THE CURRENT WAGE REFORM IN THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A000800110002-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 45
• Document Creation Date: December 23, 2016
• Document Release Date: June 3, 2013
• Sequence Number: 2
• Publication Date: August 9, 1957
• Content Type: REPORT

Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
SECRET
N~ 71
ECONOMIC INTELLIGENCE REPORT
THE CURRENT WAGE REFORM IN THE USSR
CfA/RR 96
9 August 1957
CENTRAL INTELLIGENCE AGENCY
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
S-E-C-R-E-T
ECONOMIC INTELLIGENCE REPORT
THE CURRENT WAGE REFORM IN THE USSR
cIA/RR 96
Office of Research and Reports
S-E-C-R-E-T
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
Summary and Conclusions
1
I.
Introduction
3
II.
Nature of the Soviet Wage System
5
A.
Wage Scales and Rates
5
B.
Piece Rates and Norms
7
C .
Time Rates and Bonuses
8
D.
Premiums and Other Compensation
9
III.
Defects of the Existing Wage and Salary System
10
A.
Obsolete Base Rates and Norms
11
B.
Excess Complexity and Irrationality of the Wage
System
14
C.
Improper Wage Differentials
15
D.
Inadequate Incentives
17
A.
Objectives
18
B.
Establishment of Righer Minimum Wages
20
C.
Progress of the Wage Reform in Specific Industries ..
21
1. Construction
21
2. State Agriculture
23
3. Machine Building
24
4. Coal
26
5. Nonferrous Metallurgy
28
6. Other Industries
29
D.
Near Bonuses for Technological Improvements
31
E.
NeW Procedures for Reviex of Work Norms
32
F.
Controls over Wage Fund Expenditures
34
G.
Probable Effects of the Reforms
36
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141 A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
ciA/RR 96
(ORR Pro3ect 41.1796)
The Sixth Five Year Plan (1956-60) in the USSR sets ambitious
taxgeta for production which, in view of smaller annual increments
to the labor force, depend in large part for their success on sub-
stantial increases in output per worker. Recognizing this, the USSR
has embarked on a major campaign to improve industrial labor pro-
ductivity. An important part of this campaign is the decision to
overhaul the wage system with the primary objective of relating indi-
vidual earnings more closely to quantity and quality of output. The
regional development plans outlined in the Sixth Five Year Plan also
require a major redeployment of the labor force. Eschewing the use
of coercion, the government has chosen to obtain the desired alloca-
tion of workers by offering suitable economic incentives, thus neces-
sitating a further revision of the wage structure.
Besides strengthening the role of economic incentives in pro-
moting productive efficiency and in allocating the labor force, the
current wage reform is intended to correct a number of specific de-
fects identified since the last over-all wage reappraisal in 1932?
The most important of these defects are as follows: (1) average
earnings more than doub],ed between 1940 and 1956, but base rates and
salaries increased very slightly, so that at present only about half
of the workers' earnings consist of base wages, with various kinds
of bonuses and supplements providing the rest; (2) work norms for the
most part no longer represent true output standards, because they are
regularly overfulfilled by 50 to 100 percent; (3) the wage system has
becc~e extremely complicated, and a wide diversity of wage practices
characterizes the operations of ministries and enterprises; (4) inequi-
table occupational, industrial, and geographical wage differentials
have become prevalent; and (5) the widespread use of progressive piece
rates and similar bonus systems has contributed to persistent overex-
penditure of wage funds.
* 'The estimates and conclusions contained in this report represent the
best ,judgment of ORR as of 1 July 1957?
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
The wage reform was inaugurated in ].955 with the establishment of
the State Committee on Labor and Wages. On the national level the
following changes have been made: (1) the basic principles governing
the wage and norm changes have been worked out for most industries by
the State Committee on Labor and Wages and by the responsible ministries,
(2) a uniform five-zone system of geographical wage differentials has
been approved, (3) higher minimum wages have been established, (4) the
procedures for revising work norms have been changed, (5) a new system of
bonuses for technological improvements has been decreed, and (6) controls
over wage fund expenditures have been tightened. With respect to individ-
ual industries, a complete overhaul of wages and norms in the construction
industry took effect on 1 January 1956, and at the same time higher wage
rates and norms were introduced in state agriculture. Anew system of
paying state farm managers was put into effect on 1 January 1957. During
the third+quarter of 1956, wage reform was carried out experimentally in
14 selected machine building plants and is to be extended to the rest of
the industry during 1957. In October and November the reform was staxted
in the Donets Basin (Donbas) coal mines. Toward the end'of 1956 a new wage
system was installed experimentally in selected enterprises in ferrous and non-
ferrous metallurgy. Finally, much of the preparatory work has been completed in
the radio technical, automobile, petroleum, chemical, and timber in-
dustries. Once the basic decisions have been made for these and other
industries, the wage reform is to be carried out enterprise by enterprise
and will probably be completed by 1960. The changes are scheduled to be
completed in 1957 in the cement, machine building, coal, and metallurgical
industries.
The average wage (including premiums and bonuses) of workers and
employees in the USSR, currently estimated at about 700 rubles per month,
will undoubtedly rise as a result of the current wage reform. The
initial results of the wage and norm changes in several industries con-
firm this ,judgment, and also there are indications that additional sums
are being provided in the state budget to finance the higher minimum wage
and the wage reform in some sectors. As a result, the 30-percent rise in
real wages scheduled for 1956-60 will be achieved primarily through a
rise in money wages rather than through consumer price reductions as in
the recent past. Because of contradictory objectives, the probable effect
of the wage reform on earnings differentials is difficult to assess, but, on
balance,'industrial and occupational wage differences will probably increase.
When the wage reform has been completed in most of Soviet industry,
the level of work norms will be considerably higher, and the whole system
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
of norms will be more meaningful. Simultaneously with the introduction
of new wages and norms plant by plant, various measures are being under-
taken to mechanize production operations and to bring about more effi-
cient organization of plant operations. These rationalization measures,
combined with new economic incentives directly related to individual and
plant efficiency, should contribute materially to increased labor pro-
ductivity. In general, preliminary results of the innovations in coal,
construction, state agriculture, and machine building indicate such a
result. If productivity gains exceed the rise in earnings to a greater
degree than before, unit labor costs will fall concomitantly, even
though total wage costs will be higher. The wage reform program would
then contribute significantly to the success of the current drive for
rationalization and efficiency throughout Soviet industry.
The execution of a wage reform on the scale currently being carried
out in the USSR is an exceedingly complex and delicate task. Of
necessity the government has had to proceed cautiously in order to mini-
mize the danger that hasty and ill-considered actions or miscalculations
may alter the price-cost structure, upset the planned balance of con-
sumer income and expenditures, or create worker unrest. During the
difficult process of establishing the wage reform, some adverse reaction
on the part of workers is to be expected. Several instances of concerted
worker protests against the new wages and norms occurred toward the end
of 1956 in several Moscow plants, including a reported strike at the
important Kaganovich Ball Bearing Plant. Such difficulties and unfavor-
able worker reaction are believed to be transitory, however. If the
government can provide goods and services sufficient to absorb the newly
created purchasing power, the average Soviet worker will be better off
under the new wage system.
Wages in the USSR are fixed by the state in such a way as to further
predetermined policy ob,jectivea and are paid from funds allocated through
the state budget in accordance with national economic plans. The total
wage fund for any year is the composite of the funds allocated to each
enterprise and institution on the basis of the established wage rates,
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
S-E-C-R-E-T
salaries, and bonus systems and of the planned number and kinds of
employees. Because wages are a cost of production to the state, the
factors determining their magnitude have a decisive influence on coat
and price levels. Wages, hoxever, also represent the income of persons
employed in the state sector of the economy, and, therefore, wage
determinants have an even more decisive influence on purchasing power
and consumption levels.
In a free market economy, broadly speaking, wages are determined
like other prices by the interaction of demand and supply. Wage
differences tend to'spproximate productivity differences, and workers
tend to distribute themselves among industries and occupations in re-
sponse to differences in monetary remuneration. These general tend-
encies characteristic of capitalist labor markets also are operative in
the Soviet economy, the principal difference being that in the USSR the
government is the sole employer of labor. This monopolistic employer,
in pursuing the goals set in the national economic plans, strives to
maximize output, minimize monetary costs, and Hilly utilize available
manpower, Even though Soviet production goals may be different from
those of a capitalist economy, it is nevertheless to the interest of
the state to relate xages to productivity and to fix wage differentials
that will attract labor to the desired occupations, industries, and geo-
graphic areas. The wage structure must also be adjusted to the output
of consumption goods. Although fiscal measures are flexible enough to
accomplish this, their use in such a manner may act as a drag to in-
centive in production.
After an initial experiment with "equalitarianism" ae s principle
in wage fixing, the USSR adopted a policy of providing differentiated
monetary incentives in order to obtain maximum output from each xorker
and to induce workers to acquire skills and to move into the industries
and areas required by the planned goals for production. In the hope of
maximizing individual output, the government pays most workers under the
piece-rate system, which relates earnings directly to output: Higher
wages are paid for work in disagreeable climates; for jobs that require
skill; and for unpleasant and difficult jobs in essential industries,
such as coal mining, which workers would otherwise shun. Likewise,
wages are adjusted from time to time to attract labor to industries which
are given priority at any given time.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
The Sixth Five Year Plan in the USSR sets ambitious production
targets, which, in view of the smaller increments to the labor force
expected during the Plan period, depend in large part for their success
on increased output per worker. Recognizing this, the USSR has em-
barked on a major campaign to improve industrial labor productivity.
An important part of this campaign is the decision to overhaul the
wage system and to strengthen its incentive Peatures by relating indi-
vidual earnings more closely to quantity and quality of output. The
development programs outlined in the Sixth Five Year Plan likexise
require a major redeployment of the labor force. Avoiding the use of
coercion, the government has decided to obtain the desired allocation
of workers through provision of suitable economic incentives, thus
necessitating a major readjustment of the wage structure. The exe-
cution of the contemplated wage reform is an exceedingly complex and
delicate task. Of necessity the government is proceeding slowly and
cautiously lest it frustrate its objectives by incurring the 111 will
of the workers, which could arise from hasty actions that create
inequities or reduce earnings.
II. Nature of the Soviet Wage System.
Forms of employee compensation in the USSR do not differ essen-
tially from those used in capitalist economies. Workers are paid for
their labor either on the basis of units of time spent (timework) or
units of wtput (incentive work, or piecework). The latter form is
more common, for in 1956 more than three-fourths of all workers in
Soviet industry were on piecework. ~*~ In addition to basic time and
piece wages, workers also are paid various kinds of premiums and
bonuses.
A. Wage Scales and Rates.
In general, the basic determinant of a Soviet worker's wage is
the labor grade into which his job is classified and the rate fixed for
that grade. The jobs within a given branch of industry are grouped into
labor grades on the basis of standard job description manuals (tarifno-
kvalifikateionnyy s ravochnik) issued by the responsible ministry.
Usually there are 7 or such grades, although there may be as few as 4
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
S-E-C-R-E-T
or as many as 14. For each grade a numerical coefficient is fixed so
as to reflect varying levels of job difficulty and skill. The coeffi-
cient for labor grade 1 is always 1.0, and that for the highest grade
usually falls within a range of 2.0 to 3.5. The labor grade structure
with corresponding coefficients is called the wage scale (tarifnaya
setka).
An hourly rate in rubles is fixed for labor grade 1, and the
rates for the other grades are obtained by multiplying this rate by
the corresponding labor grade coefficients. The labor grade rate,
expressed in .rubles per hour or per day, is called the wage rate
(tarifnaya stavka). For each wage scale, separate sets of rates are
set for timework and for incentive work. Rates applicable to incentive
work are often called base rates. As an illustration, a wage scale and
rates for the chemical industry are as follows 2~:
Labor Grade
1
2
3
4
5
6
7
Coefficient
1.0
1.12
1.27
1.44
1.62
1.92
2.29
Rates for
timeworkers
(rubles per hour)
1.22
1.36
1.53
1.73
1.97
2.26
2.74
Rates for
incentive workers
(rubles per hour)
1.33
1.49
1.69
1.92
2.15
2.55
3?G5
Within a given industry there are usually a number of additional
sets of rates, reflecting differences in such factors as size of plant;
geographic area; job conditions (for example, hot work or cold work in
metalworking); and type of enterprise (for example, basic or subsidiary).
The rates are established by the economic ministries in accordance with
over-all government policies. Within a given industry, favorable rate
differentials are usually established for incentive work, for work under
difficult or unpleasant conditions, for work in remote areas, and for
work in large or important enterprises. Wage rates also vary widely
among industries.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
All jobs in the USSR for which standards of output can be estab-
lished are paid for ~on the basis of piece rates. For each such job a
work norm, sometimes called an output or production norm (norms vyrabotki),
is determined; the norm represents the number of units of output that
the worker is expected to produce in 1 hour or 1 day under normal working
conditions. Work norms are of two kinds: experimental-statistical
(opytno-statisticheskiye normy), and technical (tekhnicheskiye normy).
The former reflects what the average worker has actually done in the
past, as shown by historical records, whereas the latter reflects what
a worker midway between average and best might reasonably be expected
to do in the future as demonstrated by time studies carried on under
specified technological conditions. Increasing the relative number of
technical norms has been a continuing major objective of Soviet wage
policy, because norms based on time studies are the only real standards
for measuring the performance potential for a given job. Norms may
apply to the expected performance of a single worker or to the per-
formance of a team or brigade.
After the norm for a given job is set, the piece rate for the
job is determined by dividing the norm, which is expressed in units per
hour or per day, into the appropriate wage rate (base rate) for the
labor grade in which the job is classified. For example, if the norm
for a milling machine operator is 10 units or pieces per hour and the
applicable rate is 2 rubles per hour, then the piece rate is one-half
ruble. Thus if the worker fulfills his norm, he is paid the wage rate
for his labor grade. His earnings increase correspondingly with each
additional piece that he produces. This method of piecework payment ie
called the straight piece-rate system (pryamays sdel'naya sistema).
Piecexorkers may also be paid in accordance with the progressive
piece-rate system (sdel'no-progressivnaya sistema). Under this method
the worker receives the regular straight piece rate for fulfilling his
norm, but for above-norm output his piece rate is increased by per-
centages which increase with output. Two examples of progressive
piece-rate scales are as folloxs 3~:
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Percent of Output Percent Increase
Above the Norm 1n Piece Rate
O.1 to 5
5p
5.1 to l0
100
10.1 and over
200
This method of wage payment is used primarily in heavy industry, partic-
ularly in those branches to which the government assigns priority. In
the coal industry, for example, 46 percent of all production workers
were paid on the basis of progressive piece rates in 1956.
C. Time Rates and Bonuses.
As indicated above, flat hourly or daily rates based on the
applicable wage scale are paid in the USSR to production and service
workers whose jobs do not permit the establishment of norms (for example,
janitors, storekeepers, guards, and electrical maintenance men). Mana-
gerial and engineering-technical employees are paid on the basis of a
formal salary system (sistema dolzhnostnykh okladov). Under this system,
monthly salaries are set in accordance with standard position lists
(tables of organization) established by the appropriate ministry and
approved by the State Table of Organizations Commission, attached to the
Ministry of Finance. Like the wage rates described above, these salary
scales differ widely with industry, occupation, and area. The table of
organization approved for each enterprise or institution usually provides
a minimum and maximum rate for each salaried position, and the enterprise
director is permitted to fix the salariea of individual employees within
this range based on merit. Persons having special qualifications or
experience may be paid "personal salaries" in excess of the regular
salaries fixed for their jobs; such payments require specific sanction
from the appropriate ministry or council of ministers of the union-
- republic.
In addition to basic wages or salaries, employees paid by the
hour, day, or month receive bonuses for fulfillment and overfulfil7raent
of the monthly production plans for their shop or plant. For managerial
and engineering-technical employees, these bonuses are contingent upon
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
simultaneous fulfillment of the plant's plan for the reduction of pro-
duct cost. The monthly bonus for individual employees in the machine
building, coal, and metallurgical industries may not exceed 2 months'
salary; and in other industries the bonus may not exceed 12 months'
salary. 6j For the parpose of illustration, the bonus system in effect for
administrative-technical employees in the paper industry is as follows ~:
Plant director and
chief engineers
Technical and clerical
employees
Percentage Bonus for
Percentage Bonus for Each Percentage of
Plan Fulfillment Plan Overfulfillment
Additional bonuses, which differ widely with industry and plant, are
also paid for above-plan cost reduction, improvements in product quality,.
reduction in the rate of product rejects, reduction in the amount of
machine idling, and above-plan economies in fuel and raw materials.
D. Premiums and Other Compensation.
Wage and salary earners in the USSR may receive various kinds
of premiums from time to time for meritorious performance. These premiums
may be paid from the "enterprise fund,"~ a fund derived from the profits
of the enterprise and made available to the enterprise director for
specified purposes, including the payment of premiums to workers. ~~
Other sources of funds for the payment of premiums are the appropriate
minister's fund and sums provided by special order of the Council of
Ministers in recognition of outstanding plant performance. Enterprises
declared the winners in socialist competition are awarded substantial
prizes, which are distributed to employees in accordance with ministerial
regulations.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
In some branches of industry, percentage additions to basic
wages and salaries are paid to employees with specified amounts of
continuous service in the industry. Such an addition may be paid
either in the form of an annual bonus or as a monthly supplement to
the basic wage or salary. Extra longevity caagpensation amounting to
10 percent Por each 6 months of service is also given to persons xho
are assigned or who volunteer to work in designated remote areas for a
minimum of 3 years 10/; the total of such surrates, however, may not
exceed the employee's regular wage rate or salary.* Finally, em-
ployees receive extra compensation for overtime, night work, training
new employees, inventions and improvements, and other activities for
which compensation is not provided in the basic wage and salary scales.
Generally speaking, the basic characteristics of the present Soviet
wage and salary system were established in 1931 and 1932 as a result of
the major wage reform undertaken in response to directives laid down by?
Stalin in a speech of 23 June 1931. In this speech he severely crit-
icized the "equalitarian" nature of the then-existing wage system,
holding it largely responsible for widespread and excessively high labor
turnover, and called for the "destruction" of the old system. 12 During
the next several years the entire wage structure was revised, new wage
scales were established to provide greater wage differentials between
skilled and unskilled jobs, wage and salary rates were changed, and
formal job classification manuals were prepared for all industries.
During the 25 or more years since this reform the Soviet wage system has
simply grown without plan or coordination as a result of numerous
decrees of the Council of Ministers and a multiplicity of actions by
individual ministries and enterprises. Relatively little effort was
made to establish guiding principles or to coordinate in detail the
actions and policies of the various ministries. 13/ From the demise
of the Commissariat for Labor in 1933 until the establishment of the
* Persons migrating to designated remote areas also receive lump-sum
grants upon signing work contracts ranging from 150 to 1,000 rubles,
loan privileges, per diem and travel allowances, and extra vacation
time. In addition, each year of service in these areas is counted as
2 years for purposes of meeting the length-of-service requirements under
the state pension system. 11
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
State Committee on Labor and Wages (Gosudarstvennyy Komitet Soveta
Ministrov SSSR po Voprosam Truda i Zarabotnoy Platy in 1955, there was
no central agency with primary responsibility for day-to-day coordi-
nation and review of ministerial actions in the field of wages and
labor . *~
A number of fundamental defects in the employee compensation
system have developed over the years, partly as a result of this
lack of coordination and partly as a result of inadequate efforts to
keep the system abreast of far-reaching changes in production, income,
and technology. Although these shortcomings have been pointed out by
Soviet writers for a number of years, 14 discussion of them has
become commonplace following Premier Bulganin's speech to the Plenum
of the Central C~ittee of the Cc~unist Party in July 1955. 15
Average money earnings of Soviet workers and employees have
more than doubled since 1940, but the average level of wage rates has
increased only slightly. 17 As a result of this difference in rates
of increase, the relative share of wage (base) rates in workers' total
earnings has decreased markedly, so that at present the base wage forms
only about half of a worker's earnings, on the average, 18~ compared
with 75 to 80 percent in prewar years. 19 The remainder of workers'
earnings consists of payments for overfulfillment of norms and various
kinds of premiums for performance not directly related to the worker's
own quantity of output.
In the individual enterprise, this discrepancy between wage rates
and average earnings was reflected in a similar discrepancy between the
planned average wage, which has tended to rise slowly, and the average
base rates, which have remained fairly stable. The rising trend in
earnings was the composite result of many factors, probably the most
important being the increasing rate of overfulfillment of norms by
* Annual plans fixing the size and distribution of wage fluids and allo-
cating manpower were coordinated by the State Planning Crnmission, which
*-~ the average 50X1
base rates rate~as Duos ou ru ea per mon in 1953 and that the average
earnings of wage earners were about 650 rubles. 16 According to this
estimate, base rates would represent about 62 percent of total earnings.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
pieceworkers and the institution of various kinds of premiums for
timeworkers, so as to keep their earnings in line with those of
pieceworkers. Not being willing to upset the whole system of basic
wage scales, the government has tacitly sanctioned these developments
in the interests of peaceful industrial relations. In this way the
enterprises were enabled to .bridge the gap between the wage con-
templated by the established wage scales and regulations and the wage
which the worker had to have to live and which the enterprise heal to
pay to retain its labor force under conditions of full employment and
acute shortages of skilled workers.
The relative stability of base rates in the face of arising
average wage (money earnings) has acted as a brake on the establishment
of work norms which dilly reflect the output possible under existing
technological conditions. In other words, work norms have been usually
set so low that the workers could easily overfulfill them by substantial
margins. The director of the Grinding Machine Plant in Moscow, a large
and important machine building plant, explained how this situation
arises. In his plant the average planned monthly wage (which is based
on the previous year's average wage and average percentage of norm
fulfillment) was 880 rubles, and the average base wage was 413 rubles.
In order to earn the planned average wage, pieceworkers would have to
fulfill their norms by about 150 percent, and, therefore, the vast
majority of work norms were deliberately fixed to make this possible.
Although about 300,000 norms were used in the plant, only about one-
eighth of them were based on time studies. 20
These wage- and norm-fixing practices in the enterprises mean,
as Bulganin has pointed out, that wages determine the norms instead
of norms determining the wages. 21/ Under such methods of norm fixing
the norm ceases to be a true output standard -- that is, a measure of
what the average worker should be able to produce in a given time under
given job conditions. The average worker need make no particular
effort to fulfill such norms, and incentive to increase productivity
was lessened in consequence.
Figures from Soviet sources Indicate that the wage and norm
conditions described above for the Grinding Machine Plant in Moscow are
quite common throughout industry, particularly heavy industry. Norms
usually were not based on time studies. Thus in 1855., technically
based norms comprised only 21 percent of all norms in the Ministry of,
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
the Petroleum Industry, 23.5 percent in the Ministry of Geology and
Mineral Conservation, 22~ 18.2 percent in the Ministry of General Ma-
chine Building, 19.7 percent in the Ministry of Machine Tools, and
27.1 percent in the Ministry of Machine and Instruments Building. 23
In contrast, the proportion was 56.7 percent in the chemical industry
and 78.6 percent in the paper and woodworking industry. 24~ Norms are
overfulfilled by wide margins. Thus in recent years the average
percentage of norm fulfillment by pieceworkers was about 180 at the
Kuybyshev Locomotive Plant in Moscow, 25~ 172 at the Nevskiy Machine
Building Plant in Leningrad, 26~ and 191 at the Compressor Plant in
Moscow. 27 During 1954-55, norms were fulfilled 160 to 180 percent
in machine building, 135 percent in metallurgy, and more than 140
percent in the chemical industry. 28~ These high rates of norm ful-
fillment, to which workers become accustomed, act as a deterrent to
the establishment of technically based (higher) work norms because,
with the existing low base rates, workers' earnings would fall if norms
were raised substantially.
Until 1957, xork norms were supposed to be reviewed annually
throughout industry.*~ The scheduled annual review of output norms
in the enterprises, however, seems to have produced little increase
in the relative importance of technical norms, in spite of perennial
government pressure toward that end. 29~ EWen with respect to exper-
imental-statistical norms, the norm reviews seem to have been largely
ineffective in increasing the relative number of realistic norms.
Although these reviews were supposed to result in significantly higher
norms, workers seem to have met the new norms with remarkable ease. Thus
in the Ministry of Shipbuilding, norms were fulfilled by 163 percent in
a typical month in 1955 before the annual norm review and by 165 percent
in a month shortly following the review. 30 Corresponding percentage
figures for the Ministry of Tractor and Agricultural Machine Building
are 174 and 177; for the Ministry of Machine and Instruments Building,
185 and 186; and for the Ministry of the Paper and Wood Processing
Industry, 140 and 141. '.
These figures suggest that the enterprises, in spite of official
proscriptions, have resorted to widespread manipulation of norms so as to
insure that workers' earnings do not fall. Under the characteristically
* By decree of the Council of Ministers of the USSR, a new procedure for
reviewing work norms became effective on 1 January 1957. See p. 32-34, below.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
uncertain conditions of planning and raw materials supply prevailing
under the Soviet system, such manipulation has apparently provided a
needed element of flexibility for the enterprises in their efforts to
fulfill production plans with a minimum of worker discontent.
The growth of the Soviet wage system over the past 25 years
has resulted in an extremely complicated wage structure, with wide
diversity in wage practices among the ministries and even within a
single ministry. ,Before the wage reform in 1956 the construction
industry had 320 different wage scales, 150,000 norms with norm
reference books amounting to about 30,000 pages, and nearly 80 different
kinds of correction factors to be used in computing piece rates in
certain areas. 31/ In 1955 there were 170 labor grade schedules in the
iron and steel industry, 140 in the chemical industry, 140 to 160 in
the various branches of the machine building industry, and more than
200 in the building materials industry. 32/ The 24 industrial mini-
stries as a whole used more than 1,900 wage schedules and over 2,000
base rates. 33/ Similar multiplicity of rates prevailed even within
a single enterprise -- the Metallurgical Combine in Leninogorsk, for
example, had 36 different base rates for the first labor grade. 34/
Numerous job classification manuals, most of which are obsolete,
are used in determining workers' labor grades. Before 1956 the con-
struction industry, for example, used two such manuals, one adopted in
1939 and the other in 1944. 35 In many instances the same job was
classified in different grades in the two manuals, and many new job
classifications, resulting from technological changes in the industry,
were not listed. Manuals applicable to the machine tool, chemical, and
ferrous metallurgy industries had not been revised since 1948. 36/ Until
recently, no attempt was made to coordinate the work of job evaluation
among the ministries, with the result that a variety of criteria were
applied and the same job frequently was evaluated and classified differ-
ently by different ministries. Furthermore, the low level of base rates
caused the enterprises to upgrade jobs as a means of raising wages,
particularly for timeworkers. The lowest 2 or 3 labor grades therefore
were seldom used, and jobs frequently were placed in higher grades than
provided in the manuals. 37
The greatest complexity prevailed in progressive piecework
systems and in the methods and scales used to determine bonuses and
premiums. In 1955, more than 20 different scales of progressive piece
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
rates were used in the machine building industries, more than 35 in
the consumer goods industries, and more than 25 in the construction
materials industry. 38 Progressive payments were used in many cases
merely as a device for increasing wages, a perversion of their original
mission of stimulating output of high-priority products. 39/ In some
industries, notably coal and textile, progressive payments began with
80 to 90 percent of norm fulfillment. Scales xere often excessively
steep and were graded much more finely than necessary. The system of
bonuses for fulfilling various planned tasks had become quite chaotic.
A number of different kinds of bonuses applied in each industry, and
often several were used simultaneously to fix the total compensation
for a given Sob. Like progressive piece rates, bonuses sometimes were
paid without rational basis. It is reported, for example, that a plant
spent over 2 million rubles in bonuses to workers for reducing the
spoilage of raw materials valued at 60,000 rubles. 40/ In the Perrous
metallurgy industry, group bonuses were paid when the production plan
was fulfilled by only 90 percent. In the textile industry, assistant
foremen received bonuses based on the extent to which shop workers
fulfilled their norms -- hence foremen had a vested interest in keeping
norms low. '
The complexities of the wage system made it difficult for the
average worker to understand, with the result that the system failed
to exert maximum pressure on productivity. In addition, the multi-
plicity of wage rates and methods of wage determination complicated
wage accounting, with an attendant increase in administrative expenses
and personnel.
C. Improper Wage Differentials.
According to Soviet sources, a mayor shortcoming of the present
wage structure was the existence of improper and inequitable regional
and occupational wage differentials. To highlight this situation,
Bulganin, in his speech to the Party Plenum in July 1955, cited the
case of a worker who was paid a monthly wage of 1,500 rubles for a
given ,job in Barnaul, 700 rubles in Kharkov, and 1,800 rubles in
Minsk. 41 In his speech to the XXth Party Congress, Khrushchev
asserted that wages were too low for some workers and "quite un~usti-
fiably high" for others. 42/
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Soviet economists maintain that the wage structure had become
compressed to such an extent that the wage differentials between
skilled and unskilled jobs were too narrow. This compression was mani-
fested particularly in the large number of wage scales in various
industries, where the small pay differences from grade to grade al-
legedly dampened the worker's incentive to improve his qualifications
in order to be promoted. The compression of the wage schedules was
caused in large part by the incorporation into the base rates of the
substantial increase in wages for low-paid workers resulting from a
government decree of 16 September 1946 (the so-called "bread-price
compensation"). 43 Thus before 1946 the relationship between the
lowest and the highest labor grade in the base pay schedule for the
petroleum industry was 1 to 3.6, and in 1956 it was 1 to 2.7 44
Although some industries had corrected this situation since 19 , most
have not yet done so. The adjustment in wages for low-paid workers
likewise substantially reduced differentials between base pay rates of
timeworkers and pieceworkers, as well as the pay differentials between
those engaged on hot work and those engaged on cold work in heavy
industry.
Incorrect occupational wage differences also sprang from other
sources. Norms for the same job were set differently between one
enterprise and another, even in the same industry and area. As noted
earlier, the same job often was rated differently in the various job
classification manuals in use. Moreover, since adherence to these
manuals was not mandatory for the enterprises, they sometimes took di-
verse action, with respect to job slotting. In scientific and educa-
tional fields, unwarranted differences in earnings existed between
scientists in the universities and institutes and those engaged on
scientific work in the enterprises because salaries of scientists
depended mainly on the number and kinds of degrees held, 45~ with
little regard to the kind of work done. In the cement, rubber., slate,
and other industries, many enterprises paid the same rates for light
work as for heavy work. 46 About one-third of all industrial enter-
prises, presumably those subordinated to republic ministries, did not
have official salary scales fixed centrally and applicable to groups
of similar enterprises; instead, salaries were fixed individually for
each enterprise, and great diversities prevailed. 47~
Wage differentials between geographic regions allegedly
have become distorted, largely because of lack of coordination in the
wage-setting activities of the various ministries. Although a
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
20-percent wage differential was established by government decree in
1946 for basic enterprises in heavy industry in the Urals, Siberia,
and the Far East, this difference has now virtually disappeared in the
machine building industry, because of methods of wage fixing. Up to
1956, no regional (zonal) wage differentials were provided in the wage
schedules of the machine building, chemical, and paper industries. In
the coal and timber industries there were 2 wage rate zones, and for
cotton textile factories there were as many as 30 zones within a single
economic region.
D. Inadequate Incentives.
Soviet spokesmen have maintained that the present system of
employee compensation failed to provide workers and managers with
adequate economic incentive to increase individual and enterprise pro-
ductivity. This deficiency allegedly stems from a number of different
aspects of the existing system, same of which have been mentioned
above. The wide prevalence of unjustifiably low norms and their con-
sequent overfulfillment by substantial margins meant that workers
needed to make little effort to fulfill them. Such norms were called
"ceiling norms" by the workers. 49 Plant managers have testified
that when norms could be so easily fulfilled, workers had little in-
centive to avoid waste 'motion or to devise ways of getting things done
more quickly and efficiently. 50 The existence of unduly small wage
differentials between labor grades and the relatively low ratio of
base rates to total earnings, moreover, dampened the worker's incen-
tive to improve his educational and skill qualifications in order to
advance to higher grades. The arbitrary upgrading of fobs and the
accompanying nonuse of the lowest several labor grades further reduced
the significance of the labor grade system. Finally, the bonus systems
used to remunerate timeworkers were usually related only to plan ful-
fillment for an individual section or shop, and consequently the
workers had no, direct interest in what happened to the plant as a
whole. 51
Soviet economists have been particularly critical of the system
of awarding bonuses to engineering-technical and managerial personnel in
the enterprises. These bonuses, computed in accordance with a 1946
decree, have been paid for fulfillment or overfulfillment of the enter-
prise production plan, contingent upon simultaneous fulfillment of the
plan?for reducing product costs. Above-plan cost reductions did not
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
affect the amount of these bonuses, nor was the amount affected by the
plant's performance with respect to such other efficiency indexes as the
plans for improvements in product quality, for increased labor produc-
tivity, and for the introduction of new technology. Hence enterprise
managers often had striven For fulfillment and overfulfillment of the
production plan without sufficient regard for plant efficiency.
Because his personal income was not greatly affected, the enterprise
director had little incentive to strive for economies in manpower,
wages, materials, and fuel above the minimum called for by the plan.
To illustrate these points, one writer cited the case of a railroad
foreman in charge of locomotive repair who received a bonus of 5,000
rubles for 2 consecutive months, in spite of the fact that the same job,
that of repairing a locomotive, required 477 manhours in one month and
360 in the other. 52 Often substantial monthly bonuses were paid to
managerial personnel even though they had permitted large overexpend-
itures of planned wage funds during these months. 53
In 1955 the USSR embarked on a large-scale project to revise its
entire system of employee compensation, the Yiret over-all reappraisal
introducing a major wage reform since 1932. To 'direct end coordinate
this mammoth undertaking, the Council of Ministers established in May
1955 the State Committee on Labor and Wages,*~ chaired by L.M. Kaganovich
until June 1956, when he was succeeded by A.P. Volkov. The projected
reform proceeded quite slowly until the latter part of 1956, when the
pace was stepped up considerably.
The Sixth Five Year Plan in the USSR calls for substantial
increases in industrial labor productivity -- 50 percent in industry
and 52 percent in construction. Attainment of these goals will be an
important determinant of success in meeting total output targets be-
cause 85 percent of the scheduled rise in total industrial output is to
come from increases in output per worker. Although most of the achieved
gain in labor productivity undoubtedly will result .from the introduction
~ The establishment of the State Committee on Labor and Wages actually
amounts to the restoration of a Ministry of Labor in the USSR because
the Committee's functions extend far beyond the coordination and
direction of the current wage reform. 54
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
of new and better machinery, the government is also attacking the
productivity problem in other ways. One of the most important of these
measures is the scheduled rationalization of the wage and salary system,
which is directed toward providing workers and managers with greater
material incentive to increase output and reduce production costs.
Broadly speaking, the current wage and salary reform is
designed to overcome the defects in the present system outlined above.
The specific objectives are set forth in the directives for the Sixth
Five Year Plan as follows: (1) to ensure the widespread introduction
of technically based work norms "corresponding to the modern level of
technology and organization of production"; (2) to raise the proportion
of base rates in workers' total earnings and to establish "proper" wage
relationships between industries and areas; (3) to abolish the "multi-
plicity of systems" and to correct "disparities" in the methods of re-
munerating engineering-technical and other salaried employees; and (4) to
"enhance the role of bonuses to stimulate new technical innovations,
higher labor productivity and reduction of production costs." 55/ In
addition, a separate project was scheduled with the objective of raising
the wages of low-paid workers in advance of completion of the wage reform.
This project was announced by Khrushchev in his speech to the XXth Party
Congress, in which he also hinted that there might be accompanying
reductions in the "unjustifiably high" salaries of "a category of
workers -- granted not a big one." 56
Another goal to be accomplished by the wage reform is the estab-
lishment of levels and conditions of pay that will contribute to a re-
duction in the high labor turnover characteristic of Soviet industry in
recent years* and will facilitate the regional and industrial distri-
bution of labor required by the large-scale regional development plans
scheduled for 1956-60. Finally, it is intended that the contemplated
changes in base rates, norms, and bonus systems will help to alleviate
the chronic problem of overexpenditure of wage funds.
* In his speech to the Party Plenum in July 1955, Bulganin stated that
"in 1954 at enterprises of All-Union and union-republic industrial mini-
stries alone, and not counting timber-cutting enterprises, 2,923,000
workers were engaged ire] while the number of workers that left was
2,802,000." 57/ The total number of workers and employees in industry
was 17 million, 58 and the labor turnover rate for 1954 was about
33 Percent. The labor turnover rate in the construction industry during
the same year was nearly double that for industry as a whole.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
As an interim measure benefiting low-paid workers, the Soviet
government on 8 September 1956 issued a decree establishing legal
minimum wages to be applicable throughout the state sector and to take
effect on 1 January 1957. ~ The decree provides the following: (1) a
basic minimum wage of 300 rubles per month for all workers and employeesx*
in towns and workers' settlements; (2) a basic minimum wage of 270 rubles
per month for workers and employees in rural areas; and (3) minimum wages
not to be less than 300 rubles or more than 350 rubles per month to be
set separately for each industry and to be applicable only to workers and
employees (excluding ,junior service staffs and security personnel) in
industry, construction, transport, and communications. These higher
rates are to be fixed by the various ministries in collaboration with
the All-Union Central Council of Trade Unions and the State Committee
on Labor and Wages. The increase provided by the decree affects only the
base rates or salaries. Bonuses for ilzlfillment and overfulfillment of
norms and plans, as well as all other bonuses sad premium payments for
overtime, night shift work, length of service; and service in remote areas,
are to be computed on the basis of the old base rates and salaries, pre-
sumably to minimize the cost of the minimum wage ad3ustment and to ensure
'that it will not complicate unnecessarily the broader task of revising
base rates and norms.
According to the text of the decree, the minimum wage adjustments
will add 8 billion rubles to the total wage bill in 1957 and will raise
the average wage of the employees directly affected about 33 percent. It
is estimated that about 8 million workers and employees (one-sixth of the
total) will benefit immediately. Whether these benefits will be permanent
depends on the final outcome of the over-all revision of xages and norms.
* As far as can be determined, the last decree before this one which
provided for a national minimum wage was adopted on 1 November 1937. This
3ecree fixed a monthly minimum wage of 110 rubles for pieceworkers and 115
rubles for timeworkers in industry, railroads, and water transport. 59~
The "bread-price compensation" decree of 16 September 1946 provided for
an increase of 110 rubles in all monthly wages below 300 rubles: Thus it
appears that the legal minimum wages in effect before 1 January 1957 were
220 or 225 rubles, at least for industry and part of transportation.
x-~ Workers and employees is a technical term used by the Soviet govern-
ment. It includes all wage and salary earners except those employed on
collective farms, members of the armed forces, workers in forced labor
camps, and independent artisans.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
With the State Committee on Labor and Wages acting as super-
visor and coordinator, the details of the wage reform in the USSR are
being worked out industry by industry by the respective ministries and
enterprises. The reform has already been completed in construction
and partly completed in state agriculture. In machine building, i'errous
and nonferrous metallurgy, and coal, new wages and norms have been put
into effect in selected enterprises on an experimental basis. In other
industries the details of the planned reforms are still being worked out.
On 23 August 1955 the Council o? Ministers of the USSR
issued a decree providing for a sweeping reform of wages and norms
throughout the entire construction industry, effective 1 January 1956. E,1
The decree established uniform and obligatory wage-fixing procedures for
the construction projects of all ministries and departments as follows:
norms and piece rates, a job-rating manual, a 7-grade wage scale, a scale
of progressive piece rates, and a bonus system for timeworkers. Under the
terms of this decree, work norms were increased an average of 17 percent
for mechanized construction operations and 9.5 percent for installation
operations but were decreased 11.2 percent for hand operations. 62 The
new~job-rating manual provides, among other things, for a substantial
upgrading of such basic skilled occupations as plasterer, bricklayer,
painter, and carpenter, which have been assigned the highest labor grade.
The new 7-grade wage scale, with coefficients ranging from
1.0 for grade 1 to 2.8 for grade 7, replaced the 300 scales formerly in
use, the lowest of such scales having had a range of 1.0 to 2.38 and the
highest a range of 1.0 to 2.8. Four separate sets of labor grade rates
are established by the new decree -- for Group I construction projects,
Group II construction projects,* construction workers, and metalworkers
and equipment-installers. Anew uniform progressive piece-rate scale
provides a piece-rate increase of 50 percent for overfulfillment of norms
* Group I includes projects of most of the construction ministries and
the Ministries of Machine Building, the Chemical Industry, the Coal
Industry, the Petroleum Industry, Ferrous Metallurgy, Nonferrous Metallurgy,
Electric Power Stations, Shipbuilding, Aviation Industry, Defense,
Internal Affairs, and certain other designated organizations. Group
II includes all other projects.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
by 20 percent or less and an increase of 100 percent for overfulfill-
ment by more than 20 percent. Finally, a uniform set of geographic
wage differentials is provided through the establishment of four
regional wage-rate zones, with the highest differential (40 percent)
being provided for such areas as Primorskiy Kray, Amurskaya Oblast,
Khabarovskiy Kray, and Magadanskays Oblast (south of the Arctic cir-
cle). In addition, a differential of 100 percent is fixed for Sakhalin
and Kamchatka and 150 percent for the Kurile Islands. Finally, the
new procedures extend to construction workers the provisions respecting
travel expenses, overtime pay, and pay for work on days off that are
applicable to other workers in the USSR.
The new wage structure has been in effect for more than
a year, but 1lttle evidence is as yet available on which to appraise
its effects on productivity and average wages. Certainly the new sys-
tem is more rational and simple than that which it replaced. Although
the construction industry as a whole achieved the planned increase of
10 percent in labor productivity, a similar goal was also met in
1955. 63/ The over-all contribution of the new wage system to improved
labor productivity in 1956 therefore remains obscure. The average out-
put per worker in construction enterprises subordinate to the Chief
Directorate of the Moscow Oblast Construction Industry (Glavmosstroy),
however, was 18 percent higher during the first quarter of 1956, in
spite of bad weather, than in the corresponding quarter of 1955. 61+/
With respect to the effect on average wages, it is probable
that the new wage rates and procedures, in spite of the accompanying
increased work norms, resulted in an increased average wage for con-
struction workers. Although the net effect of the higher norms and base
rates cannot be judged, it seems clear that the uniform labor grade sys-
tem and zonal adjustment factors will increase the wage level. In
addition, there is evidence that the new wages and norms have substan-
tially raised average wage levels on some construction projects in the
Far East. 65 The average wage for the construction industry in Mos-
cow Oblast during the first quarter of 1956 was 10 percent above that
for the first quarter of 1955, While the wages of "many workers"
increased 15 to 20 percent during this period. 66 The head of the labor
*~ Zone I includes the European USSR (except the extreme north); Zone II
includes the Urals area, most of West Siberia, and parts of East Siberia
and Central Asia; Zone III includes part of Central Aaia and Weat Si-
beria, most of East Siberia except Yakutsk, and the extreme northern part
of the European USSR; Zone IV includes the Far East and Yakutsk.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
and wages section of Olavmoastroy attributed the increases in wages,
as well as the rise in labor productivity, to the new wage structure
introduced in January 1956.
Finally, the Ministry of City and Rural Construction, USSR,
reported that in those trusts where "serious attention" was given to the
transfer to the new wage conditions the preliminary results have been
highly favorable. In three trusts cited as examples, labor productivity
during the first quarter of 1956 rose by 22.2 percent, 17.2 percent,
and 83.2 percent, respectively, compared with the same period in 1955?
Corresponding percentage increases in wages were 0.5, 9.4, and 35.5. 67
Results were less satisfactory in other trusts, where the new wage
procedures allegedly were introduced incorrectly.
2. State Agriculture.
Beginning in 1956, higher wage rates and norms were put into
effect on state farms in the USSR as part of the program of the Ministry
of State Farms to increase output per worker. 68~ Under the new rates
the monthly base wages of state farm workers will increase by an average
of 52 rubles. At the same time, work norms were also raised considerably --
for example, they rose 13.4 percent for milking cows, 25.7 percent for
swine breeding, and 16.5 percent for sheep breeding. The wage system was
also simplified by reducing the number of methods used for computing
wage payments for above-plan performance.
On 1 January 1957 a new system of paying managers and
specialists on state farms was introduced, ostensibly to relate the
income of these officials more directly to the economic effectiveness of
their farms' operations. ~ Under the old system the salary of a state
farm director depended primarily on the physical size of the farm and the
number of livestock, but under the new system the director's salary
will depend to an important extent on the farm's net income. The offi-
cials are to be guaranteed 70 percent of their monthly pay, but the rest
is to be withheld until the results of the farm's operations for the month
are known. If the production plan is not fulfilled, appropriate deductions
will be made from the portion of wages withheld, and if the plan is over
fulfilled the director and other officials will be paid a bonus of 20
percent for each percentage of overfulfillment. Finally, 12 percent of
the farm's above-plan profits are to be allotted for the payment of
bonuses to managerial and technical personnel.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Available information does not permit valid assessment
of the effects of these new wage systems. They may have contributed
somewhat to the substantial increase in labor productivity on state
fsx'ms in 1956 compared with 1955? The effect on workers' incomes is
not known, but it is possible that the new system of paying managerial
employees may decrease their total earnings to some extent. 70 The
wage reform on state farms is not yet completed, for Khrushchev indi-
cated in a recent speech that fYu~ther changes are contemplated. 71~
3. Machine Building.
In June 1956 the Soviet government announced that new wage
scales and work norms were to be put into effect in 14~enterprises of
the machine building ministries. The plants selected for experimental
testing of the new wage. conditions for example, the Kaganovich Ball
Bearing Plant in Moscow, the Tractor Plant in Kharkov, the Nevskiy
Machine Building Plant in Leningrad, and the Kuybyshev Locomotive Plant
in Moscow) represent a wide range of products and methods oP production.
The experiments are intended to supply data concerning the effects of
the new wages and norms on workers' earnings and productivity. On the
basis of the experience of the 14 plants, the ministries, with the
concurrence of the State Committee on Labor and Wages, will issue
general regulations extending the wage reform to all machine building
enterprises during 1957. 72
The wage changes were introduced in the experimenting plants
beginning in August 1956. Plans called for the following changes: the
establishment of a uniform, 8-grade wage scale, with labor grade
coefficients ranging from 1.0 to 2.8; uniform base rates for time-
workers and pieceworkers, with differentials for heavy and light work;
base rate increases ranging from 36 to 55 percent Por pieceworkers and
from 10 to 37 percent for timeworkers; a substantial increase in the
number of technically based norms; regrading of Sobs and rewriting of
,job-rating manuals;~and drastic curtailment of the use of progressive
piece rates. In addition, the plants subordinate to the Ministry of
Machine Building (and perhaps all of the experimenting plants) had to
adopt the new regulations governing bonuses for timeworkers issued by the
Ministry, probably in July. 73 The regulations provide that timeworkers
are to be paid bonuses for fulfillment of production plans, for reduction
in idle equipment time and other factors causing production delays, for
improving the servicing of equipment and work sites, and for raising
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
? product quality. Maximum bonuses of 20, 25, 30, and 40 percent are
fixed for deaignated general categories of workers and for performance
with respect to designated indexes, and within these limits the enter-
prise directors may award bonuses to individual workers and decide which
jobs and shops in the plant are to be covered by the bonus system.
Considerable information has been made available with
respect to the initial results of the new wage conditions in some of the
experimenting plants. In the Kuybyshev Locomotive Plant, work norms
were raised 48.5 percent and base rates 41 percent. For November,
4 months after introduction of the reforms, the plant's average wage
was 1.7 percent above that for July, and the output per worker was 5.2
percent higher. 74~ In the first month of operation under the new con-
ditions, hoxever, wages of pieceworkers actually declined 4.9 percent,
and 12.3 percent of them were unable to fulfill the new norms. 75~ In
the Nevskiy Machine Building Plant, where the changes were made in August,
the average percentage of norm fulfillment fell from 189 to 126.6 in Sep-
tember. Labor productivity in September was 17.5 percent above the
average for 1955 and 6.9 percent above that for the first 8 months of
1956, while average wages were 4.6 and 1.8 percent higher, respectively.
The base rates represented 69.1 percent of pieceworkers' total earnings
in September compared with 51.2 percent for the first half of 1956, while
for timeworkers the corresponding percentages were 79.0 and 68.5. 76
Base rates were increased 38 percent for pieceworkers and 35 percent
for timeworkers. 77~
The "Progress" plant (unidentified) in Leningrad reported
that workers fulfilled their norms an average of 135.3 Percent in Sep-
tember compared with 213 percent in August, before wages and norms were
changed. 78~ Base rates were increased 43 percent. During the first
month of operation under the higher base rates and norms, 30 percent of
all pieceworkers had higher earnings, a "small group" earned less, and
earnings of the rest were the same. Of timeworkers, 84 percent re-
ceived higher wages, the wages of 12 percent remained the same, and those
of the remaining 4 percent fell 30 to 70 rubles per month.
In the Kaganovich Ball Bearing Plant in Moscow, employing
acme 12,000 workera, norms were increased by an average of 52.3 percent,
while the relative proportion of technically based norms increased from
12.5 percent to 40 percent. ~ The new norms were overfulfilled by
15 to 20 percent compared with 50 to 100 percent under the old ones.
With the introduction of higher base rates, the share of such rates in
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
total earnings rose from 47.5 percent to 65 percent for pieceworkers and
from 68.7 percent to 81 percent for timeworkers. As a result of the
reclassification and regrading of jobs, the average grade of timeworkers
was reduced from 6.5 to 5, and such workers now comprise 45 percent of
the total labor force of the plant, compared with 20 percent before the
changes. The director of the plant stated that during the first month
under the new conditions the wages of "the overwhelming majority of
workers have remained at the same level, with the exception of certain
cases in which those of certain workers were obviously too high." 80~
In summary, according to the preliminary evidence available,
the initial results of the wage reform in machine building have been
fairly satisfactory, at least from the point of view of management. In
general, the results have been as follows: substantial increases in
base rates and even greater increases in work norms, a large drop in the
average percentage by which norms are overfulfilled, a rise in the ratio
of base rates to total earnings, downgrading of many jobs and transfers
of significant numbers of workers from piecework to timework, and
relatively small increases in average wages along with greater increases
in labor productivity. Various representatives of the 14 experimenting
plants maintain, however, that the range of coefficients in the new
8-grade wage scale (1.0 to 2.8) is not great enough -- they have urged
that the range be extended to 1.0 to 3.2 or 1.0 to 3.4. 82
In addition to the work being carried out at the 14 plants,
representatives of the various machine building ministries and the State
Committee on Labor and Wages are preparing uniform occupational lists
and a uniform job-rating manual. 83~ They are also working out uniform
methods for remunerating engineering-technical and managerial employees.
As part of a broad program to increase production in the
coal industry of the Ukraine, the Council of Ministers of the USSR and
the Central Committee of the Party issued a joint decree in October 1956
which provided, among other things, for a reduction in hours and a major
revision in wage rates and methods of payment in the Ukrainian coal
~ In some of the plants, where preparations for the wage changes
allegedly were inadequate, the initial increase in the average wage
exceeded the increase in productivity. 81~
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
mining industry. 84/ The wage provisions of the decree are aimed at
reducing the extremely high Labor turnover and attracting new manpower
to the mines by providing the workers xith additional economic incen-
tive. In addition, the decree is intended to correct some defects of
the old system -- obsolete base rates (set in 1943), unjustifiably low
ratio of base rates to total earnings (40 to 50 percent), payment of
progressive piece rates starting with 80-percent plan fulfillment,
excessive number of occupations, and numerous occupational wage rate
inequities. 85/
The major provisions of the decree are as follows: (a) an
8-grade wage scale with labor grade coefficients ranging from 1.0 to
3.75 is established, and base rates are raised substantially; (b) the
-number of occupations is reduced by more than two-thirds, and workers
are encouraged to master more than one skill; (c) bonuses, based on the
work of the brigade rather than that of the individual worker, are paid
for weekly plan fulfillment (instead of monthly as formerly) at the
rate of 20 percent for plan fulfillment plus 2 percent for each per-
centage oP output above plan; (d) increases ranging from 12 to 77 per-
cent in salaries for managerial and engineering-technical employees
are provided, plus bonuses of 30 to 50 percent for plan fulfillment
and 3 to 5 percent for each percentage of above-plan production; and
(e) mine managers are given the right to deny bonuses to workers who
neglect their work dr who commit progul (unjustified absenteeism). 86/
In addition, a new job-rating manual prepared by the Ministry of the
Coal Industry has been approved. Finally, the Ukrainian Ministry of
the Coal Industry has authorized payment of special bonuses, beginning
in 1957, to outstanding workers who introduce production innovations
which raise productivity and lower product costs. The bonus for an
individual may not exceed his annual salary, nor may it be greater
than 50 percent of the cost savings resulting from the innovation. 87
Many of the features of the new wage system apparently were
introduced in a few mines on an experimental basis earlier in the
year. 88/ After t'he wage decree was issued in early October, its pro-
visions were introduced gradually in a few mines at a time. The
announcement was made that more than 100 mines in the Donets Basin (Don-
bas) would be operating under the new conditions by 1 November. 89/
By the middle of December, 215 Donbas mines -- more than two-thirds of
the total -- had converted to the new system. 90/ If this wage system
proves satisfactory in the Ukrainian coal mines, it will be extended to
coal mines in other parts of the USSR.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
system. In one mine, which in June switched over to the payment of
collective premiums based on fulfillment of the coal extraction plan,
the cost of l ton of coal allegedly fell by 12.5 percent, wages rose
10.1 percent, and output per worker increased 16.3 percent. 91/
Similar claims concerning wages and productiv#ty have been made with
respect to other mines, in which the changes specified in the wa e
decree were introduced beginning in October. 92/ 50X1
de endent u on the performance of all workers in the brigade. 93/ 50X1
wages in the experimenting mines rose by 24.2 per- 50X1
cent. 94
Preliminary evidence suggests that the new wage system
will have favorable effects on output and productivity in the coal in-
dustry. Higher unit costs may result from the higher wages, however,
unless the number of workers per brigade can be reduced and the workers
can be induced to master a second trade. The reaction of the miners to
the new wage and work conditions is not known. The wage reform, along
with other measures started late in 1956, probably contributed mate-
rially to the success of the coal industry in the Ukraine in fulfilling
its output plan for the last quarter of ,1956 and the first months of
1957. 95/ In the long run it seems likely that the wage reform will
result in a significant increase in the average wage of coal miners.
Indeed, the deputy minister of the coal industry reportedly stated to
a British union delegation that miners believed their wages to be too
low relative to those in other industries and that as a result of the
current revisions wages would be raised generally throughout the in-
dustry. 96/ Higher wages seem to be an integral part of a concerted
program of incentives being offered by the government to attract and
hold manpower in the arduous and unpopular jobs in coal mines.
5. Nonferrous Metallurgy.
In October 1956 it was announced that the Ministry of Non-
ferrous Metallurgy, together with the "inspector for the metallurgical
and chemical industries" of the State Committee on Labor and Wages, had
agreed upon the fundamental provisions for reorganizing the wage struc-
ture of the industry. 97/ Plans call for the following: (a) replacement
of the existing 92 labor grade scales and more than 800 base rates with
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
a single 8-grade scale and 40 base rates, the labor grade coefficients to
range from 1.0 to 3.0; (b) establishment of 5 sets of base rates, the
highest for miners working underground and the lowest for auxiliary
workers of various kinds; (c) wage differentials of 15 percent and 30
percent for work in high altitudes; (d) geographical wage differentials
as recommended by the Committee for Wage Zones and Coefficients (pre-
sumably a subcommittee of the State Committee on Labor and Wages);
(e) equalization of wage rates for all workers in plants in the Urals,
Siberia, and the Far East (at present a 20-percent wage differential
applies to part of such workers); (f) establishment of uniform rates for
the wolfram, molybdenum, gold, platinum, and rare metals branches of
the industry; (g) a uniform scale of progressive piece rates and uni-
form system of bonuses for time- and auxiliary-workers; and (h) a
review of work norms. The Ministry of Nonferrous Metallurgy has also
prepared a new fob-rating manual. 98
According to preliminary estimates of the Ministry, the
new wage system will raise the relative share of base rates in total
earnings to 72 percent for pieceworkers and 82 percent For timeworkers,
with work norms to be fulfilled by 110 to 115 percent on the average.
Zn order to determine how the system will work out in practice, the Min-
istry ordered eight enterprises to put it into effect during the last
quarter of 1956. 99/ The eight enterprises are the following: the
Norilsk Combine, the Lena Gold Trust at Bodaybo, the Urals Aluminum
Plant in Kamensk-Ural'skiy, the Degtyarsk Ore Mining Directorate, the
Leninogorsk Metallurgical Combine, and the Dzhezkazgan Ore Mining Direc-
torate. The new system was introduced in three Dal`stroy placer mines
on 1 May 1956. 100/
6. Other Industries.
In November 1956 the Ministry of Ferrous Metallurgy of the
USSR announced that agreement had been reached with the State Committee
on Labor and Wages on the basic features of a wage revision in the indus-
try, and that the revisions were being introduced on an experimental
basis in several enterprises. 101/ The new system, which is similar in
a number of respects to that worked out for nonferrous metallurgy, pro-
vides for the use of 3 labor grade scales -- a 10-grade scale with grade
coefficients ranging from 1.0 to 3.2 for payment of production workers
in coke-chemical shops, an 8-grade scale with coefficients ranging
from 1.0 to 3.0 for production workers in mining operations, and an
8-grade scale with a range of 1.0 to 2.8 for all other workers. The
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
proposed wage scale and wage rates for mining operations are the same
as those adopted by the Ministry of Nonferrous Metallurgy. For non-
mining operations, three sets of base rates are fixed, the highest
applicable to pieceworkers on hot or heavy work, the second for piece-
workers on cold work and timeworkers on hot work, and the third for time-
workers on cold work. The new base rates are 48 percent above existing
ones. Numerous progressive piece-rate and bonus systems are to be
replaced with a uniform set of rules for calculating bonuses for plan
fulfillment. Machine building enterprises under the Ministry of Ferrous
Metallurgy are to use the wage scales fixed for the machine building
ministries. Likewise, timber enterprises, construction organizations,
and geological exploration activities subordinate to the Ministry are
to operate under the wage systems approved for those branches of industry.
Geographical wage differentials will be fixed in accordance with those
established for industry as a whole.
Preliminary steps toward a general wage reform have also
been taken in other industries. Various departments of the Ministry.
of the Timber Industry are working out draft plans for revision of the
xage system in certain sectors of the industry, in accord with general
guides laid down by the Collegium of the Ministry. 102 In January
1957 a new wage system was introduced on an experimental basis in
several large railroad stations, with the progressive piece-rate system
being replaced by straight piece rates plus bonuses. 103/ Preparatory
work has begun in the Ministry of the Radiotechnical Industry with the
intention of introducing new wages and norms in that industry in 1957. 104/
An experimental wage system, perhaps identical to that being used by the
14 machine building plants, is being used in an unidentified plant in the
aviation industry. 105/ The Ministry of the Automobile Industry has
sent draft proposals concerning the details of a norm and wage reform to
the enterprises for discussion and comment and is also working on the
draft of a new job rating manual. 106/ Finally, the State Committee on
Labor and Wages has approved proposals for the reorganization of wages
in the chemical industry and in highway transport and is reviewing pro-
posals for the gas and petroleum industry. 107/ The Ministry of Health
plans to try out in early 1957 a new system of payment in seven plants
producing medical instruments. 108/
Besides directing the wage reforms in individual industries,
the State Committee on Labor and Wages is working on policies to be .
applied nationally. As noted above, a subcommittee on "wage zones and
coefficients" is preparing proposals for the establishment of uniform
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
i
geographic wage differentials*; presumably this subcommittee is also
reviewing the existing provisions concerning bonuses and privileges
for work in the Far North. The industrial ministries have been
directed to work out standard work norms to be used by all enterprises
in a given ministry. 110
Policies to govern the payment of engineering-technical
and managerial employees are also being developed. Effective 1 Jan-
uary 1956, additional sums for payment of bonuses to meritorious
workers were made available to the enterprises through a liberali-
zation of the rules governing the formation and administration of the
special "enterprise fund." 111 These special funds, established in
eligible enterprises and financed by specified deductions from profits,
are placed at the disposal of enterprise managers to be used for bo-
nuses to workers and for other designated purposes.
D. New Bonuses for Technological Improvements.
On 1 August 1956 a new system of paying bonuses for techno-
logical improvements was put into effect in the USSR. 112 The new
rules, which replace those established in 1947-48, authorize the pay-
ment of bonuses to engineering-technical employees for working out and
introducing within a fixed period improved machines, equipment, and
materials used in production, as well as for improvements in the quality
of the final product. In contrast with the old system, the amount of
the bonus under the new arrangements will depend on the monetary econ-
omies resulting from the technological innovations and on the speed with
which they are introduced in production. Bonuses range from 5 to 30
percent of the annual economies. If the savings are less than 200,000
rubles, the bonus may be as high as 30 percent, but for savings of more
than 50 million rubles, the bonus may not exceed 5 percent, and in no
case may it exceed 3.5 million rubles. Bonuses for improved quality of
product are fixed at half those for technological improvements. Bo-
nuses are to be paid in installments at designated stages in the design
and introduction of the new technological improvements, which must be
completed within the planned period -- otherwise the bonus will be with-
held or reduced.
* According to the Chairman of the State Committee on Labor and Wages,
there are to be 5 wage zones with the following wage coefficients:
Zone 1, 1.0; Zone 2, 1.15; Zone 3, 1.3; Zone 4, 1.5; and Zone 5, 1.8. 109
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
The following general criteria for determining the economic
effectiveness of technical innovations have been established by an
interdepartmental commission representing the interested ministries and
committees: (1) the extent of reduction during the first and second
years in net cost per unit of product; (2) comparison of the new unit
cost with unit-cost levels in other Soviet enterprises and in foreign
enterprises; (3) the extent of the increase in output per worker; and
(4) the extent of reduction in capital expenditure per ruble of output.
Funds for the payment of the bonuses are to be provided, not from
regular wage funds as before, but from special Hinds established cen-
trally in each ministry concerned and fixed at 0.3 percent of total
planned product cost for the year.
In order to encourage the enterprises to produce new products,
changes have also been made recently (probably about mid-1956) in the
rules for paying plan-fulfillment bonuses to managerial and engineering-
technical employees. 113 The amount of the bonus will now depend on
the percentage of total ruble output that consists of products newly
produced in the enterprise, in contrast to the old method, under which
bonuses were paid for plan fulfillment and overfulfillment regardless
of whether or not the products were new.
E. New Procedures for Review of Work Norms.
On 15 August 1956 the Council of Ministers of the USSR
promulgated a decree entitled "Concerning a Change in the Method of Re-
view of Work Norms," which radically altered the procedures for
revising norms. 114 The decree, effective 1 January 1957, gives enter-
prise directors the right to determine the amounts by which work norms
are to be increased each year, as well as the time or times when such
adjustments are to be made. These decisions must be made in agreement
with the appropriate trade union representatives in the plant. The
decree also stipulates that norms may be raised only on those jobs that
have been affected by changes in technology or work methods.
'Under previous procedures, work norms were revised annually
throughout Soviet industry in January and February, with the inaugura-
tion of new annual economic plans. In January the enterprise received
from its ministry specific assignments on raising work norms, which
specified the percentage by which plant work norms were to be increased
and the date by which this was to be accomplished. When norms were thus
reviewed and revised, they might remain unchanged for the rest of the
year. This one-time, mass review of work norms allegedly had the following
serious shortcomings:
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
1. In general, each ministry fixed norm increases by
establishing flat percentages applicable to all enterprises under
it, or it fixed the goal for each enterprise by mechanical reference
to the past performance of the enterprise with respect to fulfilling
the norms. Under these conditions, tasks were often set too low for
some .enterprises and too high for others.
2. Because it proved physically impossible to restudy the
thousands of piece-rate jobs during the allotted period, enterprises
tended to raise norms for such jobs by flat percentages, regardless
of whether or not job conditions changed in such a way as to make
possible the fulfillment of the new norms. This approach sometimes
resulted in unwarranted increases in norms and consequent unjustified
reductions in workers' earnings.
3. Enterprises adopted the practice of not revising work
norms at the time that technological changes were made but instead
waited until the annual review period to do so. This practice re-
sulted in overexpenditure of wage hinds and in excessive earnings for
some workers.
4. Norms actually being used no longer represented true out-
put standards, and norm reviews had became a sham, as indicated by
the fact that in many instances the new norms were quickly overful-
filled to as great an extent as the old ones.
The new method of work norm revision represents a much more
rational approach to the task of keeping norms in line with technical
progress and changes in work methods. As apart of the general Soviet
drive for economic efficiency and decentralization of decision making,
the new decree grants great authority to the directors of individual
enterprises in the important area of norm determination. Formerly;
plant managers had merely the responsibility for fixing the initial
work norms on individual jobs and had to adhere whenever possible to
standard schedules set forth in manuals issued by the ministry. Under
the new decree they are now able to decide when norms are to be increased
and by how much. Presumably they also have the right to decrease norms
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
on particular jobs when warranted. The fact that annual economic plans
for the enterprise will continue to call for increases in labor pro-
ductivity and decreases in production costs, however, will generally
prevent plant managers from reducing norms.
Overexpenditure of planned wage funds by enterprises in the
USSR and the accompanying delays in wage payments to workers have been
chronic problems for many years. Wage fund overexpenditures, which
contribute to inflationary pressures in an economy operating at full
capacity with perennial shortages of consumer goods, are of consider-
able magnitude, particularly in certain industries. Thus during the
.first half of 1955, timber enterprises in Khabarovskiy Kray exceeded
approved wage funds 8.9 percent, while industrial enterprises ih the
xray as a whole overspent 5.9 percent. 115 During 1954 the Ministry
of the Paper and Wood Processing Industry of the USSR overspent its
total allotted wage fund by 37 million rubles. 116 Likewise, wage
delinquencies also have been frequent and of considerable magnitude.
Overexpenditure of planned wage funds has resulted from a
variety of factors, including the following: employing more workers
than called for by the plans, failure of the annual technical-indus-
trial-financial plans of the enterprises to make sufficient allowances
for required wage payments, failure of the plans to allow for emer-
gencies requiring overtime and extra wage payments, imposition of
above-plan production requirements without adequate provision for
necessary additional wage funds, and faulty estimates of the effect
of norm revisions on total wage expenditures. In addition, the wide-
spread use of progressive piece rates and of a murtiplicity of complex
bonus formulas makes the task of planning wage flxnds extremely diffi-
cult and leads to overexpenditures.
Overexpenditure of allotted wage funds is probably the most
common cause of enterprise wage delinquencies to workers. Under the
Soviet system, wage fund disbursements are closely controlled by the
banks. When an enterprise seeks to exceed its planned wage fund for
any month, the bank can release the necessary funds on its own
initiative only under narrowly defined conditions. Otherwise, funds
can be released only upon receipt of specific authorization from the
chief directorate or ministry to which the enterprise is subordinate.
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Because the superior organization will have to redistribute wage funds
to cover a given overexpenditure and may even be forced to appeal to
its superior, the necessary authorization may not be quickly forthcoming,
with the result that wage payments to workers are similarly delayed.
In 1954 the Soviet government launched a concerted drive to
minimize wage delinquencies and overexpenditures, as part of a general
move to maximize enterprise profitability and to strengthen bank con-
trol over enterprise finances. A decree of the Council of Ministers
of 21 August 1954 entitled "On the Role and Tasks of Oosbank USSR"
required enterprises to make up during a 3- to 5-month period any wage
fund overexpenditure not related directly to overfulfillment of the
production plan. 117 To do so, the enterprises must increase worker"
productivity or reduce wage costs. The banks are empowered to enforce
these obligations. To minimize delays in payment of wages
to workers,
50X1
the decree also gives wages the first claim on enterprise
This means that wage payments have priority over payments
funds.
to suppliers,
repayment of bank loans, and other financial obligations. 0
50X1
(this new system has reduced the level and frequency
of wage Hand overexpenditures and has hgd beneficial effects on enterprise
roductivit in many instances. 118 50X1
shortcomings in_methods of control over wage disburse-50X1
ments are still numerous. 119 It seems likely that these methods will
be revised further, in line with the general move to strengthen the
powers of the organs of state control in the USSR.
Another measure that should help to reduce instances of
excessive wage payment is the broader authority to manipulate wage funds
recently granted to enterprise directors. In a decree of the Council
of Ministers of 9 August 1955, enterprise directors were granted the
right 'to "economize on the wage funds received in the preceding quarters
for the payment of wages in the subsequent quarters of the same year." 120
These new powers will permit the accumulation of funds for defrayment of
future unplanned wage payments.
Finally, one of the objectives of the current general wage
reform is to reduce the pressures for overexpenditures of wage funds
that stem from the nature of the existing wage system. This is to be
accomplished in part by curtailing the application of progressive piece
rates, limiting their use to situations where it is considered vital to
secure production irrespective of cost. Higher base rates, which are
being introduced, should make it no longer necessary for enterprise mana-
gers to devise bonuses and extra payments of various kinds in order to
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
keep timeworkers' earnings in line with those of pieceworkers. The
efforts to improve procedures for planning and material procurement
which are being made along with the wage reform also should help
greatly to reduce wage delinquencies and overexpenditures.
The execution of an over-all reform of wages and work norms
throughout the economy of the USSR is exceedingly complex and time con-
suming. Hundreds of thousands of norms must be recalculated and many
thousands of estimates made of the probable effects of the rev}sed
norms and wage rates on workers' earnings, labor productivity, and
product costs. Revisions necessarily must proceed slowly, for miscal-
culations of any magnitude could alter the basic cost-price structure
and upset the planned balance of consumer income and expenditures.
Although the wage reform has proceeded somewhat slowly thus far, its
completion by the end of 1960 -- one of the major objectives of the
Sixth Five Year Plan (1956-60) -- should be achieved.
The government has shown unmistakably, both by word and deed,
that the wage and norm changes must not reduce workers' earnings. 121/
On the contrary, the average wage of workers and employees, currently
estimated at about 700 rubles per month, will undoubtedly rise as a
result of the reforms. Elden without other changes, the higher minimum
wages that took effect in 1957 will raise the wage level slightly.
Also, the preliminary results of the wage reform in construction and
in the experimenting enterprises in the coal and machine building indus-
tries indicate a rise in workers' earnings. According to plan fulfill-
ment announcements, the average wage of all workers and employees
in the USSR rose 3 percent in 1956 compared with arise estimated to
have been 2 percent in 1955. 122/ The chairman of the State Committee
on Labor and Wages has stated, moreover, that during 1957 wage reforms
in the machinebuilding, coal, cement, and metallurgical industries
will be carried out with "additional funds allocated for that pur-
pose." 123/ In his speech to the XXth Party Congress, Khrushchev
stated that during the Sixth Five Year Plan retail price reductions
would be on a smaller scale than in former periods and that funds
saved in this way would be devoted to a number of enumerated measures
includin the wage. reform. 124 More specifically, 50X1
the scheduled increase of 30 percent in rea wages uring 50X1
the Sixth Five Year Plan will be achieved primarily through an increase
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
in money xages. 125 Finally, the wage level necessarily must rise
if wage differentials that will attract manpower to the desired areas
and industries are to be established while at the same time wages in
the rest of the economy are not lowered.
The probable effect of the wage reform on earnings differen-
tials is difficult to assess because the expressed objectives with
respect to differentials are contradictory. On the one hand, the
alleged "equalitarian" trend in earnings is to be halted by estab-
lishing occupational, industrial, and geographical wage differentials
that will encourage the acquisition of skills, provide adequate com-
pensation for differences in job difficulty and work conditions, and
stimulate the voluntary migration of labor to the desired industries
and areas. At the same time the wages of the lowest paid workers are
being raised, and it is intended to reduce some "unjustifiably high"
earnings. The new base wage scales thus far established seem, on
balance, to provide for wider occupational differentials; the magni-
tude of the new "zonal" and industrial differentials is not yet fully
known. In contrast, the new minimum wage substantially raised low wage
rates, while the potential for high earnings will probably be reduced
through curtailment of the use of progressive piece rates and a sharp
reduction in the number of bonus systems.
After the wage reform has been carried out in most of Soviet
industry along the lines currently contemplated, the general level of
work norms will be much higher, and the whole system of norms will
make infinitely more sense than it does now. Introduction of the new
wages and norms plant by plant is being carried out simultaneously
with s whole series of measures to mechanize production operations and
to organize more efficiently the entire production process of the plant.
These measures, combined with higher base rates and improved bonus
systems geared more closely to individual and plant productive effi-
ciency, should contribute materially to increased labor productivity
and lower unit labor costs. The early results of the changes in sane
of the experimenting machine building and coal enterprises show in-
creases in productivity, increases which also usually have exceeded
the rise in the average wage. On balance, it is likely also that the
rationalization measures accompanying the changes in wages and norms
will help to reduce unit costs. In addition, the simplification and
standardization of the wage and norm structure, once effected, ought
to reduce administrative costs. On the other hand, total wage costs
will undoubtedly rise as a result of the reform. Same increase in
money wage levels is explicitly contemplated by the government, and
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
appropriate allowances will be made in the plans for this. Costs
could rise even more than planned, however, if there is serious miscal-
culation of the effects of the changes in wages and norms on workers'
earnings.
In the long run, worker reaction to the wage reform will
probably be favorable. The worker will like the increased earnings
which will accrue to him from the wage changes, even though the new
norms may require him to work harder. His task will be lightened,
however, if the program to improve the general efficiency of his plant
and industry succeeds, for his earnings potential will be less fre-
quently reduced by machine breakdown, irregularity of supplies, and
other production difficulties. The worker also should approve the
simplification of the system by which he is paid and the greater
rewards for acquiring education and skills. If the government can pro-
vide consumer goods and services sufficient to absorb the newly created
purchasing power, the Soviet worker will be better off under the new
wage regime.
During the difficult process of establishing the wage reform,
however, some adverse worker reaction is to be expected, for the av-
erage worker can hardly be expected to welcome the additional pressure
for increased output per unit of wage expenditure. Indeed, several
instances of concerted worker protests against wage and norm practices
reportedly occurred in the fall of 1856 in Moscow machine building
plants, 126 one being the large Kaganovich Ball Bearing Plant.* The
mere fact of change in itself may be unsettling to the worker, for he
cannot be sure how his personal fortune will be affected. The
earnings of some workers may actually decline during the initial phases,
even though such is not the intent, because of miscalculation of the
workers' ability to cope with the new norms or failure to carry out
adequate preparatory work. It is believed, however, that such diffi-
culties and unfavorable worker reaction are transitory and that on the
whole the wage reform will have positive effects on worker morale.
*~ According to available evidence, the strike at the Kaganovich plant
involved grievances concerning bonus awards and working conditions in
addition to dissatisfaction over some of the results of the wage
reform. 127 _
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
Declassified in Part -Sanitized Copy Approved for Release 2013/06/04
CIA-R DP79R01141A000800110002-8
 Declassified in Part -Sanitized Copy Approved for Release 2013/06/04 :CIA-RDP79R01141A000800110002-8