip to Marty Millete for the HVS research.
Also happened in Lithuania. Expats come in, train the locals and find they are quite competent and they aren’t needed any more. It was very clear in the run up to EU entry.
I was estimating numbers for the American School in Vilnius that all foreigners used for their kids. By the time the kids grew up, their parents were off again, so the school grew in numbers, then shrank again.
Wonder what the schools in Moscow are planning for numbers?
I wonder what is really behind this visa crack down. If I were ‘dud Lucas from the EconoChrist, I would put it down to those old soviets regaining control. Fortunately I’m not. If I start with the base that Putin is a spook (retired or not), then everything more or less is calculated. My wild assed guess is that he is balancing the economic with the political (EU wise). Dispite all the Bee Gees over Litvinenko, investment, consultancy and being a complete fascist dicatorship(!) etc. money continues to pour in to Russia. EU member states despite all the rhetoric are thinking about no.1, business & returns. My hypothesis goes like this: West wants its cash, I want WTO and a proper EU deal (visas and stuff), so how can I apply pressure? Squeeze the ex-pats! Either the the companies they work for quit or they employ locals, still less preferable to their own. This brings up the question of sustainability. Business wants stable ties with Russia and has massive lobbying powers in EU states.
So, reduced to a shell, Putin’s actions are pre-positioning and reinforcing his hand in an EU-Russia poker world series final. He’s putting the squeeze (but not too far) on all the West holds dear and that he can actually apply pressure to. This includes the whole energy shebang thing. The Poles and others can continue to try and veto and EU-Russia strategic compact, but they will come up against the business lobby. Russia gets long term energy contracts, easy visas, less bullshit (hopefully), fair access to EU markets (downstreaming in the energy case) and lots of other things I cannot think of or remember.
It’s also a message to the EU member states that borders work both ways. You want something from us, we are capitalists now and this is our price.
Speaking of visas, I bet there are few problems for those who need to travel to the big new volkswagen factory in Kaliningrad….
Not sure about pre-positioning. Russia very much plays tit for tat. Much has to do with walling up Kaliningrad and it is a problem for the factories, yes. A Special Economic Zone can’t function without a labour pool. Two years ago Kaliningrad offered incentives to Russian emigres around Europe to come to the city, but few Russians wish to be landlocked into a ‘European Prison’, as Oleg describes it. Kaliningrad estimates it needs another 300,000 people at least.
There’s a suggestion that they might have overcooked the issue with work permit restrictions, however, and the number is being revised upwards. I’ll write an update to this later.
I see the hidden hand of Putin behind everything (how’s that for paranoid?). Tit-for-tat, certainly, but calculated too.
Kaliningrad is certainly a point of pressure the EU can exert on Russia like Russia is using visa rules etc. against expats, but it is in the EU’s interests to have a secure and stable Kaliningrad. I’m fairly sure that Kremlin would prefer Kaliningrad to be at minimum economically self-sustainable (and hopefully very profitable) rather than a heavily subsidised outpost. I vaguely remember reported from previous EU-Russia talks that a ‘visa light’ railway corridor to and from the motherland was under discussion.
Most Kaliningraders don’t want to go to the Motherland in a ’sealed train’. They are more oriented towards Western Europe. The freedom of cross-border movement they had for sixty years was shut down by Schengen. Russia’s tightening rules against the EU is in response to this, not the other way around. Three years ago there were perfectly good transit arrangements in place with Poland and Lithuania and even visa-free day trips to Kaliningrad on the water linking Elblag.
I didn’t mean that the EU was responding to Russian policy though rereading my post, I can see that I wasn’t particularly clear.
Has there been any tangible effects of Schengen on the price of imported goods (such as swiss milka chocolate) or have wages, inflation since its imposition absorbed these potential additional costs? I’ve read your previous posts about the abominable wait at the border and assume this must have some impact on transport costs and ultimate consumer retail price.
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