Vladimir Putin's introductory remarks:

Mr Shmakov (to Mikhail Shmakov, the head of the FNPR), ladies and gentlemen,

You could not have chosen a better venue for a trade union event. Mr Shmakov, perhaps you don't need the Hall of Columns of the House of Trade Unions any more? Just let me know, we will help any way we can. But speaking seriously, this is really an appropriate venue.

To begin with, I would like to congratulate you on the opening of the 7th Congress of the Federation of Independent Trade Unions of Russia. Thank you for inviting me to attend this event and address such a large and representative audience. I would also like to call your attention to the fact that the trade union congress is the year's first major public forum in this country, on which I also congratulate you. It is logical and symbolical that we can start 2011 with a serious conversation about social policy and a discussion of matters that concern the interests and, without exaggeration, the fates of millions of our people.

I suggest we summarise certain aspects of our teamwork today, and talk about the future. I would like to note that it was literally on New Year's Eve that the general agreement was signed for 2011-2013 between trade unions, employers' organisations and the federal government. The drafting of this document demanded substantial efforts of all participants, and I greatly appreciate what has been done.

The principles and ideas of the agreement will allow us to carry on the policy that envisages the creation of a civilised labour market, enhanced efficiency of industry and public services, higher living standards, and improving labour remuneration and the pension system.

Importantly, we have smooth and well-tested tools of regulating employment relations, and of social partnership. This is essential for any country, especially one with a transition economy. Such tools help solve problems through negotiations and compromise, and allow consideration for mutual interests and existing opportunities, which is of great importance. This cooperation was our source of strength during the global economic crisis.

I cannot but agree with what Mr Shmakov said here about the crisis and how we passed through its peak.

It is no exaggeration to say that trade unions were among the authors of the Russian government's anti-crisis plan, and I have firsthand knowledge of that. We had so many debates but we always heard each other out and retained constructive relations between all participants of social partnership. It was evident that all the parties involved were aware of the challenges and acted very responsibly. As a result, when the crisis was at its peak, we prevented the worst case scenario, which had ample chances of coming true because Russia had to deal with the global financial crisis, plummeting prices for its main exports, market shrinkage and risks for the national banking system.

However, we did not allow the downturn to destroy our economy and social services. There were no mass bankruptcies of our financial institutions, as was the case in 1998, and no mass bankruptcies of manufacturing companies. We helped people retain money in their bank accounts, and supported many who had problems with mortgage payments. We fought rampant unemployment consistently and, on the whole, with success. We did everything for this country not to return to humiliating months-long wage, pension and military pay arrears that we had seen on a mass scale in the past. As of December 1, 2010, overall national wage arrears made 3.2 billion roubles, less than 1% of monthly gross wages, and 63% less than on April 1, 2007, when debts were at their peak.

Not that we should rest on our laurels. It is our duty to regard these figures as the background for the problems of every individual and every business. So we will continue to monitor the situation as before, and use our administrative tools to respond to every instance of back wages.

Current financial and economic problems in the manufacturing sector certainly should not be solved by keeping back honest earnings. In this, we rely on close contact with trade union organisations and on employers' responsibility.

We came through an unprecedentedly hard and deep-going crisis, whose aftermath could not but have an effect on people's lives. The production downswing made many companies cut wages and personnel, shift to part-time employment schemes, and send staff on forced leave. This is the reality we have been forced to face, and we will not turn a blind eye to it in the future.

In its cooperation with trade unions, the government made it a point to respond promptly to the situation in industries, businesses and single-industry cities. We had to adopt an individual approach in some cases and I think that we were right to do so if other methods were not effective. That was the case, for instance, in Pikalyovo, a small town in the Leningrad Region, the AVTOVAZ and KAMAZ car plants, the space, steel and coal industries, and agriculture. Our decisions aimed to support the people and retain as many jobs as possible.

I would like to say in this connection that the employment programme involved more than 4 million people. A majority of them kept their jobs or got new ones, or retrained. Last year alone we helped more than 172,000 people to start their own businesses. All told, more than 1.2 million jobs were created or restored last year, and general unemployment decreased from 9.2% of the workforce to 6.8%, though this is also much.

That is why we intend to continue our active effort to revive the labour market. We have earmarked 105 billion roubles from this year's federal budget for social support of the unemployed and employment programmes with the emphasis not just on employment but on upgrading employees' qualifications and providing opportunities for people to acquire new skills and professions that are in high demand on the labour market.

Programmes for the development of 35 single-industry towns were launched last year. Another 15 such cities and towns will receive financial aid this year. Comprehensive investment plans are being drawn to modernise these cities, including the establishment of industrial parks and the infrastructure for small and high-tech businesses.

We intend to create no fewer than 200,000 new jobs in single-industry towns by 2015 and so reduce their average registered unemployment from present-day 4.5% to 2% in 2015.

The promotion of market demand and targeted support of companies made it possible for us to revive the real sector – particularly the car industry, as I have said. The crisis hit it possibly harder than any other Russian industry. At a certain point, its output fell by 60%. There was a feeling that the industry was doomed and our car plants will never rise again. Many in this audience may know that there were proposals to wind up the industry and shift entirely to car imports.

However, as I would like to remind you, car assembly lines alone employ about 600,000 workers in this country, and roughly 3 million people are employed in related industries. How many people is that, considering workers' families. Could we abandon them and never give another thought to their children's future? We certainly could not. As we see now, the car industry is regaining its pre-crisis rates and has retained the potential for progress. Car output doubled last year. What matters even more, the industry has started modernisation – large-scale, comprehensive planned modernisation.

We have also provided support to the construction industry from the budget and through ambitious housing programmes. The state became the main player in the housing market by investing over a trillion roubles in it. We have saved several hundred thousand construction jobs and made sizeable progress in solving the housing problems of several population groups – war veterans, military personnel, people living in the Far North, and families with children.

I would like to stress that, unlike many other countries, we did not cut social programmes. We did not go back on any social obligation the state took on in the previous years. You have seen how our friends and neighbours in Europe and other parts of the world are raising the pension age. To tell you the truth, they are patching up the budget deficit by cutting wages in the public sector and by laying off personnel, while we have not cut publically funded salaries, pensions and benefits. On the contrary, we have increased these government expenditures, and we have increased them spectacularly. In particular, all children's benefits were increased by 1% last year. We also implemented an ambitious reform of the pension system in 2010. The average occupational pension grew by close to 45% throughout the year.

We intend to further improve the pension system to the benefit of present-day pensioners and people who are earning their future pensions. The amount of insurance fees should reflect more fairly the future pension, and the accumulation part of the pension system should work to greater effect. That is our goal.

I would like to make one important point here. The average life expectancy in Russia is 75 years for women and only 62 or so for men. In this situation, raising the state pension age should not be discussed as our first priority; instead we should focus on improving the quality of life and extending life expectancy, improving healthcare and social services. This year, we will launch several important policies aimed at modernising the national healthcare system; a new law on medical insurance will come into effect. This new law will guarantee every Russian citizen medical services in any region, as the new insurance policies will be valid across the country. An individual will also be entitled to choose the medical centre and the specific physician they want to consult.

We will also start regional healthcare modernisation programmes. Hospitals and outpatient clinics will be renovated, with modern equipment installed there. In addition, a single standard will be introduced for medical services across the country. The government has allocated 460 billion roubles for these purposes; I have repeatedly cited this figure before.

I must say that trade unions have played an important role in drawing up these programmes. Several representatives of the Federation of Independent Trade Unions have been included in the Healthcare Ministry's working group which drafted them, as well as in regional working groups. So, as I say, trade unions have played an important role in shaping these programmes. So we also count on their assistance and support in implementing these programmes. Medical personnel need to be trained quickly and effectively to use the new equipment; regular retraining process for physicians, nurses and paramedics should be improved. I believe relevant clauses should be added to labour contracts to take care of this.

Returning to the social benefits issue, I must add that occupational pensions will be once again raised, by 8% on February 1, while children's benefits were increased 6.5% on January 1, 2011. We also plan to raise the Maternity Capital benefit to 365,700 roubles from 343,378 last year. I would like to remind you that, when I first introduced this idea in 2005, I said in my State of the Nation Address that the amount would be increased every year, and it is.

The government is also working on a set of policies to support families which have their third child, as President Dmitry Medvedev said in his last year's Address, and to develop preschool education. Despite the deficit of the Social Security Fund, we have preserved the existing procedure for calculating pensionable service, which is important for the size of sick leave benefits. We have worked closely with trade unions to draft amendments and improve legislation so as to remove some of their greatest concerns. We have also introduced a policy to support new mothers: in 2011, they will be able to choose their childbirth benefit plan and select the period of their service to use for benefits calculation to ensure the highest benefits possible.

We have also amended our labor legislation based on best international practices, especially those of the International Labour Organisation. In 2010, Russia ratified four ILO conventions. One of them is the Workers' Representatives Convention, which gives more rights and authority to trade union representatives at companies.

On the whole, I believe we have selected the right strategy during the recession and the post-crisis period. We have supported the national economy and continued a vigorous social development policy. According to estimates, Russia's GDP increased 3.8% in 2010 while industrial output grew 8.3%. Importantly, these encouraging trends have improved public sentiment. People's real wages increased 4.2% in 2010 after a drop in 2009 while effective monetary incomes increased 3.8%. These results have not been easy to achieve.

I would like to remind you that GDP dropped by 7.9% in 2009, more than in many other developed economies. We experienced both a budget deficit and a scarcity of resources. But we did not shift the burden onto people, we did not leave them to face the problems and difficulties on their own, we found the necessary reserves and did everything possible to support our citizens.

Ladies and gentlemen,

Even during the crisis we did not give up our development plans, the long-term goals defined in Russia's Development Strategy to 2020: an overhaul of economic and social policies and improvement of the living standards.

We closely follow international experience and see how other nations shape their economic policies. Some countries show very high growth rates. According to international estimates, China's GDP in 2010 will grow by over 10% and that of Brazil, by over 7%. These countries have their own competitive advantages. In China, these are political stability, cheap workforce and some other factors. This no doubt attracts investors and pushes the economy upward. But we need our own growth factors. Above all, we must introduce advanced technology, develop the human potential and improve workforce productivity dramatically.

In 2010, workforce productivity in Russia went up by 3.1%. In 2013, we expect to go to 4.3%. I want to emphasise this: we cannot afford to continue using outdated technology or the inefficient and archaic employment structure, but neither should we go to extremes in replacing them. Modernisation cannot be achieved through exploitation of staff, here I cannot but agree with the trade union leaders: problems of development and competition cannot be addressed by freezing wages, abandoning social guarantees or introducing a simplified layoff procedure when workers are left unprotected and just thrown out into the street.

Under our laws, a working week cannot be longer than 40 hours in the primary employment and 20 hours in the secondary job. These are provisions that are not to be debated. Workforce productivity should be raised through technological advances and by improving staff qualifications, not by sweatshop methods.

A qualitative development of the economy and innovations are not important by themselves. Above all else, they must create new opportunities for people, offer higher wages and professional qualifications and alter the quality of life in the Russian Federation. Together we need to focus on creating modern, effective and high-paying jobs, on raising the competitiveness and professional status of workers, on introducing, where possible, new technology and gradually moving away from hazardous and dangerous production processes.

I think the trade unions and employers should team up in tackling and implementing modernisation and expansion plans. And I see one of the key objectives for the trade unions to closely link these programmes with qualitative improvements in working conditions, with the establishment of an occupational retraining system.

The state, for its part, will help people acquire new professional skills, and will finance retraining and supplementary training programmes for staff of the companies engaged in production modernisation. Women employed in hazardous jobs, as well as new mothers on maternity leave, until their children reach the age of three years, will be able to acquire new professions for which there is high demand at state expense. Please note: we are allocating additional budget for these categories of individuals. We will also continue to assist people with disabilities to find employment. Employers will be paid 50,000 roubles in compensation for each job specially equipped for disabled persons.

Work safety is another consideration. Employers' attempts to raise output while disregarding safety rules leads to tragedies, such as the one at the Raspadskaya mine. We have therefore toughened labour protection laws. There is a law on insurance in dangerous occupations and the so-called law on coal, which introduces strict safety standards in the mines. These standards will be laid down by the government.

This year, further amendments will come into force that will increase employers' liability for violating safety regulations. What we need is an effective system of administrative and economic incentives obliging company managers to observe safety regulations and invest in labour protection. Care must be taken to make safety investments more financially feasible than minimising the grave consequences of violations. There must be a clear procedure for qualifying a job as hazardous, because in our industry there are more than 27% of such jobs. I know that personnel at many enterprises fear that their jobs might be found safe on paper, by a willful decision of the management, with nothing done to really improve matters. Privileges allowed under the Labour Code might be taken away. We cannot permit such things and decisions to happen. Therefore, we will be introducing clear and transparent procedures for job evaluation. Independent experts will be invited, and compensation for hazardous conditions will be determined personally for each worker. I expect the trade unions will continue to monitor safety issues together with state supervisory bodies.

Ladies and gentlemen,

I’d like to focus on the situation in the public sector. The trade union leaders have rightfully pointed to two issues: the salaries of doctors, teachers and creative professionals, which so far remain low, and the quality of services to the public, which is often inadequate. These two problems are interrelated and should be therefore addressed as a package.

We have adopted a law changing the mechanism for financing publicly-funded organisations and approved a transition period for its introduction from January 1, 2011, to January 1, 2012. The progress of this reform and its results will largely depend on the level of readiness of the regions and municipalities. This is where we also need your assistance.

Trade unions should take part in monitoring the pilot projects and work jointly with regional and municipal authorities to draw up relevant legislation, explain the essence and importance of the reform to the people, including at publicly-funded organisations. The people must know that the planned reform has nothing to do with the alleged privatisation of publicly-funded organisations, massive layoffs and the introduction of paid services across the board.

I want to assure you once again that the government will continue to finance education, healthcare and culture, although not by balance sheets but on the basis of government orders for the provision of services which will be accompanied by a detailed description of the amount of these services, terms of their provision and their quality standards.

These measures are designed to ensure that the people receive quality services and the staff of publicly-funded organisations has fair salaries. These organisations will have more freedom in spending the additional funds allocated for financial incentives for the best employees.

In this connection, I would like to draw your attention to the distribution of the wage fund at publicly-financed organisations. Of course, false egalitarianism is out of the question; personal skills and contribution must always be taken into account. However, it is unacceptable when the heads of such organisations are paid several times more than ordinary doctors or teachers just by virtue of their high position. I have issued an instruction that such discrepancies – and you know that they do exist – be dealt with. Salaries of the staff of federal publicly-funded organisations will be increased once again, by 6.5% on June 1, 2011.

I hope that our colleagues in the regions and municipalities will act in the same manner, especially since we will clearly indicate our intentions by raising the minimum wage. As you know, the minimum monthly wage will be raised to 4,611 roubles on June 1, 2011. The decision was made late last year at the initiative of and during discussions with trade unions.

Our goal is to gradually raise the minimum wage to the subsistence wage, and we will certainly achieve this goal. An increase of the minimum wage should facilitate a general growth of wages at publicly-funded organisations and in industries, especially for those employees who currently do not receive a fair salary for their contribution. As for further increase of salaries at publicly-funded organisations, we will revisit this issue in summer 2011, when we will assess our financial resources before making a decision.

Ladies and gentlemen,

An active social policy, development of the pension and healthcare systems, assistance to mothers and children are our key priorities. The government must find the money to finance these crucial programmes.

As you know, we had to take a difficult but the only possible decision – to increase insurance contributions to extra-budgetary funds. Trade unions supported that government decision from the beginning. I think it was a correct decision taken in the interests of the entire Russian society. It is important that the new insurance contributions scheme is being introduced gradually. We have approved a transition period of several years for small and medium-sized enterprises working in industry, innovations and social services. We have also proposed a set of measures to cushion the overall growth of the financial burden on business. We will consider and propose other measures to mitigate the effects of that decision to increase the financial burden.

However, I would like to remind you that some companies could take advantage of this decision – there is such a risk – to revive the old scheme of paying their employees under the table, when instead of signing proper employment contracts employees will be offered to sign some dodgy papers, all those sorts of contracts for services and works, which do not clearly stipulate [the employer’s] obligations.

The point at issue is not only that such schemes spell losses for the federal budget. Paying people under the table is a gross violation of the employees’ rights that will reduce their social guarantees and affect their future pensions. I am confident that the trade unions will take a firm stand on this issue and will work jointly with the authorities to prevent this.

Labour migration is another issue that is directly connected with the development of a civilised labour market. We seem to have reached agreement on the matter. Of course, we will create new jobs primarily for Russian citizens. But it should be said openly that a growing economy cannot develop without an additional workforce, without attracting professionals with different qualification levels.

Our goal is to use all the positive elements of labour migration while avoiding the ensuing risks such as ethnic and religious tensions, crime and corruption.

We want labour migration to be absolutely legal. People coming to Russia should be able to integrate in Russian society and culture, and the rights of law-abiding migrants must be protected to ensure that they have the opportunity to work honestly and support their families no matter which Russian region or country they come from.

I expect you to help us promote civil accord in the multinational Russian state.

While working to improve people’s living standards, create a civilised labour market and properly educate our young people, we must prevent the development of social conditions that could be used to split and divide Russian society and to weaken or disrupt the unity and integrity of the Russian state.

Ladies and gentlemen,

These goals can only be achieved with the assistance of the trade unions which enjoy respect in society. All of us need really strong, effective and independent trade unions. However, we have seen some trade unions deteriorate into formal organisations that do not protect people’s rights but engage in self-promotion, address personal problems, and serve the interests of owners and employers behind people’s backs.

I must tell you that I often hear such complaints during my visits to enterprises. I think we should seriously consider these complaints and draw proper conclusions. The operation of trade unions should be adjusted to new realities and Russia’s development goals.

I know that you plan to hold an extensive discussion and to make important, crucial decisions during your congress. In fact, you intend to formulate an action plan for the Federation of Independent Trade Unions. I hope it will boost the development of the trade union movement in Russia.

Personally, I would like to repeat that I see trade unions as a reliable, responsible and constructive partner [of the government]. We have complicated but constructive relations with the Federation’s leadership, and I want to thank Mr Shmakov for this. We have shared goals of creating proper living conditions for the Russian people, ensuring sustainable economic development and raising the quality of life. I am confident that we will achieve all of these goals if we work together. I wish you success.

Thank you.