Recent reports show every third Russian company has reduced employee salaries during the pandemic

The state news agency TASS recently reported that according to a study by Otkritie Bank, a third of Russian companies have cut employee salaries. Furthermore, a quarter of the companies have made their staff redundant during the COVID-19 pandemic.

Layoffs of employees in Russian companies continue, allegedly because of the economic crisis which was exacerbated by the pandemic. 

Based on the results of the survey, conducted by Otkritie Bank, 35% of enterprises have reduced salaries of employees due to the pandemic. 25% of companies have also reduced staff for the same reason. In addition, only a quarter of the participants in the survey received any State support. Although many companies had planned to take advantage of the support measures, their applications had not been accepted.

Today, this kind of news in perceived as obvious consequences of any crisis. No matter what happens, it will eventually lead to reductions in wages and staff. Such measures are thought to be the norm in modern society. Instead of increasing productivity, generating employment and providing stable benefits to workers during unstable conditions, they increase unemployment and lower wages. It is needless to say that such measures only deepen the crisis.

Of course, it doesn’t just happen in Russia – such situation is a common scenario in any capitalist country. In fact, it’s not even considered a problem. In cyclical market economy, the crisis is part of the cycle. 

Along with layoffs and massive wage reductions there are mane more market economy patterns. For example, prices for masks rose sharply and significantly during the pandemic. While the price of masks usually ranged from 1 to 5 rubles, since the time that the pandemic began their price increased tenfold, sometimes exceeding 100 rubles per mask. 

Such paradox is called Giffen good. (A Giffen good is a low income, non-luxury product that defies standard economic and consumer demand theory. Demand for Giffen goods rises when the price rises and falls when the price falls. In econometrics, this results in an upward-sloping demand curve, contrary to the fundamental laws of demand which create a downward sloping demand curve). 

This paradox, unlike wage cuts, is most often fought by national authorities. But since it is not uncommon it clearly demonstrates the absurdity of the capitalist economy and a total disregard for the population’s standard of living.

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