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Crisis-hit Russians tighten their belts Crisis-hit Russians tighten their belts
(about 6 hours later)
By Konstantin Rozhnov Business reporter, BBC NewsBy Konstantin Rozhnov Business reporter, BBC News
Many Russians have had to agree to huge salary cutsMany Russians have had to agree to huge salary cuts
What would you do if your income was slashed by 80% because of the continuing downturn?What would you do if your income was slashed by 80% because of the continuing downturn?
What choice would you make if your bosses asked you and your colleagues to agree either to a 50% salary cut or to reducing the firm's workforce by half?What choice would you make if your bosses asked you and your colleagues to agree either to a 50% salary cut or to reducing the firm's workforce by half?
Such a choice might seem unreal to a lot of professionals in the West, whose rights are protected by laws and unions, as well as by history itself, as these rights have been in place for decades or even centuries.Such a choice might seem unreal to a lot of professionals in the West, whose rights are protected by laws and unions, as well as by history itself, as these rights have been in place for decades or even centuries.
But these questions are now a reality for some people in crisis-hit Russia as it comes to the end of a decade-long boom, the first time in its existence that this has happened in a free-market economy.But these questions are now a reality for some people in crisis-hit Russia as it comes to the end of a decade-long boom, the first time in its existence that this has happened in a free-market economy.
The problem is that many Russians still get the bigger part of their salaries "in envelopes", even despite a flat 13% rate of income tax. Their official salaries may be no more than a couple of hundred dollars.The problem is that many Russians still get the bigger part of their salaries "in envelopes", even despite a flat 13% rate of income tax. Their official salaries may be no more than a couple of hundred dollars.
It all seemed fine to them when they did not have to worry about their jobs. But now it leaves them unprotected.It all seemed fine to them when they did not have to worry about their jobs. But now it leaves them unprotected.
Their bosses do not need to fear the cost of making them redundant, as the severance money, calculated as the sum of several official monthly salaries, would be tiny in comparison even with an employee's real one-month salary.Their bosses do not need to fear the cost of making them redundant, as the severance money, calculated as the sum of several official monthly salaries, would be tiny in comparison even with an employee's real one-month salary.
That is why many professionals, who have had to agree to a 30% salary cut, consider themselves relatively lucky.That is why many professionals, who have had to agree to a 30% salary cut, consider themselves relatively lucky.
New experienceNew experience
Post-Soviet Russia was weak in the 1990s and many people were hit hard, first by painful economic reforms and then by the global financial crisis in 1998.Post-Soviet Russia was weak in the 1990s and many people were hit hard, first by painful economic reforms and then by the global financial crisis in 1998.
To accept the point of view of those who were expecting the crisis to come meant to go to a cemetery and bury yourself, as it meant selling your business Konstantin, Moscow businessman But in the following years, the country's economy became stronger, allowing many people to fulfil their dreams by buying cars and property and regularly going abroad on holidays.To accept the point of view of those who were expecting the crisis to come meant to go to a cemetery and bury yourself, as it meant selling your business Konstantin, Moscow businessman But in the following years, the country's economy became stronger, allowing many people to fulfil their dreams by buying cars and property and regularly going abroad on holidays.
Rapid growth, driven by rising oil and gas prices and record consumer spending, made a lot of Russians, especially young people, believe the boom would last forever.Rapid growth, driven by rising oil and gas prices and record consumer spending, made a lot of Russians, especially young people, believe the boom would last forever.
Unlike their counterparts in the West, they could not expect their parents or grandparents to advise them on what to do if the situation changed.Unlike their counterparts in the West, they could not expect their parents or grandparents to advise them on what to do if the situation changed.
Besides, the 1990s taught many Russians not to trust banks, investment funds or anybody but themselves with their money.Besides, the 1990s taught many Russians not to trust banks, investment funds or anybody but themselves with their money.
So for a lot of them, the 21st Century was all about investing in themselves, spending tirelessly on goods and services they wanted.So for a lot of them, the 21st Century was all about investing in themselves, spending tirelessly on goods and services they wanted.
'No regrets''No regrets'
The crisis began last autumn and swallowed a lot of jobs and businesses.The crisis began last autumn and swallowed a lot of jobs and businesses.
Alexander, 27, a marketing communications manager in a big Russian company, has been lucky so far.Alexander, 27, a marketing communications manager in a big Russian company, has been lucky so far.
He still has his job and his salary has not been reduced, meaning he has not had to change his usual style of living and was able to spend Christmas in Western Europe once again.He still has his job and his salary has not been reduced, meaning he has not had to change his usual style of living and was able to spend Christmas in Western Europe once again.
It is unpleasant to understand that any moment I can be made redundant or lose part of my salary, and it is beyond my power to influence this development Alexander, marketing communications managerIt is unpleasant to understand that any moment I can be made redundant or lose part of my salary, and it is beyond my power to influence this development Alexander, marketing communications manager
But like many others, he does not know for sure what will happen next and whether he will have to rein in his spending, so that he can still afford, for example, his nice rented flat in the centre of Moscow.But like many others, he does not know for sure what will happen next and whether he will have to rein in his spending, so that he can still afford, for example, his nice rented flat in the centre of Moscow.
He has good reason to worry. Some of his friends have already faced the same problems.He has good reason to worry. Some of his friends have already faced the same problems.
"It is unpleasant to understand that any moment I can be made redundant or lose part of my salary, and it is beyond my power to influence this development, as it is not based on logic or common sense," he says."It is unpleasant to understand that any moment I can be made redundant or lose part of my salary, and it is beyond my power to influence this development, as it is not based on logic or common sense," he says.
He says he does not regret the fact that he has no savings, although for several years he had the opportunity to create his own "safety net".He says he does not regret the fact that he has no savings, although for several years he had the opportunity to create his own "safety net".
There is only one thing he would do differently: "Knowing where we are now, in the past one or two years I would have tried to create my own source of income, which would have been based on a constant demand."There is only one thing he would do differently: "Knowing where we are now, in the past one or two years I would have tried to create my own source of income, which would have been based on a constant demand."
He says he will try to do it when the crisis is over, if he has a chance.He says he will try to do it when the crisis is over, if he has a chance.
Striving to surviveStriving to survive
"In Russia, the crisis started in September," says Konstantin, 29, a Moscow businessmen, who created a real estate company eight years ago with his business partner. "In Russia, the crisis started in September," says Konstantin, 29, a Moscow businessman, who created a real estate company eight years ago with his business partner.
It's impossible to be stressed for too long. Shocking developments have gradually turned into routine day-to-day worries Olga, investment projects managerIt's impossible to be stressed for too long. Shocking developments have gradually turned into routine day-to-day worries Olga, investment projects manager
"We were not ready either morally or business-wise, because to accept the point of view of those who were expecting the crisis to come meant to go to a cemetery and bury yourself, as it meant selling your business and making other similar steps.""We were not ready either morally or business-wise, because to accept the point of view of those who were expecting the crisis to come meant to go to a cemetery and bury yourself, as it meant selling your business and making other similar steps."
The Russian economy expanded by more than 8% in 2007, but by the end of 2008, government officials were publicly debating whether the economy had already entered a recession, while the rouble has been steadily falling against major currencies.The Russian economy expanded by more than 8% in 2007, but by the end of 2008, government officials were publicly debating whether the economy had already entered a recession, while the rouble has been steadily falling against major currencies.
Many firms had to close in autumn, but Konstantin says his company has been better positioned.Many firms had to close in autumn, but Konstantin says his company has been better positioned.
"We will survive until March, while the gods will live till May," he jokes."We will survive until March, while the gods will live till May," he jokes.
Konstantin says that in the worst-case scenario, he will be able to provide for his family for a year, as they have a flat and "all the primal needs are fulfilled - without foreign trips and big spending".Konstantin says that in the worst-case scenario, he will be able to provide for his family for a year, as they have a flat and "all the primal needs are fulfilled - without foreign trips and big spending".
Speaking of the main lessons he has learned during the crisis, Konstantin says that when things get back to normal, he will try to put aside enough money to tide him over for two years, not the three to six months he thought was enough before.Speaking of the main lessons he has learned during the crisis, Konstantin says that when things get back to normal, he will try to put aside enough money to tide him over for two years, not the three to six months he thought was enough before.
Sticking to her jobSticking to her job
Unlike Alexander, the marketing communications manager, Olga, 30, an investment projects manager, has never had enough money to be able both to enjoy life to some extent and to start saving.Unlike Alexander, the marketing communications manager, Olga, 30, an investment projects manager, has never had enough money to be able both to enjoy life to some extent and to start saving.
When the crisis began, it put on hold her dreams of satisfying her needs comfortably on her income.When the crisis began, it put on hold her dreams of satisfying her needs comfortably on her income.
It also made her nervous, as she was not sure she would be able to keep renting her flat in Moscow or to repay a loan to her bank.It also made her nervous, as she was not sure she would be able to keep renting her flat in Moscow or to repay a loan to her bank.
She managed to cut her spending and says she feels more confident now.She managed to cut her spending and says she feels more confident now.
"It's impossible to be stressed for too long. Shocking developments have gradually turned into routine day-to-day worries," she says."It's impossible to be stressed for too long. Shocking developments have gradually turned into routine day-to-day worries," she says.
At the beginning of the 1990s, when the Russian economy was in a critical state, many engineers and other specialists abandoned their professions for good, in order to make enough money to support their families.At the beginning of the 1990s, when the Russian economy was in a critical state, many engineers and other specialists abandoned their professions for good, in order to make enough money to support their families.
The current crisis has put less pressure on large firms that make and sell consumer goods, turning this sector into a safe haven.The current crisis has put less pressure on large firms that make and sell consumer goods, turning this sector into a safe haven.
On the other hand, property development, the sector in which Olga works, has been badly hit by the downturn. Even so, she says she will try to stick to the profession that interests her, as she has done for the past 10 years.On the other hand, property development, the sector in which Olga works, has been badly hit by the downturn. Even so, she says she will try to stick to the profession that interests her, as she has done for the past 10 years.
Like many other Russians, Olga is not planning any specific changes to her future spending and life preferences to be more prepared for another crisis when it comes.Like many other Russians, Olga is not planning any specific changes to her future spending and life preferences to be more prepared for another crisis when it comes.
As Alexander put it: "I will definitely live a different life after this crisis. However, it won't save me from a new one, because any new crisis rarely repeats the previous one."As Alexander put it: "I will definitely live a different life after this crisis. However, it won't save me from a new one, because any new crisis rarely repeats the previous one."