Since March 2022, international experts and economists have been trying to predict how deeply and quickly the Russian economy will collapse under the sanctions. Fortunately for people who live in Russia, these forecasts have yet to be quickly adjusted. And yet at this point one can state that there is a noticeable decline in industrial production, exports, and consumer demand. How will the impending crisis affect the most progressive sectors of the economy, those that are deeply integrated into the new international division of labor?
Experts usually see Russia’s economic model as heavily dependent on fossil fuels and highly uneven in industrial development. These are not separate issues, though. Prioritizing growth in the strategic sectors of the economy proved effective in the early stages of the formation of Russian state capitalism. The same process threw the less profitable sectors far behind in terms of technology and labor productivity. However, there have been occasional success stories in this unbalanced development model.
With its IT services and digital platforms, the Internet industry was undoubtedly one of these successes. The Russian middle class has traditionally prided itself on the quality of digital infrastructure in the service sector (banking, retail, online consumer services). Hundreds of thousands of gig workers of various skill levels work for the massive online consumption industry in wealthy metropolitan areas. Regardless of their qualifications and the services they provide, all of them are united by employment on online platforms that offer flexible working hours combined with precarious employment. The digital platform economy in Russia (as elsewhere in the world) turned out to be quite resistant to economic shocks. The coronavirus pandemic boosted profits and the share rates of digital companies. The platforms also absorbed the workforce freed by the COVID-19 layoffs. What effect has the war, unprecedented sanctions, and international crisis had on the Russian gig economy? How have these events affected the those working for the digital platforms? What scenarios can we expect in the future?
How does the platform economy function in Russia?
Over the past decade, foreign platform companies have failed to settle into the Russian gig economy, and in 2022 they left the country entirely. The fascination of the country’s political elites with the Chinese experience of the sovereign digital economy is likely to determine the development of the Russian gig economy in the coming years. The current international isolation is just one more reason to support this model.
Currently, the Russian market is unequally divided between several local companies (up to twenty). The three most prominent brands in the market are Yandex, VK, and Sber. These corporations own the most popular online services and marketplaces, as well as ride-hailing, food delivery, and grocery markets. Outside Russian Big Tech, Internet companies compete in smaller and less diversified service markets and have tiny chances of surviving the crisis independently. Even before the war, mergers, acquisitions, and the rotation of assets between Internet corporations characterized the Russian technology market. Now the process is accelerating.
In the 2010s, oligopolies were still competing for the same markets. In recent years, however, they organized to divide spheres of influence. For example, Yandex effectively monopolized online advertising, mobility services, and restaurant food delivery, eliminating “toxic” assets like news aggregators and the blogosphere. VK solely controls social networks and information resources previously owned by Yandex. In addition to joint assets with VK, Sber holds food delivery and ready-to-eat companies. So today, quasi-monopolies seem to have replaced oligopolies. In the labor-intensive sectors (for example, in food delivery and ride-hailing), the monopoly can likely transform into a monopsony soon, having no competition with other employers within the same category of services.
Interests of the State vs. State Interests
The state plays an essential role in the turnaround of digital assets and establishing digital monopolies in Russia. For example, without meeting any resistance from the Federal Antimonopoly Service, Yandex monopolized markets, explicitly detaching itself from politics. However, the officials still retained the right to “watch over” the corporation via a supervisory board. The son of Sergei Kirienko, the leading curator of the Kremlin’s domestic policy, became the CEO of VK. Russian social networks are now reliably protected from the invasion of ideas hostile to the Kremlin. As Facebook and Instagram were blocked and Twitter slowed down in Russia, VK now has no competition. After the full-scale invasion of Ukraine, Sberbank, a company with state investment, was immediately affected by sanctions and localized all businesses inside the country. The idea of “sovereignty” dear to Russian officials in all spheres of public life, whereby the state’s political interests may intersect with the real interests of the real society, will affect platforms as well.
In our view, the trend toward building state capitalism of digital platforms in Russia after the start of the invasion has become more apparent. It must be that the state’s interests in regulating Internet companies are driven by the attempt to gain greater informational control over its citizens. But an equally important goal is the regulation of gig workers in the form of gradual legalization of the quasi-informal labor market in order to fill the budget holes created during the war. The followers of libertarianism could envy the current Russian legislation in this area.
For several years in Europe and the United States, there have been heated scholarly and socio-political discussions about the position of digital platform workers. Some proposed recognizing digital platform workers as official employees while others offered to create a special “digital platform worker” status. Courts have received numerous lawsuits against the most prominent platforms. In the West, to some extent, the state opposes digital platforms, gradually limiting their power in the labor market. In Russia, on the contrary, the state, pursuing its fiscal interests, liberally regulates the gig economy and employment on the digital platforms. We are witnessing a formation of a strong alliance between the state, capital, and consumers against workers.
The Liberal Legalization of the Informal Labor Market
According to the estimates by market analysts, 1.7 million workers in Russia have listed digital platforms as their primary job, and up to 15.5 million people have had occasional or regular part-time jobs on digital platforms by 2022.
Although one could legally register self-employment in Russia, most gig workers did not have legal status (e.g., sole proprietorship), did not sign contracts, and did not pay taxes. Thus, in the last decade, among the freelancers who took job offers for remote work, only up to 12-15 % regularly signed formal contracts.
The ride-hailing and delivery markets have developed a model of indirect hiring through middlemen: companies or individual entrepreneurs enter into a partnership agreement with the platforms and then hire workers with or without a contract. In this way, platforms avoided a significant tax burden and possible inquiries from the regulatory authorities.
In recent years, however, the state has made efforts to legalize self-employment: from 2019, workers can register as self-employed with meager tax rates (4-6%) through a simplified application. In contrast to previous attempts, the initiative has had some success: to date, more than 5.5 million people have registered as self-employed.
The state is legalizing the informal sector by liberalizing the employment system. At the suggestion of the tax authorities, platforms have started to work directly with the self-employed, bypassing the mediators. Following its fiscal interests, the state is not much interested in labor rights and the social status of platform workers. Public and scholarly discussions of this issue barely exist, and there have been few lawsuits against platforms regarding workers’ conditions and rights.
In today’s Russia (as in many developing countries), platforms can become a powerful tool for legalizing the informal sector. In the first stage, the state seeks to establish accounting and taxation of the self-employed. Then the platforms start to function as tax agents, independently calculating and collecting taxes from the employee. Finally, the “whitewashing” of the sector is followed by an increase in the tax burden on workers. Forming a liberal regulatory regime of the “sovereign” gig economy is undoubtedly a pessimistic scenario, primarily for workers.
The Working Class in the State Capitalism of the Platforms
Platforms claim their workers are individual entrepreneurs with broad professional autonomy who decide where, when, and how much they work. “You will work as a small entrepreneur, an independent business all in one person,” the statement accompanied the employment of one of our informants at a popular grocery delivery service. As one can easily guess, both the “small entrepreneur” and the “one-person independent business” have to take full responsibility for life, health, income, and any financial and production risks that come with work.
Gig workers can benefit from flexible hours but are more vulnerable than their full-time corporate counterparts. 2022 has changed little in the balance of forces in the market, except that there are far fewer opportunities to find a well-paid job after large foreign manufacturers have left Russia. The share of non-standard employment in large cities will probably continue to grow due to a shift of workers from the industrial to the service sector. In addition, the accelerating crisis will force companies to reduce pay rates for full-time employees. Many skilled workers will turn to platforms in pursuit of regular part-time work while maintaining their primary occupation (1). Therefore, a set of issues related to the legalization of gig workers and working conditions on platforms will sooner or later be on the public agenda.
There is no doubt that today platform workers are excluded from national social security systems, including unemployment benefits, health insurance, and pensions. They are not protected by labor law that sets standards for working conditions, including working hours and compliance with health and safety requirements. Finally, gig workers cannot unionize or go on strike.
In the West, the political debate around the platform economy centers on the issue of legal employment for gig workers, who now, in fact, are concealed employees, but without the right to social benefits, health insurance, redundancy bonuses, etc. Due to Russia’s massive political anabiosis, such public discussions are absent. As there is almost no contestation of different positions on this issue, it is difficult to understand the position of the Russian platform precariat in large cities, where it is most massively represented. According to what workers say in private, at this stage, the trajectory of the discussion here would probably resemble the American case if not for the overall political situation.
A 16-year-old Yandex courier values, above all, the flexibility of working hours, which allows him to combine his education with a steady income:
“I chose Yandex simply because of the schedule. I can come home after school, have a meal, get ready, and go to work for as long as I want.”
Middle-aged workers have a similar sentiment regarding precarious employment. One could expect that the demand for stable jobs also should be accompanied by the demand for long-term planning of life and finances. However, that is not the case:
“I earned enough for the vacation and decided to rest, so I left for a week. I have money.”
The absence of this kind of demand can probably be explained by the state of the labor market and the quality of jobs, especially in the low-skilled segment. Comparing gig employment with other available options leads many workers to conclude that they would lose considerably more than they would gain if they switched to more stable jobs.
“Couriers are paid well at Yandex and Delivery. Because if you work as a courier anywhere else, 20 thousand [rubles] a month is what one can expect at best. Here they pay a lot more.”
In addition, only a few have been happy about the timid attempts by unorganized unions to pressure major platforms to give workers a choice between stable and flexible employment. If the political campaign is successful, workers do not expect their conditions to improve. They doubt it will result in the reduction of corporate profits but instead in lower pay rates and fewer bonuses:
“First of all, there will be less free time; <…> we will have to work minimum hours required by law; <…> the couriers’ wages will be cut in half. <…> there will be deductions [to the Russian Pension Fund]; <…> an average salary will be around 40,000 rubles. In comparison, now you can work well and make 100 thousand rubles.”
This is not a groundless concern. Due to the economic crisis driven by the unprecedented sanctions, the outflow of investment and consumers from the megacities, and the lower solvency of the population as a whole, the predictions may be accurate. Numerous studies also confirm the trend: Russian employers tend to retain staff in times of crisis by generally reducing wages and manipulating the fixed and variable parts of the workers’ payment. In other words, by gaining official employment, gig workers risk getting an unstable wage, with lower rates and no flexibility in the schedule.
Unions and Collective Actions of Gig-workers
The organized protection of workers’ interests via unions and collective bargaining was an essential element in the institutionalization of class conflict in industrial society and contributed to the formation of the welfare state.
In contrast to typical mass-production industries, decisive structural factors inherently limit the potential for unionization in the gig economy. The decentralized production and individualization of labor, the lack of collectivity at work, the social heterogeneity of workers and their interests, and the legal vulnerability of the informally employed and migrants impede large-scale collective action.
Despite the ban on strikes, Russian gig workers have already organized more than 1271 protests (primarily in the delivery and mobility industries(2)). Some of them involved more than a thousand workers at a time. Official trade unions backed these collective actions and helped gain supporters and media coverage. Besides strikes and demonstrations, other forms of struggle included coordinated activities online and various manipulations with the platform apps (for example, drivers simultaneously logged out of the ride-hailing app during peak hours).
Platform workers organized collective actions on the go as modern Russian history does not have a tradition of independent unions. Platform workers’ protests sought to attract media attention and gain public coverage of their problems, demanding concessions from the de facto employer (not the mediators). As a rule, a narrow informal circle of activists coordinated and carried out actions. Still, in most cases, the number of journalists at the protests exceeded the number of protesters, usually limited to a few dozen.
But even these strategies have been progressively hampered by political constraints, especially after the outbreak of war. First, as the state control of the media rapidly increased in 2022, no independent publications were left, and any political content, including the coverage of grassroots protests, was censored. Under these conditions, workers are effectively deprived of their primary tool of struggle, public awareness of the problems of platform employment.
Second, the state politicized and criminalized collective action in the labor sphere. Although workers usually did not make overt political demands, security agencies began classifying any grassroots collective action as political. The above-mentioned is not unique to labor relations but describes everyday life under authoritarianism, quickly becoming a dictatorship. One can see it clearly from the case of Kirill Ukraintsev, the head of the Courier union, one of the few organizations of platform workers in Russia. In April 2022, Kirill was arrested and charged with repeatedly violating “the established procedure for organizing or holding meetings, rallies, demonstrations, marches, or pickets” (Article 212.1 of the Russian Criminal Code). He remains in prison to this day. Ukraintsev’s case is an important precedent, effectively criminalizing any labor protests and making their prospects in the current environment highly unlikely.
- And this may result in uncontrolled supply growth while there is a general decline in demand. In this situation, one would expect service prices to fall, but platform pricing algorithms are far from transparent to the outside observer.
- The standardization of labor and the ability to be physically present at formal and spontaneous worker gatherings facilitates collective action in these sectors.
