THE IMPACT OF UNEMPLOYMENT ON THE ECONOMY OF THE RUSSIAN FEDERATION
Matatov R.
Student of the International Finance Faculty of the Financial University under the Government of the Russian Federation
Orusova O. Scientific adviser PhD, Assoc. prof. Economic Theory Department Financial University under the Government of the Russian Federation
Abstract
The problem of unemployment has existed since the creation of the concept of "work". It would seem that since it has existed for centuries, the humanity would have to get used to it and not pay so much attention. However, the main problem is that unemployment affects all aspects of the state's life. Unemployment is a macroeconomic problem that has the most direct and powerful impact on everyone. Losing a job for most people means a decline in living standards and causes serious psychological trauma. The article is aimed at identifying the main points of influence of unemployment on the economy of the state and giving real example of influence of unemployment on the economy of the Russian Federation
Keywords: unemployment, national economy, Okun's Law, Phillips curve, the Russian Federation.
It would be the most appropriate to start my article by describing such phenomena related to unemployment as the Phillips curve and the Okun's law. These are two theories created by famous economists that show the relationship between unemployment, inflation, and GDP
The Okun's law is an empirical observation that points to the correlation between changes in the unemployment rate and the growth of an economy. American economist Arthur Okun in the article proposed it in 1962 "Potential GNP: Its Measurement and Significance"1.
Okun noted that in order to maintain employment levels, an economy needed to grow every year between 2.6% and 3%. Any lower growth meant an increase in unemployment due to improved productivity. The Okun's law also states that once the level of employment is maintained thanks to the growth of 3%, in order to reduce unemployment, it is necessary to grow two percentage points for each point of unemployment that you want to reduce.
This "Law" is only an empirical observation, since it is not possible to prove it. Okun relied on data from the 1950s in the United States, and further warned that this theory is only effective when the unemployment rate is between 3 and 7.5 %. Despite that, the rule has been met approximately in most cases, and that is why it is considered a very reliable observation in macroeconomics. The exact percentage depends on the period and country considered, although it is usually around 2.5 % (between 2 and 3). The fact that the coefficient is not predictable makes some consider this rule inappropriate.
The Okun's law can be expressed as follows:
Y—Y _ -
—— = p * (u - u) , where Y is natural GDP or potential output; Y is real GDP; u is the natural rate of
unemployment; u is the real unemployment rate; p is the factor that links changes in unemployment with changes in production. The Okun's law states that a one-point increase in the cyclical unemployment rate is associated with two percentage points of negative real GDP growth. The ratio varies depending on the country and period of time.
The Phillips Curve is a curve describing the relationship between the rate of inflation and the rate of un-employment2. It was examined in 1958 by an economist teaching in England of New Zealand origin, Alban W. Philips. It was published in a well-known 1960 article in which Philips showed the statistical relationship between wage inflation and unemployment levels in the United Kingdom between 1861 and 1957. He set aside the inflation rate on the vertical axis and the unemployment rate on the horizontal axis by obtaining a set of points that represented the year-by-year observations. The curve that best matches the points received has been called the Philips Curve. In the period covered by the research, it has always been important that the higher wage inflation the lower unemployment.
When deciding how much extra inflation for lower unemployment, the state institutions selected a particular "point" on the curve and determined the scope and type of macroeconomic policy to be implemented in order to achieve the desired combination of prices and employment.
After considering theoretical examples of the impact of unemployment on the economy, this effect will be shown on a practical example, taking the economy of the Russian Federation as the object of research.
According to information taken from the Moscow Government's website, unemployment benefits are paid during the period of job search to citizens who
1 Okun, A. (1962). Potential GNP: Its Measurement and Significance. Retrieved from https://milescorak.files.word-press. com/2016/01/okun-potential-gnp-its-measurement-
and-significance-p0190.pdf
2 Chappelow, J. (2019). Phillips Curve. Retrieved from https://www.investopedia.eom/terms/p/phillipscurve.asp
have been officially recognized as unemployed. Unemployment benefits are paid on a monthly basis, if a citizen passes re-registration within the time limits set by the employment Center of the city of Moscow and complies with the terms of reregistration. The amount of payments was unchanged from 2015 to 2018 and was equal to 850 rubles (minimum) and 4900 rubles (maximum). In 2019, the Government increased the minimum payment amount by 76.47% to 1,500 rubles, and the maximum by 63.27% to 8000 rubles. Thus, for the average value of the unemployment benefit in 20152018, it will be taken as 2875 rubles, and 4750 rubles in 2019.
Next, it would be correct to turn to the number of people who should receive this benefit, the unemployed. The information was taken from the website of the Federal state statistics service. According to this website, the number of unemployed people in Russia is decreasing. At the end of 2019, the number of unemployed people in Russia was 3.5 million.
Then the amount of average unemployment payments per year is multiplied by the number of people who should have received this benefit. You can see the result in Table 1.
Table 1
The amount of unemployment benefits for years
Year Number of unemployed The average value of the monthly payments Total amount of unemployment benefits
2015 4200000 2 875 □ 144 900 000 000 □
2016 4200000 2 875 □ 144 900 000 000 □
2017 3900000 2 875 □ 134 550 000 000 □
2018 3600000 2 875 □ 124 200 000 000 □
2019 3500000 4 750 □ 199 500 000 000 □
As you can see, if all the unemployed received the average amount of payments, the budget would go from 120 to 200 billion rubles annually. Of course, exactly these figures were not paid, but their values are close to correct. In any case, this amount is huge. If the number of unemployed people were hundreds of times smaller, it would be possible to build several more schools, or increase funding for health care facilities.
The next point of considering will the impact of unemployment on the economy, such as the loss of tax revenues. On the website of the Federal state statistics service, there is a document called Finance of Russia 2018. It provides data on the country's consolidated budget for 2014-2017. In the Table 2, there is the data that relate to tax revenues considered to the budget from personal income tax.
Table 2
Budget revenues from personal income tax3
Year Personal income taxes (bln) Percentage of personal income taxes in GDP
2014 2 702,6 □ 3,40%
2015 2 807,8 □ 3,40%
2016 3 018,5 □ 3,50%
2017 3 252,3 □ 3,50%
Further, there is taken the simplest step: calculat- worked for the minimum wage. The minimum wage ing how much money would be added to the budget if data was taken from the website nalog-nalog.ru. at least 75% of the officially registered unemployed
Table 3
Potential extra revenues from personal income tax
Year Number of 75% of unemployed Minimum wage Potential additional revenues from personal income tax
2014 3900000 5 554 □ 33 790 536 000 □
2015 3150000 5 965 □ 29 312 010 000 □
2016 3150000 7 500 □ 36 855 000 000 □
2017 2925000 7 800 □ 35 591 400 000 □
As you can see from Table 3, the budget could receive more than 29 billion rubles each year. And this would be provided that all newly established employees receive the minimum wage. But the most interesting thing will be in the following table. In Table 3, you
can see just the potential additional income to the budget, but it is worth calculating how much the state will save on unemployment benefits for the same 75% of citizens.
3 Sabelnikova, M., & Kobrinskaya, L. (2018). Finance of Russia. Retrieved from
https://www.gks.ru/free_doc/doc_2018/fin18.pdf
Table 4
Potential additional revenue to the budget
Year Number of 75% of unemployed The average value of the monthly payments Amount of benefits for 75% of unemployed Potential additional revenues from personal income tax Final amount of additional money to the budget
2015 3150000 2 875 □ 108 675 000 000 □ 29 312 010 000 □ 137 987 010 000 □
2016 3150000 2 875 □ 108 675 000 000 □ 36 855 000 000 □ 145 530 000 000 □
2017 2925000 2 875 □ 100 912 500 000 □ 35 591 400 000 □ 136 503 900 000 □
Check out the data in Table 4. For 2015-2017, the state budget would be more than 420 billion rubles if 75% of the unemployed worked for the minimum wage. With this sum, dozens provincial towns could be renewed.
Understanding calculations above, it will be obvious that unemployment influences economy a lot. Dealing with this problem has to be one of the main Government's goals. It is a huge problem of national economy, when hundreds of billions are just lost.
Undoubtedly, there are a lot of examples in the world when the country has low level of unemployment, and, at the same time, the economy is so far from being the best. The key solution is in the middle point. Implementing theories, that in fact do work, into the economic agenda of the state could help this state a lot.
Labor market needs reforms, especially in the countries with high unemployment rate. In order to conduct such reforms, the state has to take into account
such kind of analysis that was provided above. It is not that hard to understand that the problem exists, it is hard to deal with it at the level of the country's leadership.
References
1. Chappelow, J. (2019). Phillips Curve. Retrieved from https://www.in-vestopedia.com/terms/p/phillipscurve.asp
2. Okun, A. (1962). Potential GNP: Its Measurement and Significance. Retrieved from https://milesco-rak.files.wordpress.com/2016/01/okun-potential-gnp-its-measurement-and-significance-p0190.pdf
3. Rosstat (2019). Employment and unemployment in the Russian Federation. Retrieved from https://www.gks.ru/bgd/free/B04_03/IssWWW.exe/St g/d04/142.htm
4. Sabelnikova, M., & Kobrinskaya, L. (2018). Finance of Russia. Retrieved from https://www.gks.ru/free_doc/doc_2018/fin18.pdf
DIGITAL-ТЕХНОЛОГП ТРАНСФОРМУЮТЬ ПРОФЕС1ЙНИЙ ЛАНДШАФТ БУХГАЛТЕР1В I АУДИТОР1В: СВ1ТОВ1 ТА В1ТЧИЗНЯН1 РЕАЛП1
MamieHKO-3y6eHKO I.I.
ДВНЗ «Кшвський нацгональний економ1чний утверситет 1мет Вадима Гетьмана», доцент кафедри аудиту, кандидат економ1чних наук, доцент ORCID: 0000-0003-0266-1489
DIGITAL TECHNOLOGIES TRANSFORM THE PROFESSIONAL LANDSCAPE OF ACCOUNTANTS AND AUDITORS: GLOBAL AND DOMESTIC REALITIES
Matiienko-Zubenko I.
SHEE «Kyiv National Economic University named after Vadym Hetman», Associate Professor Audit Department,
PhD in Economics, Associate Professor ORCID: 0000-0003-0266-1489
Анотащя
Стаття присвячена визначенню впливу цифрових технологш на трансформацш професшно! дшльно-сп фахiвцiв з бухгалтерского облшу та аудиту. Проаналiзовано основш тенденци цифрового розвитку сусшльства; напрями використання «розумних» технологш у бухгалтерскому обл^у та аудиту визначено основш компетентности яш повинш володгги зазначеш фахiвцi, щоб бути затребуваними на ринку пращ в умовах цифровiзацii економши.
Abstract
The article is devoted to determining the impact of digital technologies on the transformation of professional activities of accounting and auditing professionals. The main tendencies of digital development of society are analyzed; areas of use of "smart" technologies in accounting and auditing; the main competencies that these specialists must have in order to be in demand in the labor market in the context of digitalization of the economy