Russia Coal Sector Restructuring SocialAssessment 19703 ...... 19 9 6 Public Disclosure Authorized

-. n. -0 X ~~~~~'.. .. -, Public Disclosure Authorized Public Disclosure Authorized

Ayse Kudat and VadimBorisovFI EC P Public Disclosure Authorized

The World Bank ECA Country Department III Infrastructure, Energy and Environment Operations Division

RUSSIA COAL SECTOR RESTRUCTURING SOCIAL ASSESSMENT

Ayse Kudat and Vadim Borisov

The World Bank ECA Country Department m Infrastructure, Energy and Environment Operations Division

The findings,interpretations, and conclusionsexpressed in this paper are entirelythose of the author(s) and should not be attributedto the Governmentof the Russian Federation,to the WorldBank, to its affiliated organizations,or to membersof its Board of ExecutiveDirectors or the countriesthey represent.

I TABLEOF CONTENTS

PREFACE ACKNOWLEDGEMENTS EXECUTIVESUMMARY

CHAPTER1: INTRODUCTIONAND BACKGROUND...... 1

Coal Industry:Background ...... 1 Key Players and TheirInterests ...... 3 Social Impactsof Coal IndustryRestructuring ...... 5 World Bank Involvement...... 8

CHAPTER2: SOCIALASSESSMENT: OBJECTIVES AND METHODOLOGY...... 10

Objectivesand Methodology...... 10 Survey Areas...... 12

CHAPTER3: FINDINGSOF THE SA: ISSUESAND RESPONSES ...... 14

Develop CommunitySpecific Responses ...... 14 Focus on VulnerableGroups ...... 26 ImproveLiving Conditionsand Housing...... 33 RecognizeDiversity in CompensationExpectations ...... 35 DiscourageGovernment-Funded Voluntary Relocation ...... 40 RecognizeHigh Levels of PerceivedVulnerability ...... 45 IncreaseTrust in the System...... 48

FIGURES Figure 1: Place of Birth Figure 2: Age Distributionand Family Type Figure 3: Miningas a Shareof Total Employment,1992 Figure 4: EducationLevels Figure 5: EducationLevels -Pensionersvs. Unemployed Figure 6: Employment Structure - Vorkuta Figure 7: Employment Structure - Kiselovsk Figure 8: Living Conditionsin Vorkuta and Kiselovsk Figure 9: Desire to Move Figure 10: WorkerVulnerability Figure 11: Need for SocialAssistance - Vorkutaand Kiselovsk Figure 12: OrganizationsTrusted To DistributeMoney And Benefits II TABLES Table 1: Monthly AverageHousehold Income Per Capita Table 2: Labor StructureIn Coal Basins Table 3: Employeesin Different Sectors Table 4: HouseholdsWith At Least One Person EmployedOr Retired From Coal Sector Table 5: HousingConditions In SettlementsOf Vorkuta Table 6: AvailabilityOf ModernConveniences In SettlementsOf Vorkuta Table 7: ProfessionalSpecialization Table 8: Employment Structure - by Gender Table 9: OpinionsRegarding Opening Own Business Table 10: ReadinessTo Move AmongMiners And Non-Miners Table 11: OpinionsRegarding Mine Closures

BOXES Box 1: PsychologicalReactions To Mine Closures- GlobalExperience Box 2: History Of Vorkuta Box 3: CopingWith Uncertainty:Responses To The Closing Of PromyshlennayaMine Box 4: UnemploymentBenefits Box 5: Social AssistanceBenefits in Russia Box 6: Miners' Benefitsin DimitrovaMine Box 7: Halmer-YuMine Closure and Relocation Box 8: Proceduresfor Mine Closures Box 9: PromyshlennayaMine Closing Box 10: WorkersAnd The CherkasovskayaMine Closing

REFERENCES

ANNEX 1: SAMPLINGMETHOD PREFACE

Russia's programfor restructuringits coal sector affects a wide range of interest groups who have a stake in the sector. As part of the preparationof a Coal Sector AdjustmentLoan (SECAL) and an ImplementationAssistance Project, the Government of the Russian Federationand the World Bank supportedthe preparationof this Social Assessment. The assessmentwas a joint effort between Bank staff and Russian social scientists who systematicallylistened to the views of the people: the miners,their families and communities. The views of a broad range of other interestgroups were also solicitedand are reflectedin this study.

The Social Assessmenthad an important impact both on the substance and process of WorldBank assistance. With regard to substance,the Social Assessmenthelped reorientthe thinkingof the Bank, and, we believe, of the Government,towards more relevant and transparent institutional mechanismsto cushionthe impact of the restructuringon miners and affected communities. The work also helped foster a broad consensuson the need for a permanentmechanism of social monitoringand stakeholder participation in the restructuringof the coal sector. With regard to process, the Social Assessmentallowed both the Govermmentand the Bank to develop a credible basis for discussingwhat beneficiaries did and did not feel was important to improving their lives. That the Russian coal restructuringprogram now places an emphasison funding social assets divested from the coal industry is, in great part, due to the SocialAssessment's findings.

This Social Assessmentis one of the first to be associatedwith a policy based loanto be fundedby the World Bank. It has been an importantinstrument in allowing attentionto be given to social factors essentialto the long term successof the reform agenda. In light of the broad interest in the social impact assessment of sector restructuringin general and of the special interest of coal restructuringin transitioneconomies, this report is being publishedfor distributionto the generalpublic.

JonathanBrown ConstantineMichalopoulos DivisionChief SeniorAdviser Europe & Central Asia - CountryDepartment III Europe& CentralAsia Infrastructure,Energy and EnvironmentOperations Division CountryDepartnent III

Acknowledgements

Ayse Kudat, PrincipalEnvironmental Sociologist, is the task manager for the Russia Coal SectorRestructuring social assessmentand the main authorof this report. The field work for the assessment and initial analysis of the data were carried out by Vadim Borisov (Institute for Comparative Labor Relations) with support from Peter Bizyukov and KonstantinBurnyshev. The analysis of the data as reflected in the social assessmentwas completedby Bulent Ozbilgin,who, together with Nezahat Oz;men,also prepared charts and tables. Janis Bernsteindrafted sectionsof the report.

The author wishes to acknowledgethe strong support of Constantine Michalopoulos, Senior Adviser to the Director (EC3DR); David Craig, who is the task manager for the World Bank Russia Coal Sector AdjustmentLoan (SECAL);Selina Shum, task manager of the Coal Sector RestructuringImplementation Assistance Project; and of Division Chiefs JonathanBrown (EC3IV)and Anand K. Seth (EMTEN).

i EXECUTIVESUMMARY

i. Russia's coal sector is undergoingsignificant restructuring. While intended to promote long-term economicimprovement, the restructuringprocess involvesclosing many unproductive and unsafe mines - and consequently,losses of jobs and real incomes. Those employedby the mining industry,as well as numerous other enterprisesand public services,are all affected,as are their familiesand communities.The Government of the RussianFederation has requestedWorld Bank fundingto support Russia's coal sector reform program, specificallyto: (i) reduce the impactof the coal sector on the federalbudget by supportingthe reduction,and eventualelimination, of subsidies;(ii) support a restructuringprogram to reduce the size of the industryto increase efficiency;(iii) cushion the impact of the restructuing on coal miners, their families, and affected communities;and (iv) promote the long term sustainabilityof the coal sector through the establishmentof a competitive,commercial industry. As one of the first steps in preparing this support, a team of local social scientistscarried out a social assessment(SA) in collaborationwith the Ministry of Economyof the Russian Federationand the World Bank.

ii. The main objectivesof the SA were to: (a) identifykey stakeholdersand establish an appropriate frameworkfor their participationin the coal sector restructuring;(b) assess the socioeconomiccharacteristics of households in mine basins; (c) determinehow miners and employees of other sectors are affected by restructuring, as well as understand the labor market and workers' expectations with respect to social protectionand compensation;(d) characterizeattitudes toward government-sponsored relocation programs that promise free housingto residentsof Northernregions affectedby the coal sector restructuring;(e) assessthe level of trust toward varioussocial institutions;and (f) determinehow people affectedby mine closureswould like to see the restructuringproceed.

iii. To achievethese objectives,the SA involvedconsultations with a broad range of stakeholdersfocusing primarily on miners, their families, and miningcommunities. In particular, the SA team carried out several thousandformal and informalinterviews and group discussionsin four of the major coal basins;Vorkuta, Tula, Rostov,and Kemerovo. The team also carriedout a surveyof 800 householdsin Komi Republic-Vorkutaand Kemerovo-Kiselovsk,and prepared case studies based on several hundred interviews. Several hundred informalinterviews in coal communitiesin Tula and Rostovalso were undertaken.In all of the conunuities visited,the SA team consultedlocal trade union members,coal associations,local govermnentrepresentatives and non-govermnentalorganizations (NGOs). A first draft of the SA report, which was prepared in March 1996, has been discussedwith the staff of Ministryof Economyand the Ministry of Labor, key stakeholder groups including members of Duma, and executive officers of trade unions. This draft reflects their comments.

Key Playersand Their Interests iv. A range of stakeholdersare affectedby the coal industryrestructuring process, each having their own specialconcerns and intereststhat often conflictwith those of the others. They includebeneficiaries and other affected populations, local and regional institutions, coal sector managers including mine managers and regional and national coal associations, trade unions, regulators and policy makers, and the broader constituencyfor reform. v. While there are no director immediatebeneficiaries of the restructuring,Russians all over the country, ii who have indirectlypaid for the large subsidieschanneled to inefficientlymanaged mines, eventuallywill see their financialburden reduced as the coal sector becomes more self-sustaining. In addition,the employeesof efficientmines are likely to benefitfrom the creationof a smallerbut viable and profitablemining sector. The major losers in the coal sector restructuringare those in the coal regions - miners and non-minersas well as their familiesand communities- who will be adverselyaffected when subsidiesare reduced,jobs are cut, and mines are closed. Their suffering,however, could be cushionedand reduced with improvedpolicies, timely and adequateinformation, and full payment of existinglegal entidtlements.Their potential losses in terms of rapid deterioration of social services, housing, and infrastructure can only be partially and gradually compensatedby strengtheninglocal govermnentsto take over the managementand maintenanceof social assets and by encouragingnew investmentsin other sectors. Internationalassistance can help to cushionthe impact of coal sector restructuring. vi. Another important stakeholdergroup is the consttuency for reform which includes the public at large, academicinstitutions, labor and professionalassociations, and the media. Due to the high visibilityof the coal sector, the views of the media and the public at large are extremelyimportant for economicreform in the country as a whole. Similarly, the managementof coal sector reform is one of the key issues that influencesthe balance of politics in Russia. NGOs of the sector, while limitedin number and regionalscope, also are importantand receivingincreasing government attention.

Socialmp=actsof Coal SectorRestructuring vii. Russia's coal sector restructuringis having and will continueto have major impactson the lives of coal minersas well as their familiesand communities.These impactsare felt in three principalways:

(a) Loss of employment. Unemploymentcan arise from: (i) losses of jobs at closing mines; (ii) downsizingof employmentat mines that continuetheir operations;and (iii) employmentreduction in enterprisesthat support mining operations(for example, equipmentmacturi) and services that supportmine settlements(for example, medicalfacilities and kindergartens).

(b) Inadequate compensatdon. Miners are uncertain of their entitlements;and there are significant differencesbetween entitlementsand what miners actually receive. Severance benefits under the existing system are restricted to three months of wages. If unemploymentextends beyond three months, laid-offworkers are entided to additionalcompensation equivalent to a portion of their base salary. While some regulations theoreticallyallow workers to receive compensationand pension payments augmentedby the regional coefficient(an increase above the base salary for residentsof harsh climatic zones), these entidtlementsusually are nullified by ceilings imposed by the entities administeringthem. Moreover, while the severancepackage agreementssigned between individual mines and unionshave been quite generous,often they have not been observedduring mine closures.

(c) Deteriorationof social services. Traditionally,mine associationshave provideda range of servicesto minersand the settlementsthat support individualmines (for example,housing, education,health care,

'Recently, the Fund for SocialGuaraotees, worldng with the Veteransof the North and DisabledMiners Fund have receivedInter- AgencyCoal Commissionsupport for a five year proposalto relocatea group of particularlyvulnerable mine workers. iii transport, vacation facilities, energy and other infrastructuralservices). While these services have tendedto be better than the averagefor the populationas a whole,2 their transfer to financiallystressed local governmentshas meant either that these services were no longer available or their quality deteriorated. Althoughthis problem is not unique to coal basins, it affects residentswhen their ability to cope with inadequateservices is particularlylimited due to large-scaleunemployment in both coal and non-coal sectors as well as to an insufficientlydiversified economic base that cannot offer alternativeemployment. viii. While any restructuring involves significantsocial costs, coal restructuring in Russia has had a particularlyadverse impact.The SA suggeststhat: (a) workershave not receivedthe advancenotice required by Russianlabor legislation;(b) coal subsidieswere not effectivelyused to providebetter social protectionfor those who have lost their jobs; (c) the coal labor unionshave failed to defendthe interests of the workersaffected by mine closures;(d) social servicestransferred from coal companiesto municipalitieshave deteriorated;(e) non- miners were inadequatelyprotected from the impactof mine closuresby the existing social safety net; (f) the present institutionalarrangements do not ensurean equitableallocation or reliable distributionof subsidies; (g) minersare ill-informedabout their rightsand aboutthe restructuringprogram; and (h) mining communitieshave littletrust in the present system,particularly for allocatingand distributingsubsidies.

Main Fincdingsof the SA ix. The results of the SA confirm that miners and mining communitiesin the four major coal basins are not faring well under the current system of coal restructuring. Their uncertain future, lack of adequate information and legal recourse, irregularity in receiving wages, severance payments, and guidance for employmentsearch, and lack of trust in the governmentand other institutions,highlight the need to manage better the social dimensionof the coal restructuringprocess. The followingare the main findingsof the SA:

(a) Coal setdements have diverse characteristicswith respect to demographic structure, income levels, and labor force. As a result, their responseto and expectationsfrom coal sector restructuring are not uniform. Some communitieshave establisheda well-linkedsocial fabric and their members are able to support each other in coping with the negative impactsof the restructuringprocess. Other communitieshave more heterogeneouspopulations, with many immigrantsfrom other regions of the FSU and weaker community support systems. Communityspecificity, therefore, is important in definingthe impactsof sector restructuringand the necessarymeasures for mitigatingthem.

(b) The portionof the worklngpopulation acually employedby the coal sector varies considerably by community. According to the 1994 World Bank Report, "Russian Federation Restructuringthe Coal Industry: Putting People First," in Kemerovo and Komi Republic, mining constitutesslightly

2 Accordingto the findings of a Barnkmission undertaken in April 1996 to various coal regions, the housingand utilitycosts were the largestburden, amountingto 58 percent of the social spending,while kindergartenswere 27 percent and entertainmentfacilities 11 percent of the total. With respectto housingcosts, those associated with providingheat and hot wateramounted to 60 percent;the rest is spenton maintenanceand capitalrepair. In 1993,the RussianGovernment initiated a generalprogram of social assets divestiturefrom enterprisesto municipalities.Until late 1995,the coal enterprisesdid not divest a significantamount of their socialassets. In the last monthsof 1995, however, a substantialportion of the entire stock was transferred. It is estimated that by January 1996, remaining socialassets attached to Rosugolamounted to 30 percentof the initial stock. iv over 18 percent and 10 percent of total employment, respectively. In all other coal regions, it constitutesa small share of employmentranging from less than 1 percent in Sverdlovskto 6 percent in Rostov. Other enterprisessuch as milk factories, refrigerator and mechanicalplants, construction materials plants, agricultural enterprises, chemical or textile enterprises are important sources of employmentin these localities. In the last five years, moreover, the miningenterprises appear to have shed ancillary functions. Consequently,those working in social services, who once were categorized as "coal sector" employees,now are considered "governmentsector."

(c) Severalarbitrary regulations make it difficultfor people to move out of the coal basins. Fear of losing one's housing entitlementappears to be the most importantconstraint to geographicmobility. Various regulationshave imposed residential registrationrequirements and fees, prevented workers from gettingtheir full pension compensation(including those witha higher "Northern" coefficient),or banned the collection of pension and unemploymentbenefits in different parts of the country. Members of coal conumunitiesanticipate severe difficulties in being able to receive unemployment benefits or their pensionsonce they move out of their communities.Perceived difficultiesin selling their homes and/or having access to housing elsewhere in Russia further restrict their geographical mobility.

(d) Pensioners, elderly, migrant workers, the disabled, and women are adversely affected. The results of the SA in the two surveyed communitiesreveal that pensioners and workers approaching retirementage are a particularlyvulnerable group. They have attained lower levels of educationthan the rest (even less than the unemployed),lack specializedexpertise, and have low geographicmobility and a weak social support base for changing locations and/or jobs.3 Pensioners are particularly vulnerable to mine closures not only because mines provide opportunities for post- retirement employment,but pension benefits often are distributed by the mmnes. The disabled constitute a relativelylarge vulnerablegroup because of the healthhazards that characterizethe coal sector. Mine closures and/or serious downsiing are particularlythreatening to this group because of the risk of losing the social benefits that they and their families received from coal associations. The status of migrantworkers is not well-ocumented. Under the current system, however, nugrant miners from LUkraine,Kazakstan, Azerbaijan, and other FSU republics receive half the salary of Russian miners and have far fewer privileges.While the vulnerabilityof womenand women-headedhouseholds is less obviousfrom survey data, case studies of mine closurespoint to discriminatorypractices directed at women.These SA findingsrelated to vulnerablegroups are broadly consistentwith the findings of the PovertyAssessment conducted for Russiain June 1995.4

(e) Non-mmersare also affectedby coal resuctuing. Amongthose who have been laid off in Vorkuta

3In this SA, vulnerabilityis measuredin terms of risk of loss of employmentand/or ability to respond to changing labor market conditionsas opposed to absolute poverty. Risk of loss of benefits and inability to find mechanismnsto access alternativeswould likewisecontribute to vulnerability.For example, if data indicatethat older workersare more likely to be laid off and have less educationand fewerskills to searchfor new employment,they wouldbe identifiedas vulnerable.

4According to the 1995 PovertyAssessment of the World Bank, "Women in Russia are particularlysusceptible to poverty. Despite higher educationlevels and high labor force participationrates, womenhave traditionallybeen concentratedin low wageoccupational groups, and paid less thanmen. They also figure disproportionatelyamong the unemployed." V and Kiselovsk, miners are a small percentage. In many coal areas, unemploymentin the non-coal sectors is high. For example, in many communitiesvisited in Tula, numerous factories have shed workers or closed their doors permanentlymuch earlier than the coal mines. Vulnerabilityto unemployment,therefore, is community-wideand is as much a problem of non-miners as it is of miners. Moreover,those employedin the non-miningsectors are vulnerablebecause they have lower incomes,higher rates of unemployment,less adequateliving quarters, and lowerlevels of sldlls.

(f) The transferof a substantialamount of social assetsfrom coal enterprisesto local governmentsis having adversesocial effects. Field observationsand case studiesas well as subsequentinformation from the Project Preparation Unit (PPU) - which was establishedin 1995 within the Ministry of Economyto help prepare the Coal Sector AdjustmentLoan (SECAL)and Coal Sector Restructuring InplementationAssistance Project - indicatethat, in principle, the transfer of social assets from coal enterprisesto local governmentshas taken placealready. In some regions, such as Vorkuta, numerous workers who were once on the payroll of coal enterprises, have been placed on the payroll of municipalitiesin the last few years. Becauseinadequate financing accompanied the transfer of assets, social support services such as hospitalsand kindergartenshave either closed or are unable to fulfill their function. The inadequatecapacity of local governmentsthat assume the responsibilityfor the maintenanceand managementof these assets also adds to the problems. Due to the lack of adequate informationsystems, moreover, there is no completelist of what assets have been transferredand when, or what has been the preciseeffect of thesetransfers.

(g) People are threatenedby the restructuringenvironment. In all four coal regions, perceived vulnerabilityto unemploymentis high. Accordingto the survey, nearly a third of the respondents interviewedexpect to lose their jobs withina year.

(h) Notwithstandingtheir perceivedvulnerability, many supportcoal sectorresrucng. Miners in all four regions and other stakeholdersgenerally agree that loss maldng enterprises need to be restructuredto build a strong coal sectorin the future.

(i) Cash compensation,the continuationof socdalbenefits and employmentare the most salient expectationsof householdsdirectly or indirectlyaffected by the coal sector restructuring. The need for alternative employment is clearly articulated during informal discussions, especially in settlements which lack a diverse economicbase and potential for the developmentof the informal sector. Not only miners and other familiesbut also representativesof Duma, the Ministry of Economy and Ministryof Labor as well as the scientificcommunity, all stressthe need to demonstrateinnovative approachesthat would help generatealternative employment opportunities in coal basins. Accordingto the survey results, there are high expectationsfor governmentsupport to mitigatethe adverse impacts of the restructuringprocess.

(j) Demandfor publiclyprovided relocation housing is specific to Vorkuta.In Vorkuta, all citizens, miners and non-minersregardless of their age, gender, income,or other socio-economiccharacteristics expect to receive a free relocationhome elsewherein Russia. This is due in part to past practices which enabled coal workers to move at their own expenseand initiativewith the miningassociations providingsupport for travel expensesto the residentsof Northernregions. The propensityfor Vorkuta vi familiesto move and expectationsof receivingstate supportfor such a move has also been fueled by a number of organizations, and several Presidential decrees announcing free relocation housing privileges for Vorkuta. Elsewhere in the coal basins surveyed, there is no similar demand for relocation.

(k) Younger skilled workers and professionalsfrequently leave their homes voluntarily and find employmentat thewrown initiativewithout any rerinig. Case studies of mine closures and community visits in the four coal regions attest to relatively high job mobility of skilled and professionalworkers. The tendencyto seek supportfrom governmentalorganizations, particularly the Federal EmploymentService, is low. Accordingto the survey, when asked about the type of support they would need if their jobs are affected, few expressed demand for employmentassistance and/or training/retraining.

(1) Coal miningcommuniies have litde trust in the system. Low trustin the system is widespread throughoutcoal regions; indeed, this appears to be the situationthroughout the country. Accordingto the survey, about one-fifthof the householdsof these communitieswould not trust any organizationto distributemoney or other forms of assistance. Only five percent would trust Rosugol, less than three percent would trust the regional coal companies, and three percent would trust the regional govermnent. Less than eightpercent wouldtrust trade unionsand less than two percent would trust an employmentservice. In contrast, 38 percent of householdsin Vorkuta and 22 percent in Kiselovsk wouldtrust a multi-stakeholdercommission such as the Inter AgencyCoal Commission. x. The findingsof the SA are not representativeof all coal regions.5 They indicate, however, that there are diverse populationsaffected by coal sector restructuring, and consequently,marked differences in how people livingin variousgeographic locations perceive and are affectedby the restructuringprocess. And these differencesare confirmedby 1995 census data and other recent informationprovided to the SA team by the PPU. In light of these data, there clearly is a need for a continuousSA process to monitorthe social impacts of coal restructuringand their changesover time.

Kae Issuesand Recommendations xi. The actual responses of Russian coal miners and their communitiesto the adverse impacts of restructuringare not well documented. But they appear to range from active oppositionthrough strikes, to adjustmentthrough job search and other mechanisms, to resignation and withdrawal. Expectations of government responsesalso range from voluntary relocation with full benefits, to opening new mines and creating new jobs. There seems to be increasingrecognition, however, that the financial constraints are too severe and thus realisticexpectations should be establishedin order not to reduce trust in "the system." xu. The most importantfinding is that coal sector restructuringaffects sectorsother than coal, and adverse social impactscannot be mitigatedby focusingexclusively on miners.6 While coal sector institutions(that is,

5 Also, SA is one of manyinputs to a decisionmaldng process on the issues addressed.

6The transition to the market economy appears to be causing unemploymentand hardship throughout Russia. The SA was not designedto establishwhether such hardshipis higher or lower in coal basins, and thus, does not call for a "special treatnent" of coal vii nationaland regionalcoal associations)can help to ensure that miners receive fair compensationunder the law, the main responsibilityfor designingan effectiverestructuring program falls on the nationalgovernment, throughits many ministriesand agencieswhich shouldestablish policies and institutionalmechanisms to help the general population. Indeed, location-specificaction will be needed to realize such reforms. These mechanisms,therefore, clearly cannot emerge from coal sector institutionsalone. Given the current level of knowledge,there are severalkey areas where governmentaction might increasethe social sustainabiityof the coal sectorrestructuring program 7:

(a) Reducinguncertainty among miners and their families by establishingand adhering to a scheduleof whichmines will be closed and where employmentwill be reduced in the near term.

(b) Clarifyingthe legal frameworkand establishingwhat could be more equitablepolicies (for example, allowingthe transfer of coal pensionswith higher coefficientsto other regionsand providingflexibility in the residentialregistration system for those leavingcoal regions).

(c) Acceleratingthe coal sector reformprogram by specialfocus on the followingaction areas:

• Localgovernments need to condinuesocial programs and services. SA showshigh demandfor the social services that were once provided by the coal associations.A substantialportion of these servicesand relevant assets alreadyhave been transferredto local governments. With no further support from the mines in the provisionof such services, many householdsare adverselyaffected even when their members have not lost their jobs. Therefore, strengtheningthe institutional capacity of local governnents to prepare and implementsocial mitigationprograms coveringboth miners and non-minersis important. This can be done by allocatinga substantialportion of the remainingsubsidies to the sector to supportthe managementof transferredsocial assets;ensuring that budgetaryarrangements are in place; so that supportto the communitiesis not divertedat the regionallevel or assignedto lowerpriority objectives at the local level.

* Governmentpayment of severance in a timely manner is a high priority that would enhance workers' ability to move freely in search of alternative opportunities.Case studies on mine closuresindicate mixed experiencein workers' abilityto receive full severancepayments under the labor Law and only partal compensationas per tariff agreements. Becauseworkers feel that full and timelypayments are important,a substantialportion of the subsidiesremaining in the sector should be specificallyallocated to social protection expendituresand disability compensation. Given high levels of uncertaintyand low trust in the system as documentedby the SA, promises for additionalcompensation should only be made when financiallyand economicallyfeasible. 8 areas.Nor does it call for exclusivenew benefitsdirected to vulnerablegroups.

7The WorldBank alreadysupports or is preparingprojects that deal with communityinfriastructure development, enterprise housing divestiture,employment services and social protectionbut are not focused on mining communities.Lessons emergingfrom these projectsshould be taken into account for the govemment'srestructuring program and for any pilot programs that the Bank might support. s Clearlya financialframework is necessaryand people'spriorities need to be better understoodwith respectto alternativecushioning mechanismssuch as supportto socialprograms. The next phaseof SA aims at a better understandingof these priorities. viii

* The governmentshould only consider financial support to voluntary relocation programs when there are environmentalhazards associatedwith mining operations or a mine closing and the affectedhouseholds require relocationto a physicallysafer location. Field visits undertakenduring the course of the SA pointed to housing made unsafe as a result of mining operations. This suggeststhe need to provide relocationservices (definedas govermnentprovided free housing)for physical safetypurposes to be extendedto affectedhouseholds whether or not their members have lost theirjobs in the case of closuresor significantdownsizing.

* The government should consider establishingpositive policies to enhance labor mobility and eliminatethose that retard it. The SA revealed that there are numerouspolicies and practices that hinder the ability of workers to move out of the coal basins in their search for employment. Such policiesand practices also make it difficultfor the retired populationsto move to other regions of the country. xiii. In supporting the Government's coal sector restructuringprogram, the World Bank can make a contributionby:

Supportingthe developmentof communityspecific responses. The bulk of coal production and coal sector employmentis in 18 regions, four of which make up for more than 90 percent of total coal output and 70 percent of employment(1992 figures). For that reason, efforts should be focused on these four regions to ensure maximumimpact. Within each region, however, there is substantialvariability among the communitieson the extent to which they rely exclusivelyor primarily on coal production for their livelihood. Thosewith heavier relianceshould receive greater support.

Assistng in the developmentof commnty social i maintenanceprograms that would benefit ai membersof the commuity, including vulnerablegroups, and that create employment opportmitiesfor some. SA also showedhigh demand for supportin the maintenanceand managementof housing and community infrastructure. Maintaining housing and infrastructure would not only help improve living conditions,but would generate a certain level of employmentfor miners and non-miners alike. While the employmenteffects of these programs are likely to benefitprimarily the younger, better trained, and dynamic parts of the labor force, their developmenteffects would be shared by the more vulnerablegroups.

Helping create employment opportunites through community-basedinnovative development initiativessuch as micro-enterprisedevelopment. Accordingto the SA findings, a segment of the coal communitiesis somewhatskeptical of private initiativesbased on what they perceive to be the motivations of private sector operators. Nonetheless, there is large support for and interest in micro-enterprises. Many workers feel that they can be engagedby such enterprisesand that they would be willing to receive training to acquire the skills needed by these enterprises. This type of community-oriented development effort would provide opportunites for both miners and non-minersand thus provide social protection for the communities.Further, supportingsuch programs would help civil society development in coal basins ix and strengthencommunity-based organizations (CBOs) and NGOs.9

Supportng RegionalInter-Agency Commissions and a network of local govermnentsto facilitate participatorypriority seting in the regionaldistribution of benefits. One of the importantfindings of the SA related to demand for local multi-stakeholderstructures to administer subsidiesand severance packagesassociated with the coal sector restructuring.In defining community-specificactions, it may be useful to promote the developmentof a participatorystructure that brings together the views of key elementsof the local communities.In this relation,supporting regional branches of the Inter-AgencyCoal Commissionand mechanismssuch as the recently established(February 1996) Network of Mayors of MiningCities is important.

Helping set up an independent social impact monitoring mechasm. Given the emphasis on "putting people first" and the findingsof the SA, the informationgaps relating to the social impactsof transferring social assets from enterprises to local governments, the low trust communitiescovered by the SA have for the "system," and the need for greater transparency in the implementationof the restructuringprogram, all point to the usefulnessof establishinga continuousSA process.

Assistingin the developmentof a participatoryframework for the coal rest scuringprocess. Such a frameworkshould take into considerationsome of the conflictsamong stakeholdersand empoweraffected populationswith sufficientinformation concerning their rghts and entilements. This frarneworkalso shouldbe designed to ensure transparencyin reform implementationso that all stakeholderscan make appropriatechanges in their responsesto reform. The restructuringprogram should:

* providetimely and adequateinformation;

* involvelocal level stakeholders;

* ensure that those typically "voiceless" are empowered and have a clear understanding of their entitlementsand prospectsfor re-adjustment;and

* clarify stakeholderresponsibilities to facilitateworker and communityaccess programs supportedby the restructuringprogram.

9 However, there is need to base decsions on micro-enterprises on an analysis of economic feasibility. These enterprises should be viable for the regions proposed and not be established merely for purposes of social assistance.

CHAPTER1: INTRODUCTIONAND BACKGROUND

1. Russia's transitionfrom central planning to a market economyhas increasedopportunities for many of its workers. In the coal sector, however,where restructuringwill mean rising unemploymentand falling real incomes, economicreform has exacerbatedthe already difficult lives of many coal industryemployees, their families, and communities. Consequently,the coal sector, now one of the country's most heavily subsidizedindustries, is the focus of intense attention as the closing of unproductivemines will affect the lives of over 800,000 people indirectly and some 250,000 miners and their families directly. In considering support to Russia's restructuringof the coal sector, the World Bank hopes to encouragea process that (a) reduces hardships to affected workers and communitiesand (b) ensures the establishmentof an appropriate social safetynet.

2. The purpose of this report is to present the findings of a social assessment(SA) designedto help the govermnentand the World Bank prepare a programof assistancethat respondsto the concerns,reactions, and expectations of miners, their families, and communities affected by restructuring.Chapter 1 presents an overviewof the coal miningsituation in Russia, covering the status of the coal industry,the social effects of coal industryrestructuring, and the varied stakeholdersaffected by this process. Subsequentchapters discuss the objectivesand activitiesof the SA (chapter 2); and the key findings and implicationsof the SA (chapter 3).

Coal Industry: Background

3. Russia has some of the world's largest coal reserves, and one of the world's largest coal production industry. Currently,this industryemploys about 800,000 people working at about 260 mines and associated coal processing and related auxiliary and servicing enterprises. As in the case of other industrialcountries, which have experiencedpainful periods of change in their coal sectorsduring the last 20 to 30 years, Russia's coal industryis in the process of restructuring.Unlike most other countrieswhich have seen their coal sectors decline drastically,Russia's coal sector will remain large even with restructuring.Throughout Russia, there are approximately18 coal regionswhich include over 70 cities and settlements. In addition,there are 28 coal associations under which approximately 261 coal mines (deep and surface) operate. There are vast differencesamong large and small cities and settlements,northern and southerncoal regions, and those areas where alternativeenergy is available.

4. Accordingto the World Bank Sector Report (Restructuringthe Coal Industry: Putting People First, 1994),the situation in Russia'scoal sector is very serious.During the past several years, demand for coal has been falling and inefficiency in sector management has remained unchanged. Coal prices have been decontrolled,but subsidiesto the coal industry are the second largest in the federal budget after agriculture. The problems of adjusting to changing market conditions are exacerbated by excessive hiring, low productivity,and the generallypoor economicconditions in the mines.

5. The scale of adjustmentrequired to obtain an economicallyviable industry,operating without a large- scale subsidy, cannot feasibly be made through changes in productivityand wages alone. By the year 2000, the demand for coal can be expected to be 50 percent less than the 1990 levels. Accordingto most realistic projectionsof the demandfor coal, there will be a need for major reductions in mining employmentover the next 10 to 15 years. 2

6. Currently, the coal industryreceives a large amount of state subsidies,with Rosugol controlling the distribution of these funds to the coal industry. In the administrationof these subsidies, however, several problems have emerged. For example, subsidies have been used to build new mines and rehabilitate old mines at a time when funds might be better used to cushion the impact on those who lose their jobs in loss making mines. In addition,workers generally get inadequate, unreliable, and inconsistent information on compensationrights, and compensationpayments are irregular.The managementstructures of almost all local coal associationsseem unpreparedto deal with the consequencesof restructuring. Regionalmanagers or local coal association managers appear unaware of the fragile economic outlook for coal in the medium to long- term and do not appreciate the need to reduce employment if the industry is to provide stable levels of employmentin the future. Some state funds have been used for expanding non-coal activities to create replacementjobs for laid-off miners. These jobs, however,have not materialized.

7. An over-riding problem facing coal industry workers is inadequate information.10 The various actors in the sector, such as the national and regional mining associations, unions, and the media provide inconsistent information. Moreover, there are diverse and complicated legal instruments and tariff agreementsas well as diverse practices appliedto wage payments,downsizing, closures, and the allocation of benefits. Coal workers, for example, are uncertain about what presidential decrees related to worker rights apply to what area of the country, or what legal mechanismsmay be available through which they have any recourse (in fact, we have found no examples of workers who have successfullytaken legal action against a coal company).In many cases, workers, who remain in a constant state of discontentbecause they have not received wages for many months, regularly strike. Even more confusing than information pertaining to individualentitlements are issues concerningsocial assets. Who will assume their ownershipand management is unknown to the people and current practices lead them to believe that many social services will no longer be provided. The nature of coal sector operations also contributesto the growing tension throughout Russia's coal regions, and to the polarizationof families living in the coal communitieswho remain unsure of their future.

8. A key factor that contributesto the lack of or growing inaccuracy of information is the precarious shifting of power in the coal sector. Since the disbandmentof the Ministry of Coal in 1992, authority shifted to the Ministry of Fuel and Energy'sCoal Departnent and the Russian Coal Corporation. Since that time, the Ministry of Fuel and Energy appearsto have lost much of its influence,which is now centered in Rosugol,the national coal company.

-In the coal sector, workers'rights and benefits in casesof lay-offsare regulatedby more than twenty Federal decrees,resolutions, laws, and orders. In addition,there are two nationalTariff Agreementsthat providebenefits to coal sector workers. A large number of governmentbodies regulatethe legal socialsafety net for laid-off workers: SupremeCouncil of the RussianFederation, President of the RussianFederation, Government of the RussianFederation, Ministry of Labor and the FederalEmployment Service. Furthermore, Tariff Agreementshave been signed betweenthe two unions, the Union of Coal Industry Workers (PRUP) and the Independent Miners'Union (NPG),and the Ministryof Fuel and Energyas well as the Ministry of Labor regulatingthe coal industry. In addition to the Federal legal acts,regional and local governmentshave the legal right to pass legislationregulating the social safety net within theirjurisdiction. 3 Key Playersand their Interests

9. Although State subsidiesto the coal industry provide some of the funding for the social services managedby the coal enterprises,they do not appear to be reachingthe people in coal communitieswho are affected by the decliningdemand for coal. Further,many of the coal industry's problems are attributed to centralizedcontrol over the state's shareholdingin the coal industry. As evidenced by household surveys, community-basedinterviews, and informal discussions with miners, arbitrary mine closures and job reductionsmay continueif mechanismsof politicaland social control remainweak and the legal requirements for informationdisclosure to affectedpopulations are not implemented.

10. A range of stakeholdersare affectedby the coal industryrestructuring process, each having their own specialconcerns and intereststhat often conflictwith those of the others. The principal stakeholdersare:

Beneficiaries.There are no direct and immediatebeneficiaries of coal sector restructuring.Russians all over the country who have indirectly paid for large subsidiesto inefficientlymanaged loss-making mineswill eventuallysee their financialburden reduced as the coal sectorbecomes more self-sustaining. In addition,the employeesof efficient mines will benefit from the creation of a smaller,viable, and profitablemining sector. Those in the coal regions, whethermining or not, are likely to be adversely affectedwhen subsidiesare reduced,jobs cut and mines closed. Nonetheless,their sufferingcould be somewhatcushioned and reduced with improved policiesand full paymentof entitlementsunder the law. The loss accruedto miners and their communitiesin terms of rapid deteriorationof social services, housing and infrastructurecan be partially and graduallycompensated through strengtheninglocal governmentsto take over the managementand maintenanceof social assets and encouragingnew investmentsin other sectors.The problemspeople experiencein coal basins are largely,but not entirely, based on sector restructuring.The transitionto the market economy is taking its toll throughoutthe country,including coal basins. In the shortterm, to mitigateall adverse impactsof sector restructuring is, to say the least, difficult.It is hoped,however, that these impactscould be somewhatcushioned with internationalassistance. This can be achievedthrough a dialogueon the appropriatetargeting of reduced subsidiesto meetthe needsof affectedpopulations.

Affectedpopulations. This group includesminers and their familiesas well as communitiesthat rely on mine operations.They inevitablywill be the major losers in the short term. Their concernsinclude compensationfor those losingtheir jobs and continuedaccess to social and communityservices. While the populationsdirectly affected by coal sectorrestructuring in other countriesoften receivedadditional compensation,the spreadof the social problemsassociated with Russia's transitionto a marketeconomy makes it difficultto financespecial packages only for the coal sectoremployees with internalresources. Moreover,many coal communitiesare mixed, to different degrees, in their employmentstructure. Consequently,even if benefitpackages could be expanded,it may be sociallyproblematic to exclude non-miners.

Local levelstakeholders/new actors. This group includes localgovernments as well as other local or regional institutionsthat will have to take over the managementand operationof the social assets of mines as a resultof restructuring.Local governmentswould be overtaxedif they are expectedto assume responsibilityfor managingthe enterprise'ssocial assets withouthaving the financialsupport to perform their newlyassigned roles. If this supportis available,however, they wouldhave much to gain. 4

Coal sector managers. These include mine managers and managers of regionaland national mining associations.The mine associationsseem to be redefiningtheir positionsin the sectorso as to maintain their control over subsidiesand/or restructuredenterprises. Because the restructuringprogram will affect the balance of control in the coal sector, performance expectations will begin to focus on individualmines. From the perspectiveof regionalassociations, their ability to maintainthe status quo can best be achieved through the transfer of power from the national to regional level; the former, however,has certain reservationsregarding the decentralizationprocess. The continuedhold of national associationsin managingthe sector, especially subsidies,poses a challenge in directing subsidiesto appropriateobjectives.

* Trade unions. The trade unions are defining their position to either gain or regain power. The traditionaltrade union already has lost some power since the establishmentof the independenttrade union."1 What the future will hold for both unionswill largely depend on the extentto which they can represent the workers and their communities,and resist taking sides in the power struggle between nationaland regionalcoal associations. e Regulaton/policy makers - This group includes the Inter-BranchCoal Committee,policy makers (Duma),Ministry of Economy,Ministry of Fuel and Energy, Ministry of Finance,Ministry of Labor, and the Federal EmploymentService. The Inter-AgencyCoal Commissionhas made the coal sector restructuringprocess more participatoryand can substantiallyenhance its visibilityand positiverole in the system.

* Non-GovernmentalOrganizations (NGOs) - While limitedin numbersand regionalscope, NGOs are importantand receiving increasinggovernment attention and support.12The NGO sector has emerged ffiroughoutthe country largely as a response to the growing unmet social assistance needs of the disadvantaged. It also has been observedthat the presence of foreign, particularlyNGO, activity has given rise to a growth in RussianNGO interest. A lack of NGO history, financingand trainedNGO personnel in Russia have been addressedby many successful foreign NGOs, some of which have addressedRussia's coal regions. While some of the foreign NGO activity, for the most part coupled with Russian counterparts,had operatedsuccessfully in other countries, numerousNGO activitiesare unique to either Russia or the Former Soviet Union. Some of the NGOs are currently receiving governmentsubsidies in the form of staff salaries, office space, and tax relief. NGOs workingwith the disabledhave tended to form around specificdisability concerns or the need to raise awarenessamong policy makers of the problemsthis group encounters. Women's groups also have been active; the Federal Employment Service has been cooperating with, and contracting out service delivery to,

"Before 1993,shortly after independence,the IndependentMiners' Union (NPG)moved into the coal sectoras an active independent union representingonly the coal workers. The competitionpresented by NPG has let the Union of Coal IndustryWorkers (PRUP) to take a somewhatnew stand and the situationchanged since 1993.PRUP has increasedits influenceon the coal sector workersthrough a series of successfulstrikes and other national actions. Duringthe same time period, NPG's role graduallydiminished as a major player in the coal sector. Currently,more than 90 percentof the coal sector workersare membersof Rosugleprof(former PRUP).

12Recently, the Fund for SocialGuarantees, working with the Veteransof the North and DisabledMiners Fund have receivedInter- AgencyCoal Commissionsupport for a five year proposalto relocatea group of particularlyvulnerable mine workers. 5 women'sNGOs. OtherNGOs in coal sectorsoperate in areas as diverse as smallbusiness associations, sports associations,pensioners' groups,veterans' groups,chamber of commerce,environmental groups, and health and safety structures. Yet non-governmentalactivity faces serious constraints such as difficult economicconditions, a restrictiveregulatory environment, and the taxable status of income generatingactivities.

Constituencyfor Reform - This group includes public interestgroups and some of the media. Given the visibilityof the coal sector, the views of the media and the general public are extremely important for developinga constituencyfor economicreform in the country. Similarly,the managementof the coal sectorreform is one of the issuesinfluencing the balanceof politicsin Russia.

SocialImpacts of Coal IndustryRestructuring

11. Coal settlements in Russia have diverse characteristicswith respect to their demographic structure, income levels, and labor force. Consequently,the effects of coal restructuringand the means by which each communitywill respond to them are not uniform. Notwithstandingthe community-specificeffects, the three principalnegative social impactsof coal sectorrestructuring appear to be:

(a) Loss of employment.Unemployment can arise in three ways: (i) loss of jobs at closing mines; (ii) downsizingof employmentat mines that continuetheir operations;and (iii) reductionof employmentin enterprisesthat supportmining operations(for example,equipment manufacturing) and in servicesthat support mine settlements (for example, medical facilities and kindergartens). Mine restructuring throughclosure or downsizing,therefore, not only causesunemployment directly related to the sector, but resultsin the reductionof overalljob opportunities.

(b) Inadequatecompensation. Miners are uncertain of their entitlements;and there are significant differences between entitlementsand what miners actually receive. Severance benefits under the existingsystem are restrictedto three monthsof wages. If unemploymentextends beyond three months, laid-off workers are entitled to additionalcompensation equivalent to a portion of their base salary. Further,the rules and regulationsconcerning the term or durationof employmentand the size of actual severancepackages are unclear. In addition,those who are least likely to be re-employed(that is, older workers near retirementage) appear to have little protection. And while some regulationstheoretically allow workersto receive compensationand pension paymentswith the regional coefficient,therefore allowing increasesabove the base salaryfor residentsof harsh climatic zones, entitlementsusually are nullified by the ceilingsimposed on them by the entitiesadministering them. And while the severance packageagreements signed between individualmines and unionshave been quite generous,they often have not been observedduring closures. Additionalcomplications arise from the lack of informationon entitlementsand the confusionsurrounding the multiplicityof legalinstruments introduced.

(c) Deteriorationof social services. Traditionally,mine associationshave provideda range of servicesto

13 In addition to these, a number of NGOs have also emergedin the coal communitiesof Komi Republic,Rostov, Kuzbass,Tula, Chelyabinsk,and Far East Theseorganizations cover a large variety of activitiesranging from private sector involvementin Russiato social issues;they are funded eitherthrough the state or throughforeign partnerships. 6 minersand the settlementsthat support individualmines (for exanple, housing,education, health care, transport, energy). In addition,miners, even when they are pensionersor disabled, have obtained a varietyof goodssuch as coal for heating andcooking which have tendedto be betterthan the averagefor the population as a whole. It is estimated that by January 1996, the initial stock of social assets remainingattached to Rosugoldeclined by about 70 percent, while in Kuzbass this decline amounted to 80 percent. Among these assets which are still with Rosugol,non-core social facilitiescomprise a large share,while housingis either divestedor to be completelydivested in 1996. The overallhousing subsidiesavailable during the last three years are not considered sufficient for keeping the stock in propershape.1 4 In some smallercoal towns, the municipalitiesbecame responsible for the housingstock whichwas 30 times larger than what they used to manage in the past. 5 The transferof servicessuch as housing,health, and educationto financiallypressed local governmentshas meant either that these services were no longer available or that the quality of the service deteriorated.16According to the chairman of the trade union in the Shevyakovamine (Kuzbass), monthly social service payments to miners declined from 300,000 rubles to 60,000 rubles per child after they were transferred to local administrations.Miners, who have three to four monthsof backpay,could not affordto make payments for such services.While this problem is not unique to the coal basins, it affects residentsat a time when their ability to cope with the inadequacyof these services is particularlylimited due to large-scale disguised unemploymentin both coal and non-coal sectors as well as an insufficientlydiversified economicbase that cannot offeralternative employment.

12. Any restructuring involves significant social costs. In Russia, however, coal restructuring has had particularly adverse impacts because (a) workers often have not received the advance notice required by Russian labor legislation; (b) the coal labor unions have failed to defend effectively the interests of the workers affected by mine closures; (c) social services transferred from coal companiesto municipalitieshave been allowed to deteriorate; (d) non-miners are inadequatelyprotected from the impact of mine closures by the existingsocial safety net; (e) present institutionalarrangements do not ensure an equitable allocation or reliable distributionof subsidies; (f) coal company managementis diverting coal subsidiesfrom wages and

14 The nationalprogram of social assets transfer is a long process and involves manyplayers. For example,when the mine or mining associationsagree with the local municipalityor city, the transfer applicationis forwardedto the Oblast administrationwhere the requests are consolidatedwith other applicants. The oblast conducts individual negotiations with each ministry and agency that finance social assets operations. Such negotiationsmay include an exchange of liabilitiesin order for the oblast to talk over the fnancing of the social sphere. Oblast demandsvary from case to case. For example,for the coal industryRosugol is committedto financingseveral projects such as water purificationsystem installationsand the building of a new hospitalwing in Rostov (financed from investment subsidies). In addition, commitment of reconstruction of old housing is always demanded by the oblast administrationprior to the social assetstransfer.

15 Accordingto the fndings of a banklmission undertaken in April 1996 to various coal regions, housingand utility costs were the largestburden, amounting to 58 percentof the socialspending, while kindergartens were 27 percentand entertainmentfacilities 11 percent of the total. Withrespect to housingcosts, those associated with providingheat and hot wateramounted to 60 percent;the rest is spenton maintenanceand capital repair. Since 1993, the Russian Governnent initiated the general program of social assets divestiturefrom enterprisesto municipalities.Until late 1995,however, the coal enterprisesdid not divest a significantamount of their socialassets. In the last monthsof 1995,a substantialportion of the entire stockwas transferred.

1'In householdvisits undertakenin Vorkuta,a minerand four of his neighborsexplained that they have been living in their flat since 1958 and nobody ever cameto do repair work. The wooden structure was covered with plastic to protect the residentsfrom the cold, and the roof had collapsed. 7 other social obligations to operating losses and investment; (g) coal subsidies could have been used to

provide better social protection for E - ,-- A those who have lost their jobs; (h) ...... miners are ill-informed about their iWitabatia rights and about the restructuring program, and have little trust in the present system, particularly for ... . T e at allocatingand distributingsubsidies. a f . .

13. The response of the Russian unavaiable. coal miners and their communities to the adverse impact of restructuring is not well documented.Elsewhere in the ~S a3NIno1ol~ mtO tgeSc world, responses at the individual and : j ra n community level have been diverse eieay lngcounpo atest r4e (box 1). In Russia, too, the responses appear to range from active opposition through strikes, to adjustmentthrough ; I b new job search and other mechanisms, e a to resignation or withdrawal. . . R' .. 't':. R e iiR Expectations from the government also . ,egativ : a l.,' t e"fec. an cR abus range from relocation with full benefits ip:'iR. to new mines and new jobs. It is . ... increasingly recognized,however, that n financial constraints are too severe to ~ bh~O uha eil o.~gninadsi-rpomn

even allow benefits packages to beX <. # X . defined and delivered. : i as awbole. e r iio

14. Given the current level of R oppormolties R t morepessimistic for knowledge, there are several key issues ' whose resolution will increase the social sustainabilityof the coal sector d er . restructuring program: (a) reducing i a a i''ese' uncertainty among miners and their tension a e Studi also s t y e thi o t ' families by establishing a schedule that r e i e identifies which mines will be closed a,'R. and where employment will be reduced .... .:._...... over the near term and adhering to it; (b) clarifying the legal frameworkand establishing more equitable policies (for example, allowing the transfer of coal pensions with higher "'coefficients"to other regionsand providingflexibility in the residentialregistration system for those leaving coal regions); (c) strengtheningthe institutionalcapacity of local governmentsto prepare and implement 8 social mitigation programs, covering both miners and non-miners; (d) directing reduced subsidies to the extent possibleto cushion the impact of the coal restructuringprogram and to ensure that equitable treatment is given to adversely affected populationsengaged in non-mining sectors; (e) increasing the participatory structure of coal basin local governments to ensure transparency and accountability in the regional and community specific distribution of government support; and (f) establishing a permanent SA program to expand knowledge of the situation, especially with respect to access to social services, to provide for stakeholderinvolvement and feedback,and monitor and evaluate the effectivenessof social impact mitigation efforts.

World Bank Involvement

15. Since mid-1993, the World Bank has been working with Russia's coal industry. By late 1993, the Bank had published a draft sector report, "Restructuringthe Coal Industry: Putting People First." The draft aimed to share global experience with coal sector managers and policy makers in Russia. It attempted to show the relevance of international experience for Russia and demonstrated the importance of "putting people first" instead of allowing inevitable economic hardships and bankruptciesto affect miners and their communitiesin an ad hoc manner. It argued that employmentreduction and mine closures should be carried out only when there is an appropriatesocial safety net in place and funded. The report also suggestedthat the appropriatenessof a social safety net shouldbe determined at the local level, and thereforethe government's restructuring strategy should include decentralization. Appropriate policies to promote labor mobility also were shownto be important.

16. The report noted that in 1993 only five percent of the coal industry subsidieswere used for social services, and based on internationalexperience, drew attention to several key elements of the social safety net: (a) provisionto coal miners of the existingsystem of social securityand unemploymentbenefits available throughoutRussia; (b) continuationof social services in mining communities and special financing in areas of mine closures or severe down sizing;(c) continuationof coal industrypensions; (d) considerationof a new and temporary system of lump-sum payments to encourage voluntary departures; and (e) a new and temporarysystem of specialemployment programs in affected miningregions.

17. The report was discussedwith major sector stakeholders.As a result of these discussions,the focus of the report shifted from the coal industry as a whole to a more detailed analysis of the impact of restructuring in the country's main coal basins. Between October 1993 and April 1994,the first set of supporting annexes was prepared and supplementedby a series of studies. In May 1994,a 17-persondelegation from the Inter- Agency Commissionvisited Washington to discuss the more detailed findings presented in the annexes. In August 1994,the Bank presentedthe secondversion of the main Reportand the annexes to the governmentas discussion drafts. The Government then convened a meeting of the Inter-Agency Coal Commission in Septemberto review the report. As part of the preparation for the September 23 review meeting, which included the participation of World Bank representatives, approximately 25 agencies submitted written comments. A number of the Russian stakeholders' comments suggest agreement with its findings but consideredthe pace of adjustmenttoo fast.

18. Followingthe publicationof the World Bank's report, the RussianGovernment produced a coal sector reform program in mid-1995 entitled "Basic Trends" which adopted some of the report's key recommendations,especially those relating to the need to reduce the aggregate level of subsidies, and 9 requested a US$500 million loan to support its implementation.In respondingto the Government's request for assistance in implementing a coal sector reform program, the World Bank is considering providing support through two operations,first the Coal SectorAdjustment Loan (SECAL), and second,the Coal Sector Implementation Assistance Project. The objectives are to: (a) reduce the impact of the coal sector on the federal budget by supportingthe reduction,and eventual elimination,of subsidies;(b) promote the long-term sustainabilityof the coal sector through establishmentof a competitive, commercialindustry; (c) support a restructuringprogram to reduce the size of the industryto increaseefficiency; and (d) cushion the impact of the restructuring on coal miners, their families and affected communities by reordering priorities in governmentsupport to focus on maintenanceof social assets and creation of new jobs at local level.

19. Followingthe 1994 sector study,one of the Bank's first activities in preparing a support programwas to conduct a social assessment(SA) to find out how the people in affected coal communitieswould like to see the coal restructuring continue, and to provide important input on the attitudes of a wide range of stakeholders. A Project PreparationUnit (PPU) was created by the Russian governmentin the Ministry of Economy with substantialbilateral funding. The PPU is largely staffed by Russians and is using primarily Russian consultants in preparingthe loan. The PPU has been instrumentalin expanding communicationto all stakeholdersand is implementingthe participationrecommendations of the SA.

10

2. SocialAssessment: Objectives and Methodology

20. An SA is the systematic investigationof the social processes and factors that affect development impactsand results. It supportsparticipation and is a tool for incorporatingsocial analysis into World Bank- assistedinvestments and analyticalwork. SAsare carried out primarilyto: (a) identifykey stakeholdersand establishan appropriateframework for their participationin projectselection, design, and implementation;(b) ensurethat project objectivesand incentivesfor change are acceptableto the range of beneficiaries;(c) assess the social impact of investmentprojects; and (d) developthe capacity at the appropriatelevel to facilitate participation,resolve conflicts, permit service delivery, and carry out social mitigation measures.An SA is but one input into the process by which a World Bank project is prepared. It reports what people experience and feel and draws conclusionsfrom these as a basis of a dialogue with clients. Further, an SA should be viewed as a process because continualassessment and monitoringare needed during project preparationand implementationto learn more about key issues and to ensure that the project's intendedbenefits reach the people. This chapterdescribes the specificobjectives of the RussiaCoal SA, the means by which it has been carriedout to date, and the two miningtowns where the householdsurveys were undertaken.

Obectives and Methodology

21. The main objectives of the Russia Coal SA are to: (a) identify key stakeholders and establish an appropriateframework for their participationin the restructuring;(b) assess the socioeconomiccharacteristics of households in mine basins; (c) determinehow miners and employeesof other sectors are affected by coal sector restructuring,as well as understandthe labor market and workers' expectationswith respect to social protection and compensation;(d) characterize attitudes toward governmentsponsored relocation programs which promise free housing to residents of Northern regions affected by the coal sector restructuring;(e) assess the level of trust toward various social institutions;and (f) determine how people affected by mine closureswould like to see the restructuringproceed. The SA also is intendedto help identifysteps necessary to mitigatethe negative social effects of the coal restructuringprogram.

22. Methodology. To achieve its objectives, the SA involved consultations with a broad range of stakeholdersfocusing primarily on miners, their families, and mining communities. In particular, the SA team carried out several thousandformal and informalinterviews and group discussionsin four of the major coal basins; Vorkuta,Tula, Rostov, and Kemerovo.The team also carried out a survey of 800 householdsin Komi Republic-Vorkutaand Kemerovo-Kiselovsk,and prepared case studies based on several hundred interviews in each of four towns: Halmer-Yu,Promyshlennaya, Cherkasovskaya, and Dimitrova. Several hundred informal interviews in coal communitiesin Tula and Rostov also were undertaken. In addition, a team of Bank staff and consultantsworking on the social safety net issues have held consultationswith local stakeholdergroups. In all of the communitiesvisited, the SA team consultedlocal trade union members, coal associations,local govermmentrepresentatives and, where present, NGOs. This report incorporatestheir observationsas well as informationreceived between October 1995 and May 1996 by the Project Preparation Unit (PPU) in the Ministry of Economy from a broad range of stakeholdersand secondarydata sources. In addition,a first draft of the SA report, which was preparedin March 1996,has been discussedwith the staff of the Ministryof Economy and the Ministryof Labor, key stakeholdergroups includingmembers of Duma, and executive officers of trade unions. The SA team also held systematic consultationswith the academic community and two NGOs focusing on vulnerable groups within the coal sector (the Fund for Social 11 Guaranteesand the Veteransof North). Specifically,the assessmentinvolved:

(a) Household Survey. A local team of social scientists conducted a comprehensivesurvey of 800 householdsthat will be directlyor indirectlyaffected by the restructuringof the coal industry(see annex 1 on sampling).Coal settlementsin Vorkutaand Kiselovskas well as populationsof the two "coal cities" were included.This sample, however,is not representativeof miners and mining communities throughozt the country. Rather, it includes populationsof two sub-regionsthat are already in the process of down-sizingand closing mines. Notwithstandingthe differences in the socioeconomic conditionsof these sub-regions,the trends observedin them are importantand call for an immediate launchingof a more comprehensiveSA process.

(b) CommunityVisits/Group Discussions WorldBank staff visited a large number of communitiesand held extensivediscussions with communitymembers, often in small groupsof five to seven persons. In addition,the Russian social scienceteam that led the SA also has been working during the past five years with large numbers of communities. Local branches of the Institute of Comparative Labor Relations which are located in the coal basins, particularlyKemerovo, also provide daily research supportto the unions.

(c) Case Studies. As part of the assessment,the team of social scientistsexplored lessons learnedfrom three mine closuresin Vorkutawhich were then comparedsystematically to the experiencesof five mine closures in Kiselovsk. In the course of case study preparation, several hundred interviews were conductedwith workers, unions, and mine and city managers. The SA team also conducted less systematiccase studies in Tula and Rostov.

(d) Assessmentof VoluntaryRelocation. In addition to the above, the SA team initiated consultations with experts, held communitydiscussions, reviewed proposals developedby various institutions,and conductedselected interviews with residentsof coal communitiesto assess the nature of mine closures andthe issueof voluntaryrelocation.

23. The SA methodologyinvolved a combinationof quantitativeand qualitativemethods. This approach allowed the researchers to uncover phenomenathat influence people's behavior in the present social and economicclimate but cannot be measured by statisticalmethods alone.

24. In May 1996,a number of additionaltopical SAs have been launched which focus on four regions: Kuzbass, Rostov, Vorkuta, and Tula.17 The objectives of these SAs which will be available by September 1996,are to:

* Broaden the regionalcoverage of the systematicSA activitiesundertaken up to March 1996.

* Deepen understandingof several key issues including: (a) information and communicationpatterns of miners and communities;(b) access/utilizationof social assets/services;(c) interactions with local and federal institutions; (d) household assets (acquisitionand loss of, changes in composition); (e) coping

1 7 Theseregions account for the majorityof employmentand productionin the coal sector. 12 strategies;(f) changesin levels and sourcesof income;and (g) attitudeson reform.

* Definethe role of coal sector activitiesin a broader socio-economiccontext at the household, communities/settlement,and regionallevels.

* Developa better understandingof the dynamicsof change and patternsof adaptationto transition.

25. The focus of these additionalSA activitieswill be on:

* Expandingthe existing systematicSA data base to Rostov and Tula through 800 additionalhousehold surveys undertaken in four settlements; two of these settlements will be associated with mines announced for closure starting in 1996, and the other two will be near mines that will experience significantlabor force downsizingover the next few years, starting in 1996.

* Understandingthe regional contextwithin which coal reform takes place through a focus on two micro regionsin Kuzbassand Rostov;defining the role of coal sector operations(including the managementof social assets) in the lives of the people in a dynamiccontext through use of secondarydata (for the past 5-10 years) and through focus group discussionsin the regions.

e Analyzingpatterns of adjustmentto reform through longitudinalstudies, comparingcoal and non-coal employeeswho have left their jobs voluntarily with those who have been laid-off and focusing on institutionalconstraints to their adjustment.

* Analyzing changes in family budget, comparing "coal communities" with others by using existing Goskomstatfamily budget studiesand by addinga specialtarget sampleto the existingsample base.

* Carrying out thematic studies on patterns of geographical mobility, impacts of restructuringon the disabled,and impactsof lump sumpayments on redundantworker families.

Survey Areas

26. The areas surveyedin the SA were: (a) Vorkuta and two surroundingmining towns (Oktyabrskiand Sovetski),located in the Arctic Circle,and (b) settlementsin Kiselovskclose to two closing mines (Surtaikha and Cherkasovskaya)and in other districtsof the city. The samplingprocedures used are describedin Annex 1. Vorkuta,a gulag, was settled in the mid-1950sas a result of a generalorganized recruitment of workers from differentregions of the former SovietUnion (box 2) . Since then, Vorkutahas experienceda constant migrationof people into the region, due to its high wages and the deterioratingeconomic situation in the rest of the country. Located in Western Siberia,Kiselovsk was developedduring the early Soviet period where two villagesformerly were located - Cherkasovoand Afonino. In 1936, Kiselovskwas officiallydeclared a city. In contrast to Vorkuta, Kiselovsk has a more stable population, and a substantial portion of its populationis of Siberianheritage. 13

...... XO X F VO...T ...... Wcrkutaisatering~~~~~~...... i.....s....s.ic.eerqie icmbst toabbwain Sembi ri gulag~~~.....his...... s.....e dmiat .~ 9..... en....o...idr...... ai ppt~inm ZO thisArcic orthen ciy of2O~OOO~~ccple werenowliveGenn4s 1144 in Voikuta~iwus prisoners pr.o.e.in the varioustulip thatdoted the oVrkflonwcol 42 kilo.eter...r... .ee...... u.ond ..... liv mnh tak.Bot ad ome rceiedonetotwopondsofbred ly orp~..d....h..nivdua ws predictivebadeyponidgeworket and tkibpn of sagr permonth..... M... fth.o.nn...fth atd la.br o ...... V.ut .... rc yw..ak Soeaintoa,Pltca rsnr w i oge etne an d oebni ta anndrs Folwigte lsngo telstpn i.h.....h.rioe. eereese ih sas hc prhbted thr enee nnn ott,i c h yhron t * isiidsdbe megePisnu n o uedtowokee mne wrindig he42Idwntes c intedl Ity yo h curet.n..... rea.v.ofths.p.s...Du o h p.sn es.d.... oe....kttrtehghs a aalbe bcue ftewitrmd 1 ma sowton)and. .. a.s.. c otTe i e ee oedy itl e o..T~dges eo cei ...... ad hc lok4usofca xhutlae h rtte uda o r~tW ae12sril

moth ow ,e'ayneheealayay rpatnganod abrcap dge bteaesi snuu Yw ibi aoe sce hthsntJl okz hr ol o r skd ei meiirwt

cvcr~~1ting.hedtoknhowbereceutlyhas tieatie4 lie isalmoat80yearstd~~~~~~~~~~~~~~but hasuohkads wh .o.....ebas 14 3. Findingsof the SA: Issues and Responses

27. The resultsof the SA confirmthat miners,their families,and miningcommunities in both Vorkutaand Kiselovskare not faring well in the currenteconomic environment. Their difficultliving conditions, desire to leave their homes,feelings of vulnerability,and lack of trust in the governmentand other institutionshighlight the need to carefullymanage the social dimensionsof the coal industryrestructuring process. The following presentsthe main findingsand key issuesemerging from the SA as well as the implicationsof these findingsfor the proposedrestructuring program. It shouldbe remembered,however, that the SA was limitedin its scopeand geographiccoverage. Consequently,its conclusionsmay or may not be valid for the coal sector as a whole. Nonetheless,its results stronglypoint to the need for launchinga continuousSA processto guide social safety net interventionsand to ensurethat all remainingsubsidies reach minersand their communities.

DevelopCommunity Specific Responses

28. Coal settlementshave different characteristicswith respect to their demographicstructure, income levels, and labor force.'I As a result,their responseto and expectationsfrom coal sectorrestructuring are not uniform. Some communitieshave a well integratedsocial fabric and their members support one another in coping with the negative social impacts of restructuring. Other communities,such as Vorkuta, are more heterogeneouswith many immigrantsfrom other regions of the FSU, and have weaker communitysupport systems. Communityspecificity, therefore, is importantin definingthe impactsof sectorrestructuring and the necessarymeasures for mitigatingthese impacts.

29. An important source of settlement variability is the economic base. In "coal cities" and "coal settlements,"people employedin the coal sectorconstitute only one segmentof the population,and sometimes account for a small percentageof total employment Generally,the larger and geographicallyintegrated a settlementis, the greater is the economicmixture. And as each economicsector goes through its process of restructuringand marketadjustment, different parts of the labor marketwill experiencenegative impacts. How people will be affectedby changesin each economicsector, and how they respond to them, will depend on the nature of the transitionin the economicbase as well as the patternsof social organizationthat characterizetheir communities.

30. For example, it is more difficult to cushion the impacts of unemployment,long delays in salary payments,and severereductions in purchasingpower, when both the relianceon a single sectoractivity and the incidence of single-parenthouseholds are high. Similarly, in coal communitiessuch as those surrounding Kiselovsk,where the proportionof householdsthat rely solely on pension payments is large, the effects of restructuringare difficultto mitigate. Pensioners,for example,report that they lose access to many of their entitlements(for example,free medicine) and encounterdifficulties in coping with sharp reductions in the purchasingpower of their pensions.

Is As observedduring the field visits as part of World Bank missionengaging in pre-appraisalof SECAL and Implementation AssistanceProject in March 1996,the economicand employmentstructure and prospectsof the coal regionsare varied. For example, some coallocalities have some opportunitiesfor economicdiversification and adjustmentwhile others, being remote single industry coal towns,have few alternativeemployment opportunities. Consequently, the approachesused in dealingwith coal redundancieswill need to respondto the specialcircumstances of the area. This arguesfor regionalllocalbased employmentadjustment strategies and effortswhich must includenot only the coal sectorbut the total economyof the area as well. 15

31. The following highlights ~o OIGWT NETIT~~SOSST

ecnmc bse,tlabr marentsnudi 5Xl

Kiselovsk. Alhough little is known--Si about the key featres of social O-y--swola o~oka tPo.stneln n a organization,and how the social fabric protects individuals against the imnpactsof "Seek&stiratinfSom workes ser lads ehete"mietmn demographic stucture and the role onf lb5bVrrtuwtWkesn QIC ha"nye socia relations in obtaining OStc accorerso tor mie cloingdos e .xs an -mls detine r information,Jobs, and other resources rxce. teypa osekcutatinmdse h diisrto o mechanismsfor dealingwith them (box 0 R ,,,,

32. Demographicstructur_. Coal,,..,."6'3>"''' $ c-ommunitiesdiffer substantially from "TakePol.>.it.XicaRcios Fort-on wetkes Gen.,.,,',',ndr,r:ndan eachother in alost everyaspect of its .. ''< . . ' 2 ie(tescoo2S' '''?~-o'R ,"'i,e demographic profile. For example, . =. >Winlesiniga h Vorkta has a much younger and 'Somie fneorylemaamlyes deene the,r.eet ethnically heterogeneous population Tasfern woo S+t.''oG closin"ro tGS'e'S-redGneprs (figure 1) with higher monthly incomes g tOreiLng higher wage expectations,moreover, R t othe enerrie.':it ws tererf the to f"':ightt 'ee '.'thei many familiesimmigrate to Vorkuta(the positionsthnt . .S, n1ai~Teypoillt , ~fgitt,'r h

1989). TIs isbin cotatt hmgeX o hrew ayetfr4snikrmaed ah mine3:-, feard-ha "~noone wants to live and everyonewants to escape." Based on field observations, many families who migrated recently express a desireto remain in Vorkutabecause the conditionsof their former homes are so bad. A few people, moreover,have their "roots" in Vorkutaand are committedto making it a "betterplace in which to live." The communitiesin Kiselovslc,on the otherhand, are more homogeneousand have roots in the region; most have no intentionof leavingtheir "homes."

33. Dependencyratios are low and family size is small in many mining communities. In Vorkuta, for example, 54 percent of the householdsare families with children; in Kiselovsk,by contrast, 29 percent are familieswith children. In both regions,however, a rather highpercentage of householdsare headed by a single Figure 1 P

VORKUTA RESIDENTS

Siberia (27%) Siberia (2%)

Other FSU (2%) _ Other FSU (5%)

Belorussia (0.3%) &P Belorussia (2%)

Ukraine (3%) IS Ukraine (12%)

Far East (2%) 9 Far East (1%)

Northern Caucasus (1%) Northern Caucasus (6%) Urals (1 %) _ Urals (6%) Near Volga River (5%) o' A _ Near Volga River (6%) Volga-Vyatski Region (3%) Volga-Vyatski Region (11%)

Central Russia (7%) C Central Russia (16%)

Kemerovo Oblast (47%) NW Russia (1%) _ NW Russia (5.5%)

- Kemerovo Oblast (2%) Komi Republic (26%) 16 parent; female-headed households account for a significant percentage of the total in coal towns (figure 2). Indeed, over a third of all households were headed by a single person, with or without children. In Vorkuta, there is an almostequal percentageof femaleheaded householdswith and without children(13 and 12 percent, respectively).In Kiselovsk,by contrast,about 20 percentof womendo not have their childrenwith them; these are elderlywomen livingalone. Regardlessof whether they care for their childrenon their own and are left alone at old age, female-headedhouseholds in the communitiesvisited appear to be particularlyvulnerable with low incomesand littlefamily support.

Table 1 MonthlyAverage Household Income per Capita (in US$)

Vorkuta Sovetski Oktyabrski Kiselovsk Center < below$40 9.0 10.4 15.1 34.2 $40 - $60 15.9 15.4 21.6 34.7 $60 - $80 22.8 20.1 17.5 20.4 $80- $100 15.8 24.1 12.7 5.0 $100 - $150 16.9 18.8 16.8 3.1 morethan $150 20.0 12.1 16.8 2.6 Total numberof respondents 101 150 149 383

34. Income. While coal miners generally have enjoyed higher incomes in comparison to other sector workers,long delays in wage paymentsand increasesin the prices of goods and servicespreviously controlled by the state createdgeneral poverty among miners. While there are no recent incomedata, the resultsof the SA survey indicate substantialvariability in householdincomes. With average monthly household incomes of US$92'9 in Vorkuta and US$55 in Kiselovsk, households in Kiselovsk are generally poorer than those in Vorkuta.20The averagehousehold income is nearly twice as high in Vorkuta.Prices, however, especially food prices,are said to be also higher, accordingto its residents21but no reliable cost of livingdata are available. In

19Theexchange rate used in this calculation is: US$I = 4,500 ruble.

20 Most of this differenceis attributableto regionalwage coefficients. In the Northernregions such as Vorkuta,wages are paid with a multiple of 1.6.

21"Accordingto a miner, 'the miners in Vorkuta earn more than the average wage in the rest of Russia, but a loaf of bread costs more than US$I, a bottle of vodka costs more than twice as much as in Moscow, and a warm mink hat costs US$300. In other parts of Russia, some poor people have at least a plot of land to grow potatoes, tomatoes, and cabbage. But nothing grows here.' Miners in search of the long ruble used to sock away tens of thousands of rubles in about a decade, saving for their eventual move south, "to Russia," which is how they refer to the rest of the country. Inflation has made a joke of those savings. Ten years ago, one hundred thousand rubles was life's dream. These days, it is worth less than just enough to pay for dinner at one of Vorkuta's two restaurants, which are both bad. A man who has spent 18 years working at the Vargashovska mine said to a journalist 'I came here because it was the one place in Soviet times that would insure my freedom. Now it's one of the few places where there is no freedom at all. I can't afford to leave. And even if I could, where would I get a job? I blame myself. I can't blame a politician. I put my faith in a new ideology. If we have learned anything on this land, you would think it was that no ideology will ever help a common man."' (New York Times, December I1, 1995, p. Al.) .

% of households

0 0 01 0 0

Female % interviewed headed households, with children . ,.

Female * ' ' ' ' headed hh., _ \ | a without children * , , ,

Male headed a . .0 households, a. '.. \A a a, ' without * 'a*

Maleheaded households, with children

Farnilies withou . .. . . a

Families with children

c a., 18-25 .',' a ,

o , a 26-35 1 , a

a' a1 a 8'\,~~~~~~~~~~~'\,-1Ii,' ' .,' . 'a ~ ~~~~46-50 . .

\ . . a. 6 and over a' a a,a w~~~~~~~~~~~~~::a:a: a 5~~~~~~~~~,.a.a.a.a 17 Kiselovsk,almost 70 percent of the householdshave monthlyper capita incomes of less than US$60,with 17 percentearning less than US$30. In Vorkuta,almost half (52 percent)report incomesof over US$80 per month. Also in Kiselovsk,respondents 36 years old and abovehave averagemonthly incomes that are about 20 percent less than the incomes of younger age groups. In both areas, about two thirds of the randomly selected householdshad no membersworking in coal mines as managers,skilled or unskilledworkers. When different parts of the regionsare compared,the data show that incomelevels in the miningsettlements, where there is a larger proportionof mine workers,are significantlyhigher than the incomelevel in Vorkutacity (table 1). Not surprisingly,the residentsof these settlementsalso have higher demandsfor compensationif affected by coal sectorrestructuring. 18 Table 2: LaborStructure in Coal Basins

City Total Numberof Coal sector Other significantenterprises/industries in the city Pop. Coal Sector employeesamong Employees total population(%) KomiRepublic Vorkuta 192,600 13,545 7.03 Milk factory,machinery, construction, refrigeration facilities Inta 65,300 2,681 4.11 Construction,power station,boiler Rostov Oblast Shahti 229,900 22,453 9.77 Novoshahtinsk 106,800 11,812 11.06 Textileindustry, hydro powerplant Sinegorskiyin 10,000 2,278 22.78 Agriculturalenterprises Sholohovskiyi 13,600 3,010 22.13 Agriculturalenterprises BelayaKalitva 49,600 4,333 8.74 Agriculturalenterprises TulskayaOblast Shekino 79,500 541 0.68 Agriculturalenterprises, machinery plant Uzlovaya 85,300 1,541 1.81 Chemicals Kimovsk 37,100 251 0.68 Machinery Donskoyi 73,600 583 0.79 Machinery Venev 15,500 4055 26.16 Aleksin 72,100 764 1.06 Agriculturalenterprises Kireevsk 29,400 1,536 5.22 Constructionand machinery Lipki 10,500 3,141 29.91 Agriculturalenterprises SmolenskayaOblast Safonovo 56,100 1,129 2.01 Agriculturalenterprises, hydro power station Tverskaya Oblast Nelidovo 30,100 863 2.87 Chemicals,agricultural enterprises, machinery plant KemerovskayaOblast Kemerovo 502,500 17.5 Chemicals,agricultural enterprises, machinery plant Anjoro- Sudgensk 107,500 3.5 Chemicals,machinery, construction, textiles industries Berezovskiyi 57,400 1.8 Chemicals,machinery, textiles, truck depot, forestry Belovo 170,700 5.6 Coal power station,hydro power station,textiles Leninsk- Kuznetskiyi 161,000 5.40 Textiles,mining equipment maintenance Kiselevsk 121,900 4.10 Machinery,truck depot, shoe factory Prokopevsk 253,300 8.40 Textiles,machinery, truck depots Novokuznetsk 586,000 19.4 poultry incubator,food industry,machinery, furniturefactory, forestry,metallurgical plant, constructionindustry Osinniki 80,900 _ _ 3.4 Sources: (a) Data on "Zapadnaya"mine, January 1, 1996, Vorkutaugol,Tulaugol, Rostovugol, January 7, 1996:According to the results of statisticalsurvey of PPU;(b) "Social and EconomicCost of Coal Restructuring," Kemerovo Administration, Rosugol and Kuzbassinvestugol, 1994; and (c) "Populationof the RussianFederation," Statistics Service, Moscow, 1995. 19

35. Labor Market characteristics. Perhaps the most important finding of the SA relates to the fact that a variable portion of the working population in the coal communitiesis actually employed in the coal sector. According to the 1994 World Bank study "Russian Federation Restructuring the Coal Industry: Putting People First," coal sector employment as a share of total employment is less than 6 percent in most coal regions with the exception of Komi Republic and Kemerovo, where coal sector constitute 10 percent and 18 percent of the total employment,respectively (figure 3). Other enterprises such as a milk factory, refrigerator and mechanical plants, constructionmaterials plants, agricultural enterprises,and chemicalas well as textile enterprises are important sources of employment. Moreover, in the last five years it appears that the mines have shed functions.Consequently, those working in social services,who once were categorizedas "coal sector"employees, now are considered"government sector." This is confirmedby official data indicatingthat in Vorkuta,only 7 percentof the total populationwork in the coal mines22(including pensioners) (table 2); in other regions,this ratio ranges from less than 1 percent (Shekinoin TulskayaOblast) to 26 percent(in Vanek).The SA resultsalso confimnthis finding: only 6.9 percentof the active populationin Vorkutacity is working in mines (excludingVorkutaugol workers, table 3); 12 percentof the householdsin the city have people eitherretired from or currentlyworking in the coal sector (table 4). With respect to settlementsthat support specific mines, however, nearly half of the householdshave either a person working in or a pensioner related to the coal industry. In Tula, the communitiesthat support mines are often large (30 to 40 thousand people), and in many major coal settlements,employment in the coal sector accountsfor about 8 to 10 percent of total employment. Other industriessuch as soap, shoe, textilesand manufacturingalso contributesubstantially to employment. More recently,informal sector jobs and urban agriculturehave been introducedto these communities.

Table3 Employeesin DifferentSectors (% of respondents)

VorkutaCity Sovetski Oktyabrski Vorkuta Kiselovsk Overall Overall ActivePop. 2 67.4 80.7 73.2 74.6 43 Mine workers 6.9 28.7 28.9 23.3 16.2 Vorkutaugol 4 6 15.4 9 0

Govt. employees 31.7 26.7 16.8 24.3 11.4 Othersector employees 24.8 19.3 12.1 18 15.4 Non-activepopulation 32.7 19.3 26.8 25.4 57 Pensioners 11.9 6 6.7 7.6 44.3 Unemployed 20.8 13.3 20.1 17.8 12.7

22 "Coal" settlements around Vorkuta have much higher percentages of coal employment.

23Includes pension-age individuals who are active in the work force. Figure 3 Mining as a Share of Total Employment, 1992 (% of total employment)

Oblast Amur > Bashkorstan

Chelyabinsk 1 , , Irkutsk ,, , . .,, . Kemerovo

Komi Republic: * Krasnoyarsk _ ' Magadan _ ' '

Prm :: : : :::::: Primorsky Rostov _ Sakhalin E l_ Sverdlovsk Tula Yakutia. . . .

0 2 4 6 8 10 12 14 16 18 20 All miningworkers as a % oftotal employment

Reproduced from the 1992 World Bank Report "Russian Federation Restructuring the Coal Industry: Putting People First." 20

Table 424 Households with at Least One Person Employed or Retired from Coal Sector (% of households)

Vorkuta Sovetski Oktyabrski Vorkuta Kiselovsk City Overall Overall Miners 12.9 47.3 47.0 38.51 30.1 Non-Miners 87.1 52.7 53.0 61.5 69.9

36. The level of educationin coal communitiesis high, especiallyamong the younger age workers. For exanple, a large portion of the labor force in both Vorkuta and Kiselovskhave not received formal training in a particular field and work as generalists in both the mining and non-mining sectors. Nevertheless,about a third of the labor force receiveddegrees from a specializedhigher level institution, and over a third are graduatesof high school (figure4). Those with a universityeducation are less than a tenth of the total labor force. Those with only a primary school education are the older generationand prevail in Kiselovskdue to the older age structure of communitiesin this region. The female labor force does not appear disadvantaged with respect to education. Community differences in labor force characteristics,therefore, closely relate to the age structure of the population, but point to important differences in the ability of Vorkuta and Kiselovsk residents to cope with the impacts of enterprise restructuring.

37. Recommendationsfor the Coal Sector RestructuringProgram. As illustrated above, the social and economic structureof coal regions are not uniform. And due to the large differencesbetween coal communitiesin the involvementof their members in the coal sector and in the potential for other sector developments,including the informal sector, policy makers should take into account differences in responses to coal sector restructuring.25 In assessing the community-specificimpacts of sector restructuringand designing relevant actions, therefore, it is particularly importantto: (a) pay special attention to coal settlements where the share of coal employment in total employment is high (for example, Sinegorskiy and Sholohovskiyiin Rostov, Lipki, Kemerovo); and (b) focus on specific settlementsassociated with individualmines, whetheror not the share of coal employmentis high.

38. Even in Vorkuta alone, there are substantial, statistically significant differences between householdslocated in the center city (where there are fewer householdswith members working in the mines, higher incomes,better standardsof living,and a muchhigher representationof families headedby single parents), and those in coal settlements(tables 5 and 6). The needs and concems of each type of community,as well as the broadercoal region will need to be addressed.

24 Tables3 and 4 are both statisticallysignificant.

25 The World Bank already supports projects that deal with communityinfrastructure development, enterprise housing divestiture,emnployment services and social protectionin Russia.Lessons emerging from these projects should be taken into accountfor the government'srestructuring program and any other activitiesthat the Bankmight support in the coal sector. Figure 4 Education Levels

Vorkuta Kiselovs

P rirnary ;_ ,,,,Primary

school ~ ~~ ~~~~~~~~~SChool______Basic high Basic high ; school sho

Specialized oVorkuta miners Specialized 0 Kiselovsk miners high school high school

* * aVorkuta non- .: Kiselovsk non- University minersUniversity

0 20 4060 80 ho 0 10 20 30 40 50 60

Vorkut Kiselovsk

Primary : Vorkuta-females school , Vorkuta-males Primary school

Basic high school Basic high . : . ~~~~~~~school Specialized ' ' high school Specialized , , t . .high school |Kiselovsk-females University Kiselovsk-males|| University 0 10 20 30 40 50 60 __ :_ :_ :_ :_: 0 10 20 30 40 50 21 Table 5 Housing Conditions in Settlements of Vorkuta (% of households)

Center Sovetski Oktyabrski Good 31.0 25.0 2.0 Average 40.0 60.1 37.6 Bad 19.0 12.8 31.5 Very bad 10.0 2.0 28.9 Total number of respondents 100 148 149

Table 6 Availability of Modern Conveniences in Settlements of Vorkuta (% of households)

Center Sovetski Oktyabrski All modem conveniences 76.2 99.3 0.0 Only some modem conveniences 23.8 0.7 67.1 No modem conveniences 0.0 0.0 32.9 Total number of respondents 101 1491 149

39. The following measures should be taken into account in assessing community-specific impacts and designing locally relevant actions to respond to coal sector restructuring.

(a) Supporting the development of community specific responses. The bulk of coal production and coal sector employment is in 18 regions, four of which make up for more than 90 percent of total coal output and 70 percent of employment (1992 figures). For that reason, efforts should be focused on these four regions to ensure maximum impact. Within each region, however, there is substantial variability among the communities on the extent to which they rely exclusively or primarily on coal production for their livelihood. Those with heavier reliance should receive greater support.

(b) Allowing communities themselves to help define the response. To this end, it would be important to help establish or promote local committees that bring the interests of various stakeholders together. These committees can help assess the coal sector-specific impacts and discuss ideas as to the extent to which mitigation measures could be largely coal sector-based. Given the results of the SA and field discussions held in Vorkuta, solutions should address families involved in both mining and non-mining sectors. This is an important reason why a comprehensive social response to restructuring can best be fornulated and implemented by agencies that are not limited to the coal sector .

(c) Supporting Regional Inter-Agency Commissions and a network of local governments to 22 facilitate participatorypriority setting in the regional distributionof benefits. One of the importantfindings of the SA relatedto demandfor local multi-stakeholderstructures to administer subsidiesand severancepackages associated with the coal sector restructuring. The SA findings also revealedvariability in the social, demographicand economicstructure of the coal basins and thus pointsto the need to establishlocal prioritiesfor interventionsaimed at cushioningcoal sector restructuring. In defining community specific actions, it may be useful to incorporate a participatorystructure that brings together the views of key elements of local communities(for example,a multi-stakeholdercommittee). Such a structurecould guide the process of adjustment to coal sectorrestructuring. In this relation,it is importantto supportregional branches of the Inter- Agency Coal Commissionand mechanismssuch as the recently established (February 1996) Network of Mayorsof MiningCities. The activitiesof such a Networkcould include: (i) bringing together the proposalsand views of communitiesaffected by sector restructuring;(ii) helping to develop an assistanceprogram; and (iii) helping to set priorities for communityassistance in a transparentmanner. It also could help monitorimpacts and evaluatethe effectivenessof alternative assistanceprograms.

(d) Helping set up an independentsocial impact monitoringmechanism. Given the emphasison "putting people first" and the SA findings,the informationgaps, particularlywith respect to the social impacts of transferringsocial assets from enterprisesto local governments, -- that is, the low level of trust the communitiescovered by the SA have for the "system," and the need for greater transparency in the implementationof the restructuringprogramn -- all point to the usefulnessof establishinga continuousSA process. Currently,research institutionsplay important civil functions in Russia as well as in the coal sector. It is therefore appropriate that a local university/researchinstitute provide "independent"assistance to the Government in conducting communityspecific SAs. For social impact monitoring(SIM), an advanced scheduleof closures and planneddownsizing will be needed.Such a procedurealso wouldrespond to the right of people to know about eventsthat will affecttheir lives. The objectivesof SIM would be to:

* Help determinethe extentto which the individualbenefits intendedfor mine workers made redundant by the coal industry actually reach them; that entitlements of coal sector employeesspecified by various legal instruments,including the tariff agreementsreached by the trade unions, are fully respected; that workers are fully informed of their entitlements and are given notice as per existing laws and regulations; that there are mechanisms and opportunities for recourse; and that the local, regional and Federal institutions mandated to assist the workers actually provide such services. If intended benefits and services do not reach the miners, an examination of the constraints and identificationof mechanismsto remove these will be necessary.

* Help determine whether "voluntarydepartures" are based on adequate informationand on workers' decisions. If the evidence suggestsotherwise, the SIM will focus on factors that distort workers' ability to make their own decisions. SIM also will be used for proposing correctivemeasures.

• Help determine whether geographical,job and housing mobility is hindered and that the measures envisioned under the reform program and the capacity building activities of the 23 SECALand the ImplementationAssistance Project are in place. If this is not the case, SIM data will be used for proposingspecific measures to enhancesuch mobility.

* Help determinewhether special groups such as migrant workers, the disabled, and women, do not shoulder a disproportionateburden of restructuring.Where there are discriminatory practices, SIM will identify contributing factors and provide a basis for proposing mitigationmeasures.

* Help determinewhether householdand communityaccess to and quality of social services are not adversely affected in the process of restructuring.Where such adverse impacts are observed, SIM will be used to identify contributingfactors, including coal sector reform, and providea basis for proposingmitigation measures.

* Create an appreciationof the overall hardships of a transitional environmentand evaluate the relative social impacts of coal sector reform, in addition to the absolute impacts listed above.

- Help determine whether trust in the institutions instrumental in reform implementationis not weakenedand that the public's perceptionof reform is not negatively influenced.

40. Socialimpact monitoring(SIM) also is intendedto help determine whether:

* As compared to baseline conditions, miners, their families and communities are better cushionedwith SECALand the ImplementationAssistance Project than without.

- The social safety measures in the Government's program which are supported by the SECALand the ImplementationAssistance Project are implementedand reach the intended beneficiariesto minimize,cushion, or mitigate adverse impacts.

* The restructuringprogram takes place in a dynamicand complex transitional environment in which adverse impacts of coal sector restructuringweigh less heavily in the lives of the people than planned and/or spontaneousrestructuring in other sector activities.

* Particular regions, settlements, or social groups (women, elderly, disabled, migrants) are systematicallydisadvantaged.

* At the level of communitiesand individual enterprises/mines,restructuring takes place when social safety measuresare filly in place in a planned, open, and transparentfashion.

* Institutionsmandated with reform implementation, severancepayments, training and job placement, and social assets management, etc., have the capacity and commitment to perform their roles.

* Decisions at all levels are taken with the participation of relevant stakeholders and the mechanismsput in place to ensure such a participationfunction. 24

* The public at large, especially in the coal regions, are informed of developmentsand the trust in the reform agenda is not weakened.

41. Specificmonitoring indicators include the following,6

* Access to full severancecompensation as per existinglaws. * Accessibilityof support for legal recourse. * Ability to restore level of income prior to sector restructuring,including effective utilization of severancecompensation. * Abilityto identifyalternative sources of income. * Flexibilityin changinghousehold patterns of labor force participation. * Job mobility, accessibilityof alternativeemployment opportunities. * Availabilityand accessibilityof training,re-training and job placementservices. * Access to adequate level of social services in the course of sector restructuring(in particular health and education). * Ability to maintain standard of living prior to restructuring, including access to heating/cookingenergy, housing maintenance, utilities. * Access to and availabilityof informationon social safety measures prior to departures from the sector (whethervoluntary or not). * Adequacyof supportfrom local, regionaland Federal agencies;and * Adequacyof participation/representationin relevantdecisions.

42. The SIM will have to be selective in its emphasis in order to produce timely results in a cost effective manner. This selectivitywill be manifestedin several ways:

* Regional focus: Surveys, case studies, and a major portion of the field work will focus primarily on four regions: Kuzbass,Rostov, Vorkuta and Tula. Among these, the first two account for over 55 percent of the employment in coal mines and thus deserve particular attention.

* Focus on closures and substantial reductions: Since the major emphasis of the SIM is minimization of the adverse impacts of restructuring, monitoring will focus on mines scheduledfor closure and large-scaledown sizing.

* Reliance on coal: SA has already established that some coal communitieshave higher levels of exclusivereliance on the coal sector for employmentthan others. SIM will focus more heavily on cases of exclusivereliance. Nonetheless, SA studies will attempt to put overall impacts in a more representativeperspective by showing the relationshipbetween patterns of communityreliance on the coal sector and the patterns of adjustment to post- reform conditions.

26 Indices of measurement will have to be defined as appropriate at the level of individual workers, households, communities, and micro-regions. 25

43. SIM cannot seek "representativeness"in its results. First, many regionshave a handful of mines (for example, Vorkuta has 15) and a search of a "representativemine settlement" is not statistically fruitful. Secondly, SIM will monitor a process establishedon the basis of the non-viabilityof mines. As mines are announced for closure and down sizing, a major part of the SIM will focus on the communitiesthemselves to determinewhether or not they are "typical" of the coal regions.

44. SIM will use several sources of primary and secondary data. It also will involve longitudinal, cross-sectional,and thematic studies, which complementone another with respect to their regional and issuescoverage. The followingprovides a general descriptionof SIM activities:

* Monitoringwith Secondary Data. This activity will involve an analysis of total redundancies, unemploymentregistration, training provided, and placement. The data will be collected in all regions and sources of discrepancy between intended and achieved targets with respect to redundancies,unemployment registration and placementwill be analyzed.

* Cross SectionSurveys. These will focus on mine closures and large scale down sizing: Relatively short surveys will be undertaken in a selected number of mines in the four regions identified. Committeeswill be selected on the basis of closures lists obtained from coal associations. About 1,000 interviewswill be conductedwith employeeswho are made redundant (with a control group of those who have left voluntarily)to ensurethat severancepackages are received; social assets are transferred and maintenance arrangementsare made; unemploymentregistration is made without delay and unemploymentpayments are received; adequate notice was given prior to closures; informationis availableto make the necessaryadjustments; and institutionsmandated with support to different categories of workers (including the vulnerable groups such as the disabled) actually providethe required services.

* Longitudinal monitoring.This effort will focus on a small group of miners who have left the industry voluntarilyand those who were made redundant. It will compare and contrast patterns of adjustment,job search, and mobility, etc. A control group of employeesmade redundantfrom non- mining sectors will also be traced over the same period of time (of about 18 months) in order to identify relative impacts of coal sector restructuring. This group of workers will be selected from the communitiesincluded in the first round of cross section studies and will consist of about 400 miners and 200 non-miners.

* Regional Comparisons.A modest effort is proposed for SIM purposes.As described under the SA baselinestudies, this activity will comparetwo micro-regions:one with heavy reliance on coal and the other with a more diverse economic base (for example Prokopyevsk in Kuzbass and Borodinskaya in Tula) to assess differences in coping strategies and their implications for restructuringprogram implementationbeyond the period of SIM.

27 It is expectedthat communitiesthat will be facingmine closureshave for sometime been facing someof the social consequencesof these inefficiencies. 26 * Monitoring Vulnerable Groups: Small scale studies are proposed to monitor responses of vulnerable groups (particularly the disabled and migrants) to sector restructuring.

* Thematic studies may be required as new issues emerge during the SIM period. Contingency funds, therefore, are set aside to provide flexibility to SIM.

Focus on Vulnerable Groups

45. The results of the SA in the two communities reveal that pensioners and workers approaching retirement age are a particularly vulnerable group, because they have attained lower levels of education than the rest, even less than the unemployed (figure 5), lack specialized expertise, and have low geographic mobility and a weak social support base for changing locations and/or jobs. As in other communities, older age groups are over-represented among those with lower levels of education and training. Among pensioners (55+ age group), for instance, this is particularly the case; more than half of Vorkuta's pensioners and over 80 percent of pensioners in Kiselovsk have only a primary education. The unemployed (that is, those who have voluntarily or involuntarily lost their jobs and/or those who were unable to get their first job), by contrast, have substantially higher levels of education.

46. Some pensioners continue to work and many others are potentially available for work. According to the 1995 Poverty Assessment, average pensions have been maintained at reasonable levels, although the minimum pension frequently has fallen significantly below the subsistence level. Moreover, about three percent of the pensioners receive a social pension which is as low as two-thirds of the minimum pension. The pension payments to the coal miners have a ceiling that is determined by the average pension levels for all sectors. As compared to their pre-retirement salaries the pensions of miners are dramatically depressed; the national ceiling imposed upon coal pensions makes it difficult for coal pensioners to sustain their families in environments where prices of food and other consumer items are high. Consequently, the perceived need to continue employment after retirement is extremely high among miners. This is strengthened by the fact that the retirement age in the sector is early. Pensioners are particularly vulnerable to mine closures not only because mines provide oportunities for post-retirement employment, but some pension benefits often are distributed by the mines. As in the case of the Promyshlennaya mine closing, pension age miners usually oppose retirement and do not want to transfer to other enterprises. In addition, there is a clear gender distribution among the elderly with respect to poverty levels.2 9

47. The status of migrant workers is not well-documented, but under the current system, migrant miners from Ukraine, Kazakstan, Azerbaijan and other FSU countries receive half the salary of Russian

2' A substantial portion of the housing in coal communities,especially those in settlements outside the cities rely on oven heating. Accordingto the tariff agreementsigned by trade union PRUP and the Russian government,the miners have to be provided with coal to sustain them through long winters. When these services are withdrawn because of mine closures, pensionersparticularly suffer becausethey cannot have an alternativeemployer providing these servicesor becausethey cannot affordto pay for coal deliveredto theirhomes.

29 In the summer1992 Russian Longitudinal Monitoring Survey (RLMS), the povertyrate for primeworking age malesand females (18-54)were similar.For elderlyfemales (aged 55 and over),the povertyrate was 44 percenthigher than the correspondingrate for males(22.5 percent). Figure 5 Education Levels: Pensioners vs. Unemployed (% of pensioners and unemployed) Vorkuta

Primary school

Basic high school _ _ Pensioners

g ,: : : : *~~~~~~Unemployed Specialized high school oo

University

0 1 0 20 30 40 50 60

Kiselovsk

Primary school

Basic high school S ' lo Pensioners

I Unemployed Specialized high school

University

0 10 20 30 40 50 60 70 80 27 minersand havefar fewerprivileges. How the restructuringhas so far affectedthem is unknown,but one of the laborunions is launchinga studyto documenttheir problems.

48. The vulnerabilityof women and female-headedhouseholds is less obvious from the SA survey data,30but womenappear to have lowerincomes; somewhat lower levels of specializedexpertise (table 7); and lower levels of additionaltechnical skills to fall back on in the event of job loss. Because female participationin the coal sector is especiallylow, the threat to female unemploymentcomes from the non- mine sectors. In Vorkuta,for example,around one-fifth of womenare employedin mine-relatedactivities (table 8). While unemploymentamong all the men surveyedis 13 percent,it is higher(17 percent)among women.

Table 731 ProfessionalSpecialization (% of respondents)

Vorkuta Kiselovsk Male Female Male Female Trainingin miningactivities 0.6 9.0 20.0 2.2 Generalists/Workers 46.3 43.9 51.3 43.2 Technicaltraining 26.6 17.0 4.4 11.2 No specialty 26.6 30.0 26.9 42.7 Totalnumber of respondents 177 223 160 232

49. Miners are largelymales with the largestproportion of miners belongingto the middle to higher- incomegroups. Amongthe employedrespondents in the survey,males accountfor the largestproportion of minersin both Vorkutaand Kiselovsk. In Vorkuta,moreover, males accountfor the largestpercentage of the group having specializedskills. Women, by contrast, are largely non-minerswith the majority of women in Vorkutaworking for the government. In Kiselovsk,however, there is a larger percentageof womenwho are workingin mines.

30Theemployment characteristics of coal citiesand coal settlementsare highlyvariable and have dramaticallychanged over the past four to five years. Previously,in manycoal settlements,if couplesdid not jointly work in the mines,women worked in jobs that supportedthe mines(for example,farms, repair shops, preparation plants). In addition,there was the "textile"factory whereliterally hundredsof miners'wives could work sewing miner and oil workeruniforms and underwear. Since the marketreforms began, these factorieshave quicklyclosed because material is expensiveand the qualityof the importedproducts have been foundto be better than domesticones. Other work placesfor womenincluded bread factories, beer factories, as wellas schoolsand kindergartens. Thesealso have beentransformed into tighter more market-oriented structures leaving women unemployed.

3 The distributionof professionalspecialization and the employmentstructure of genders in Vorkuta and Kiselovsk are statisticallysignificant. 28 Table 8 Employment Structure - by Gender (%)

Vorkuta Kiselovsk Male Female Male Female Mines 41.8 8.5 25 10.2 Vorkutaugol 4.5 12.6 0.0 0.0 Governmentorganizations 16.4 30.5 9.4 12.8 Other 20.9 15.7 18.1 13.6 Pensioners 3.9 10.8 35.6 52.3 Unemployed 12.4 22 11.9 11.1 Total 177 223 84 86

50. Accordingto the 1995 PovertyAssessment, the compositionof the unemployedhas shifted since 1991. Job losses have been concentratedon early retirees and women. During the early stages of the transition,the majority of the unemployedwere women -- over 80 percent in some oblasts. This was attributedto frms' desires to retain "core" productionworkers and their preferencefor laying off clerical and auxiliaryworkers first, the vast majorityof whom are women. In the same assessment,households headed by an unemployedperson were found to be more than twice as likely to be poor -- 63 percent of householdsheaded by an unemployedperson were poor in summer1993 and over 40 percentof households with an unemployedmember were poor and almost half of these were very poor. The relativelymore vulnerableposition of femaleheads of householdsalso is demonstratedby case studiesin the coal sectors.32 For example,from early 1994to July 1995,the numberof employeesat the Dimitrovamine was reducedby 45 percent,from 1,909to 1,043.While waiting for the mine to close, less mobileand less sociallyprotected groups remained at the mine, including over 200 women, often older individualsor single mothers responsiblefor the care of their children,over 200 men of pensionand pre-pensionage, and elderlyworkers with low educational and professional levels. Neither unemploymentbenefits, pension, or severance payments were sufficientto make a living.Nonetheless, workers from the settlementclaimed that under pressure, mine managementattempted to lay off single mothers (which appears to be contrary to the provisionsof the Labor Law). The SA survey also revealed a higher incidenceof unemploymentamong femaleheads of households.

51. Activity rates are especiallylow among female-headedhouseholds as comparedto male headed households. For instance,in Kiselovsk,29 percent of the female-headedhouseholds are unemployedand 43 percent are pensioners; in Vorkuta, these figures are 19 percent and 16 percent, respectively.33 Unemploymentamong male-headedhouseholds is slightly higher than in other groups in Kiselovsk(32

32 Accordingto the 1995 Poverty Assessmentof the World Bank, "women in Russia are particularlysusceptible to poverty. Despitehigher educationlevels and high labor forceparticipation rates, women have traditionallybeen concentratedin low wage occupationalgroups, and paid less thanmen. They also figure disproportionatelyamong the unemployed."

33Differences in distributionwere statistically significant based on chi squareanalysis. 29 percent), but pensioners consist of a relatively small portion of this group (20 percent). Male-headed households cluster in the older and younger age groups; the high unemployment rates are due in part to the difficulties of entering the labor market in an extremely constrained transition environment. Consistently, unemployment rates are lower in households jointly headed in both Kiselovsk and Vorkuta. Understandably, the presence of two adult members helps to cushion a family against economic crisis. Single male-headed households, therefore, also manifest vulnerability in Kiselovsk.

52. Those employed in the non-mining sectors also are vulnerable because they have lower incomes, higher rates of unemployment, less adequate living quarters, and lower levels of skills. In other words, when measured in terms of vulnerability to unemployment and ability to cope with the shocks of restructuring, non-coal sector employees also are disadvantaged. As mentioned earlier, there is a dynamic change in the classification of workers by sector; a worker who was on the payroll of a coal enterprise some three years ago may now appear in the local govemment payroll. In designing programs of assistance, therefore, it is more useful to think in community rather than individual terms.

53. The disabled, prevalent within the coal sector due to the lack of adequate safety measures for coal operations, are over-represented in the coal basins and face uncertainty regarding disability benefits in cases where it is not clear who will be the legal beneficiary of a closing mine, since it is the legal beneficiary that is responsible for paying disability benefits. In the case of Halmer-Yu, this was one of the reasons why many disabled miners remained in the settlement at the end. Moreover, there are several categories of disability and the employers had an obligation to provide surface jobs to those with lower levels of disability. Mine closures and/or serious downsizing are particularly threatening to this group because of the risk of losing the social benefits that they and their families have received from the coal associations.

54. When Vorkuta is compared to Kiselovsk with respect to a large number of indicators (for example, income, human resources, quality of housing, satisfaction with living conditions), there is little evidence that it is more vulnerable by comparison to other communities and its residents do not claim to be more vulnerable than those of other coal communities.

55. On the other hand, activity rates are much higher in Vorkuta as are the rates of unemployment (figures 6 and 7). More than half of the respondents in Kiselovsk are pensioners or unemployed; pensioners alone account for 52.6 percent of the respondents interviewed and about a sixth of them are working while receiving pension payments. Informal interviews indicate a strong preference among the pensioners to continue working because pensions are low.

56. Those unemployed but below the pension age account for a considerable percentage of the population in both regions; but the unemployment rate appears especially high (21 percent) in Vorkuta.34 Also dramatic is the finding that about 10 percent of respondents in Vorkuta and 5 percent in Kiselovsk have been laid off. Nonetheless, voluntary departures for such reasons as health, dissatisfaction with work, and intention to leave the area account for a larger portion of unemployment than lay-offs. Among those who have been laid-off, miners account for only 4 percent of the total in Vorkuta and 16 percent in

34 While 21 percent of respondents in Vorkuta and 12 percent in Kiselovsk report to be unemployed, few have registered themselves as such. A better understanding of voluntary and forced unemployment is needed. Figure 6 Employment Structure - Vorkuta

Working < Pensioners* (13%) 5% Not working 11% of which are miners Other 7% (1.2%of the total) 15%

/ V I I / ~~~~Voluntary

departure** - Unemployed (21%)

Public Sector 22% id - Male 10% Female 21%~~~~Mal

_ / - ~~~~~~Managers_ \ 1_ 2% < 2

VorkutaUgol (adm. Skilled workers workers) Unskilled workers 0 8% e10% 4% of which are miners Tt 1;V. | (0.4%of the total)

Mining Sector (30%)

*lncludesindividuals older than age55. ** Includesdeparture because of healthreasons, own desire and otherreasons. Figure 7 Employment Structure - Kiselovsk Female(60%)

Pensioners* (52.6%) Male (40%)

Working Not working 7.5% I¶Tr off U (-2% 45%45% / / /\ ~~~~~~5%5% ~~~~~~~~~:JR\ Unemployed (12%)

// / / \ W~~~~~~~~~~~~~~~~~~~12% of whichare miners _ / / / / ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(0.6%of the total)

Voluntary departure"6 16% of whichare minenr 6.6% g (1% of the total) Managers 0.4%

Skilled workers 7.8%

Unskilled workers 4.9% A Public sector Other 9% 14%_ UMiningSector (13.1%)

*Includes individuals older than age 55. ** Includes departure because of health reasons, own desire and other reasons. 30 Kiselovsk5 . In many of the "coal cities" or "coal basins," therefore, unemployment that has its origins directly in the coal sector varies considerably; and vulnerability to unemployment is community wide and as much a trait of non-miners as of miners. In numerous communities visited in Tula, for example, many factories have shed workers or closed their doors permnanently much earlier than the coal sector restructuring. During these visits, people frequently report their perception that no one has a guarantee of a job for the next day, and regardless of what employment they have, they explore other opportunities. Many ex-miners explained how they shifted to other sectors even though the mines that they were working in are still in operation.

57. With respect to the professional characteristics of working age populations in Vorkuta and Kiselovsk, the SA findings are consistent with earlier observations and reveal experience and training in other than coal sector employment as well. Indeed, only five percent of the respondents in Vorkuta and nine percent in Kiselovsk have specialized training in mine-related operations; the remaining workers are trained in diverse fields. As such, there is potential for workers to make adjustments through work in other sectors; indeed about 6 percent of households in Vorkuta and 8.3 percent in Kiselovsk report receiving additional incomes from activities other than their main employment.

58. In summary, vulnerability in the coal basins results not only from coal sector activities, but from the adverse effects of transition in other sector activities as well. This is especially true for women whose participation in the coal sector is substantially lower than that of men. Similarly, the vulnerability of the elderly, those not well-educated, those without skills, those without social support systems, can be traced to various sources -- an important one being coal sector restructuring. While coal sector institutions can help ensure that affected coal mines and their families receive their legal entitlements, the Govemment should focus on affected communities at large and help put in place community-wideprotective measures.

59. Recommendations for a Coal Sector Restructuring Program.37 In light of the above findings of the SA, the issue is whether or not targeting vulnerable groups through a coal sector restructuring program is justifiable and practicable. With respect to this issue, the following recommendations may be considered.

(a) Give special but not exclusive attention to the needs of vulnerable groups such as the disabled in coal basins.38 While focusing attention on vulnerable groups in the coal basins is necessary, singling out those who are/have been engaged directly within the coal sector is not sufficient. For

35Thisinformation is not precise.The surveydid not inquireabout the sectorof employmentprior to lay-offs.Rather, for thosewho are laid-off,information on professionalbackground is provided.Thus, the figuresquoted reflect professional background instead of sectorof lastemployment.

36Accordingto the 1995Poverty Assessment, unemployment benefits average only 15 percentof the subsistenceminimum.

37 Clearly, SA is one of the many inputs to a decision making process on the issues addressedthrough the preliminary recommendations.Economic, financial, environmental and othertechnical considerations deserve as much attentionas the social considerations.The recommendationsproposed in the SA are meantto pose issuesfor stakeholderdebate.

38 The transitionto the market economyappears to be causing unemploymentand hardshipthroughout Russia. SA cannot establishwhether such hardshipis higher or lower in coal basins,and thus, does not call for a "specialtreatment" of coal areas. Nor doesit call for exclusivenew benefitsto vulnerablegroups. 31 example,women-headed households are vulnerable,but the source of their vulnerabilityis not directly linked to their participationin the coal sector. Consequently,focusing only on those involvedin the coal sectorwould leavethe needsof the majorityof the female-headedhouseholds unattended.39 This can be accomplished by considering broader, community/region-wide interventionsthat can provideas much supportto these groupsas they wouldto the communitiesat large. Avoidingdiscrimination is also importantand impliesthat peoplewill not be deprivedof their entitlementsdue to their vulnerabilityor politicalweakness. 40 Case studiesof mine closures provideevidence for such discriminationwhich needs to be discontinued.Case studiesalso show that people have been deprivedof their regular entitlements,including wage payments.Possible broadersocial interventionsthat would benefitthe vulnerablegroups as well as othersare outlined below.

(b) Ensurethat entitlementsto vulnerablegroups provided under the existinglaws continueand avoidpromises for new protectionmechanisms unless they can be fulfilledwithout exceptions. In this regard, it is importantto note that targeting speciallydesigned assistanceto vulnerable groups may be administrativelyburdensome. Also difficult would be the monitoringof such assistancein a restructuringenviromnent.

(c) Address both minersand non-minersaffected by mine closures in cushioningthe adverse impacts of coal industryrestructuring. Implementing such a recommendation,however, would involve making a policy decision to entitle all workers in the coal basins, regardlessof their employmentsector, to fair noticeand severancecompensation.

(d) Assist in the developmentof communitysocial infrastructuremaintenance programs to ensure that all membersof the community,including vulnerable groups, are protectedand that some will be employed. The SA showedhigh demand for support in the maintenanceand managementof housingand communityinfrastructure. The housingstock and infrastructurein some of the coal settlements has severely deterioratedand the communitiesare particularly articulatein their demandfor supportto repair it. Maintaininghousing and infrastructurewould not only help improveliving conditions, but would generatea certain levelof employment. Whilethe employmenteffects of these programswould necessarilyfall on the younger,better trained, and dynamicparts of the laborforce, their developmenteffects would be sharedby the more vulnerable groups. Public works programs,focusing primarily on housing and infrastructuremaintenance, would help establishsupport for local communities,rather than just the miners,in copingwith the adverse impactsof sectorrestructuring. This support shouldhave a targetedcharacter. In many

391napparent contradiction with the "MainPrinciples of MineClosures" confirmed by the TradeUnions, the numberof workers(in Dimitrovamine) was reducedby half and productionwas practicallystopped with no socialprotection for workers.In June, after workerslearned that productionhad been stopped,they agreedto continueworking without salaries. Workersunderstood that continuingproduction would enablethem to receiveat leastsome money, whereas the liquidationof the mine would leavethem unprotected.

40Adjustingpension payments to reflectinflation would providean importantsource of protection,but this is not a sector-specific intervention(that is, it cannotbe implementedfor the coal sectoralone and would requirecross-sector treatment with substantial budgetaryimplications in an environmentwhere even the basicsalaries are in arrears). 32 miningsettlements, infrastructure services such as central heating were specificallyestablished to supportindividual mines. Case studies show that these services were owned and managedby the mine associations.And in the event of mine closure,they were not maintainedand eventuallybroke down. Transportationservices to neighboringtowns also were provided by mines and they too collapsedduring the mine closure process. Consequently,there is a need to identifythe specific infrastructurerequirements of the affected communitiesand establishmechanisms for providing these services.

(e) Help create employmentopportunities through community-basedinnovative development initiativessuch as micro-enterprisedevelopment. Providing financial and technicalassistance to local governmentsthrough the existing support programs is important in order to help create employmentalternative to mining. Such alternativesare also important in view of the fact that numerousother non-viableeconomic enterprisesin the coal regions have already closed down since, unlike coal, there were no large subsidiesto supportthem. In addition,there is a need to support innovativeinitiatives such as micro-enterprisedevelopment. These types of community programs would help in planning long-term strategies and actions aimed at creating new employmentopportunities and ensuringdiversification of the coal basins.4 1 Accordingto the SA findings,a segmentof the coal communitiesis somewhatskeptical of private initiatives,based on what they perceiveto be the motivationsof private sector operators. Nonetheless,there is large supportfor and interestin micro-enterprises.Many workers feel that they can be engaged by such enterprisesand that they would be willingto receivetraining to acquirethe skills needed by them. This type of community-oriented development effort wouldprovide opportunitiesfor both miners and non-minersand thus provide social protectionfor the communities. The need for community based actionis also supportedby the fndings of the SA. Further,supporting such programswould also help civil socie.' developmentin coal basins and strengthencommunity-based organizations (CBOs)and NGOs. Micro-enterprisesshould be free to recruittheir own labor,without regard to social vulnerabilities. Once established,however, these enterpriseswould recruit from withinthe coal communitiesand thus provide employmentopportunities for their members. Women who have experiencein non-coalsectors would be particularlygood candidates for these enterprises.

(f) Enhance transparencyin the closing of mines. The necessary institutionalarrangements for closing minesmore humanelyare not in place and shouldurgently be defined.As demonstratedby the case of the DimitrovaMine, some mines have been closed without a "beneficiary"so that the pensionerscould no longer receive their entitlements,and local services (for example, heating)

41 Accordingto World Bank studies,the RussianFederation's overall economicand employmentsituation within which the coal sectorrestructuring is takingplace creates great difficultuesfor coal sectorredundancy efforts and limitsthe effectivenessof standard ameliorativemeasures such as job placementand retraiing. Another priority,therefore, is to promoteeconomic diversification througha local economicdevelopment program aimedat creatingnew jobs in new and expandedenterprises. Possible programs include:(a) a communityemployment program to integrateexisting and potentiallynew resourcesto meet both immediateneeds and to plan long term strategies,(b) a local economic developmentprogram aimed at creatingpermanent new jobs through the developmentof new enterprisesand (c) a transitionalemployment program that would provideinterim employment for displaced workers.

42Nonetheless,there is need to base decisionson micro-enterpriseson an analysisof economic feasibility. These enterprises should be viablefor the regionsproposed and not be establishedmerely for the purposesof socialassistance. 33 became inoperable. Further, there has been insufficient considerationof the "take over" arrangementsand the capacityof municipalitiesto manageall post-closurefunctions.

(g) Encourage governmentto establish positive policies to enhance labor mobility. The SA revealedthat there are numerouspolicies and practicesthat hinder the ability of workersto move out of the coal basins in their search for employment. Such policies and practicesalso make it difficultfor the retired populationsto move to other regionsof the country. Reviewing,and when appropriate,changing regulations that require residentialregistration, that prevent workers from gettingtheir full pensioncompensation (including those with a Northerncoefficient), and do not allow collectionof pensions and unemploymentbenefits in different parts of the country are important actions. Moreover,changing these regulationsmay have institutionaland financial implicationsthat shouldbe givenadequate consideration.

ImproveLiving Conditions and Housing

60. Livingconditions are difficultin the coal basins,especially those in the Northernregions. Regional coefficientsand highly subsidizedwages have in the past compensatedfor these conditions. Miners were able to save and many in Vorkuta,having no inflationto deal with, were able to leavethese savings in a bankuntil retirement.

61. The overallhousing subsidies being availableduring the last three yearsare insufficientfor keeping the housingstock in propershape. Besides,under the current institutionalsetting (monopolistic position of serviceproviders in the housingsector, poor corporategovernance and supervisionby municipalities),even availablefunding is used in an inefficientway. Historically,the housing stock in the coal regionswas relativelyunderdeveloped with respectto both its volumeand quality. Duringthe periodbetween 1993-95, when there were substantialcuts in real social spending,the conditionof the housingstock deteriorated further. The social assessmentresults also confirmthis observation.

62. The apparent hardshipand enormousburden of transitionare reflected in people's perceptions about their livingconditions. Very few, about one percent of the sample, feel well off. This contrasts dramaticallywith the results of severalnational polls showingthat some 10 percent of the populationfeel good about their lives duringthis reformand transitionperiod. Abouta third of the populationare able to get along,but can only affordbasic necessities;a very large group (over 40 percent)can only affordfood. Thosereporting that they are barelyable to survive constituteover 20 percentof the sample.

63. Accordingto the SA findings,Vorkuta compares favorably with the coal settlementsof Kiselovsk in terms of livingstandards as perceivedby the respectivepopulations. Far more visibleare the differences betweenthose in the coal sector and those who are employedin other sectors. In both Kiselovskand Vorkuta,miners clearlyhave a more positiveperception of their standardsof living,and this perceptionis matched by their higher incomes. With respect to these findings,there are no consistent differences betweenmale, female, and jointly headedhouseholds.

64. Housing conditionsalso show significantregional variation. In Vorkuta,the great majority(98 percent)of the populationslive in flats, often in two story apartmentbuildings. Unlike other parts of Russia, living in communalapartments is not widespread(about three percent of the population). In 34 Kiselovsk,three fourths of the householdshave individual,single story homes. These dramatic location differencesare particularlyimportant with respectto the ownershipand maintenance of the housingstock.

65. Perhapsas a result of the differencesin the type of housingnoted above,Kiselovsk families are also deprivedof modemconveniences, including adequate water and sanitationservices (figure 8). In general, housingand housingservices are better in Vorkutathan in Kiselovsk. While only 12 percentof Vorkuta householdsare deprivedof amenities,two thirds of Kiselovskhouseholds are in this situation.Nonetheless, community specific differences are far more pronounced than regional differences. For example, comparingthe conditionsin the city of Vorkuta with those in the two area coal settlements,we note differencesfar more pronounced than regionaldifferences. In VorkutaCity, for instance,76 percentof the homes have modem conveniences. In Sovetski settlementevery householdhas these conveniences,but Oktyabrski is largelydeprived. This situationis consistentwith visible income differences.

66. People'sperceptions of the adequacyof their housingsituation is generally quite positivewith two thirds findingthe housingconditions good or fair. Perceptionsare somewhatmore positivein Kiselovsk, despite the reported lack of modem conveniences. In both cities,there are no differencesbetween miners versus non-miners,different income or age groups, and male/femaleheaded householdswith respect to housing conditions. The only predictor of housing quality is location. Again, community specific differencesare large: in the city of Vorkuta,31 percentof householdsfind their housingconditions to be good and another 40 percent satisfactory. The coal settlement Sovetski also reports high levels of satisfaction.In Oktyabrski,however, the conditionsare consideredto be extremelypoor.

67. In both Kiselovskand Vorkuta,there were a substantial numberof householdswaiting for a new housingassignment: 21 percent in Vorkutaand about 9 percentin Kiselovsk. In both regions, twice as many miners as non-minersexpect a housingallocation. Income, gender, or age are not determinantsof those registeredfor new housing. In addition, there is a long list of families who have signed up for relocation homes. Interestingly,those families who are living in the worst quality housing have a significantlylesser tendencyto appear on these lists than familieswith good housing. This is a difficult finding to explain given the lack of correlation between perceived conditionsof housing and socio- economicvariables such as income,age, and employmentstatus. Giventhe politicalrealities of Vorkuta,it appears that those who alreadylive in good conditionsaim at improvingtheir living standardsfurther and use variousopportunities, including queuing for relocationhomes, to maximizetheir options.

68. Some families already own second homes outside the coal basins; over 6 percent of Vorkuta householdsand 1.3 percent of Kiselovsk families are in this situation. Further, the multiple home ownershipreported in Vorkuta is significant,and a certain level of under reporting is expectedgiven the high demand for relocationfrom Vorkuta. Familieswho expect to be relocatedmay well be quiet about home ownership outside. It also is importantto recall that the percentage of pensioners in Vorkuta is substantiallylower than in Kiselovskand in comparisonwith nationalaverages. In addition,there are many pensionersthat had homes outside the area and moved after retirement. During field visits to Vorkuta, moreover,it frequentlywas reportedthat this was a commonpractice until the 1990s.

69. Recommendationsfor the Coal Sector RestructuringProgram. There are three main implications for restructuring. First, there is a need to provide support to municipalitiesto maintain social assets transferredto them. The recentdivestiture of the bulk of socialassets was not fiscallycoordinated, resulting Figure 8 Living Conditions in Vorkuta and Kiselovsk A. Type of Housing B. Availability of Modern Conveniences Vorkuta Room in comm. apt (2%) Vorkuta

All conveniences Some conveniences available (57%) available (31%)

Separate Apartment (98%) No conveniences available (12%) IA All conveniences Kiselovsk Kiselovsk available (12%)

Separate apt. (22%) No conveniences navailable(64%)nSome cnveienes \ ~~~~~~~ ~Roomsin comm. apt. (4%) availal 2e^

C. Housing Conditions Vorkuta Fair conditions(47%) Good (16%) | ~~~~~~~~~~~~~~~Fair conditions(53%)Y rGod(6) L sood(18%)

Very bad (14%) ... 2 L Bad (21%) Very bad (13%) 4 ... Bad (18%) 35 in the emergence of problems in housing and other social assets. At the moment, this problem is at least as important as more traditional social problems deriving from rising unemployment and inadequate social protection. Second, there is a need for further study of the means by which municipalities and households will be able to take over the maintenance of the housing stock and infrastructure from enterprises. Third, alternative approaches should be developed to facilitate rapid privatization of housing in areas where there is a high incidence of single story detached houses; this too will require additional SA and consultation.

Recognize Diversity in Compensation Expectations

70. Cash compensation, housing, continuation of the social benefits and continued access to social assets are the three main expectations of households directly or indirectly affected by coal sector restructuring. Remarkably, few persons expect government assistance in finding employment. By contrast, Vorkutans would like a house elsewhere, get their moving expenses covered, and have cash compensation as well. Those from Kiselovsk, on the other hand, would rather have cash and/or have guarantees that their social services will continue. The demand for direct cash compensation is particularly pronounced in Kiselovsk (about 55 percent) where there is little expectation of relocating. According to the survey results, there are high expectations for govemment support to mitigate the adverse impacts of the restructuring process and the types of assistance sought are those best delivered by the central and local government agencies.

71. It is clear that relocation expectations are high in Vorkuta. The demand for housing is particularly pronounced: 90 percent of the respondents expect assistance in either housing or housing and housing- related costs (that is, relocation/travel costs, additional costs, additional compensation). Among the households in Vorkuta, about 25 percent are concerned exclusively with the housing issue, while another 65 percent require housing as well as relocation support, additional costs, or additional compensation.

72. A large percentage of those demanding housing (70 percent) also specified the amount of money they expected to receive for this purpose (that is, amounts ranging from 1 million to 1 billion rubles). Excluding extreme figures from the data reveal an average figure of 162 million rubles or about $36,000 (1996 prices). Interestingly, the data show little relationship between the socio-economic characteristics of the individual respondents or households and the housing compensation expectations. One exception is the relationship between income and expected compensation. The largest percentage of high income respondents in Kiselovsk expect compensation in the form of cash, whereas the largest proportion of high- income respondents in Vorkuta expect housing assistance.

73. Survey respondents appear to have a fixed figure in mind for housing costs on the "mainland," Southern Russia. Far more realistic expectations were articulated during the informal pilot studies. In a large number of individual and group discussions held during a pilot study carried out in August 1995, respondents said that they would be prepared to accept cash compensation equivalent to the average square meter price of an apartment in Southern Russia multiplied by 12 square meters for each member of the household. This calculation yielded a cost of about US$10,000 for a three room apartment.43 In addition,

43 Accordingto anotherestimate, for small apartments,the cost of I squaremeter was aboutthe equivalentof US$350in summer 1995. Therefore,a 50-60square meter, 3-bedroom apartment costs between US$17,500 - US$21,000. 36 many claimedthat throughinformal channels, one couldget housingfor a littleas US$6,000-8,000in cities and less in rural areas. Nonetheless,nobody believedthat anyone would actually provide them such compensation,despite the recentexperience of a mine closurewhere many of the affectedpopulations were actually relocated. In addition, there is widespreaddisbelief that any relocation assistance would be forthcoming,despite numerous decrees.

Table9 Opinions Regarding Opening Own Business (% of respondents)

Vorkuta Kiselovsk Never 44.5 73.6 Yes, with support 24.8 11.9 Yes, if there is no otherway 24.3 10.9 Yes, if I wish 5 2.6 Already have 1.5 1 Totalnumber of respondents 400 386

74. Some people also expect support through local enterprisedevelopment. Only four percent of householdsin Kiselovskand two percentin Vorkutaare themselvesinvolved in informalsector activities. When the respondentsare asked whether they would be interestedin having their own business,those younger (Vorkuta populations)responded with enthusiasm. Nearly half (44.5 percent) of Vorkuta householdswere interestedand another24.8 percentwould be interestedif they receiverelevant training. This can be identifiedas an importantarea of trainingthat needs to be related to realistic geographic economicopportunity possibilities.

75. More importantly,the proposed micro-enterprisecomponent (para. 59) is meant to generate employmentpossibilities for the coal communities.We have already shown above that the households express flexibilityin adoptingto changingwork situations,but they do not have strongtrust for private businessinitiatives. About one-fifthof the sampleclaim that such initiativesare for peoplewho are seeking "easy money,"but many,especially those in the activeemployment age group,express a willingnessto get involvedin employmentwithin this sector.Another fifth mentionthat they will work in suchjobs if there is no betteralternative (table 9).

76. Few peopleask for state supportin findingnew employment.This can be explainedby the fact that miners can still find jobs in other mines. Nonetheless,the labor reductionprocess in most mines, has recentlystarted, and the situationin the coal sector labormarket is expectedto changerapidly in the near future. In addition,as expressedin informaldiscussions, there is a need for alternativeemployment, especiallyin settlementslacking a diverseeconomic base and potentialfor developmentof the informal sector.44These findings suggest that if trust can be established,and if there is transparencyin the

"Not onlyminers and otherfamilies but alsorepresentatives of Duma, Ministy of Economyand Ministryof Laboras wellas scientificcommuity all stressthe needto demonstateinnovative approaches that would help generate alternative employment opportunitiesincoal basins. 37 developmentand operationof micro enterpriseson a pilotbasis, they can be introducedto the coal r-egions. 38

BO) 4: UNEMPWYMENTRRNFJT$

Russinhaextensive legal #otection fr iniem$oye4workers. The extent of the 1aws application and funding variesreaZ1y. All backp yandwagesdue the worker must bepai4 by the yeron the day oflay-ott Allworkers are guaranteedtheirbasic salary during thejobsearch period forawimnm of twouiontbsifthey werelaid off dueto staff reductionsand three months itthe lw-offresulted fro losingof anenterprise (fly monthsf.x thosein theFar Notth and rregions)provided that they registerwith U eLoeaInpl0yInent Servke (LE$} during the initial two weeks aterthe lay-ott

If workershave not found ajob withinthree iriontha after lay-ofZ, they will receive wiemployment benefits which canbe equalto ormore heminimuip alsalaty iEaplicabl;regional eOetcientS are added to bnefitsAll btare inereasedby I rent for eachof wwkers4epen4wts The am texceedthe worker'sbasic salary at er lastplace ofemployment. Asuminaiyoftbe natur thesebenefits foliow Worketslaid off in connectitmwith the closureorrenizdn erpri$etndwho have worked in bateate,tise formore than 12weeks in theyear re4ul u ploynientwill receive; 75 pereentof theirbasic salary fr thefirst three months. G percentf theirbasic salary toe the next fur mOn*. 44)p at heirbasic r pdedtbisuuowit is morethan the inurariationalsaiary Bene&unay not last tbr morethan 12 ecutivemonths in an Th-monthperiod. * Workerswho wm*cdia closed orreorgaiiiced en risenfor lessthan tZ weekswill be paid benefits equaltote mininninisalary.

* WO*!....whohave lost Iheirjohs for anyother reasons receive benefits equal to the tniniminiinatiwml

* Alllaid-off workers are to einibursed100 percent of all costsassociated with voluntary or forced relocation.Thqiriay also begiven the rigltto etheirold.ngepension two years hefi,re the legal retirementapfS5 yearsold for woa14n60 yearsold for i * Afterayear01 oynientbenefltsworkers who are stiftn ployedmay quali13for "material assistanc whichis equalto the minlmwpsalary; this a stancemiy notIst firu*re than six inonrbaNonethelesser the lhnkon materialasals ebenefitaliasexpired itis unclearwhether workersmay begin a secondrowid of

* Thebenefit period is ertendedly twow*dcot each year wo4zedheadpenstoRage.

Workersunder IS yearsofage,, pregamst women, w ithhildamunder , or singlemothers with childrenunder 14,, can only belaid ffwihthepennission01 the LS or the1eglonal Commission for Minors;the employernitist 0m$mleorjob$fotihese workers, Allwomen receive benefits equal to the mininiumsalary until their yoangest child is one anda half yearsofage. Womenlaid-off in cosedenterprises receive additional benefits until their youngest child is thr0eyersof age. A wotnanalso tnayreceiv one.ti*ne henflts al* ilnesthe ndonal minitniamsalary once it is continuedthat she is pregnant Minersalso can tireat an ehirage. Porexani4de,niidexgronnd workers who have atteast .2 yearsof work enperience canretire regardless of their age. "''AsperNPC *a greewentWhiclm.PRUPis.alsotrying to pnainote. 39

77. Recommendationsfor the o d - s s- i SSi= Sector Restructuringz Program. The findings on compensation expectasion .. ..exp ion,

suggest that the restructurng program, ... give high priority to ensuring that - ialir workers receive all (if appropriate)cash administ2dby tee.....e et that is owed to them under the Law.4 c wagN (0 e - Specific recommendations are: ts t mt ii et ^ - -fj- h I- .4n he reota ie* Ihprftbiltyof (a) Provide adequate information G ht on compensation. Workers coa h ee e r w

should be (i) given due notice P...... e ...... e an:'te ,g,ctic" under the Law; (ii) have a clear . picture of their unemployment ... egb.rod. benefits as per various laws, j s ben,it at the fe for decrees, regulations and tariffs .a~a. . f hy.. a a es 0C75 er f l*go (box 4); (iii) receive all theirs a; cash entitlements regardless of b N e dins e i

their decision to stay in the B ,, r (W) f affected communities or leave in piod F2 ey n defi ned:a$5feretf search of new opportunities. w 1 d

(b) Ensure government payment of cot severance m a timely manner. that c o eo eh This is a high priority which t n would enhance workers' ability..,,..,'.. oy,. .e'..:t.f.a:.e.re.of to move freely in search of alternative opportunities. Case W.ddank(I9i:) studies on mine closures indicate i'.B . ... mixed experience in workers' ability to receive full severance payments under the Labor Law, and only partial compensationas per tariff agreementsbecause workers feel that full and timely payments are important. It is recommended,therefore, that a substantialportion of the subsidiesremaining in the sector shouldbe specificallyallocated to social protectionexpenditures and disabilitycompensation. Given high levels of uncertaintyand low trust

45 An extensivelegal socialsafety net which can assist laid off coal sector and other workersalready exists. Worker rights and benefitsin the case of layoffs are regulatedby more than 20 federal decrees,resolutions, laws and orders. In addition,there are two nationaltariff agreementswhich provide benefits for coal sector workers. Several governmentalbodies are involved in deliveringthe various programsand benefits. The safety net providesfor a full range of support-severancepay; unemployment benefits;retraining; job finding and/or creation;relocation etc. The major problem, however, is not the profusionof the safety net provisionsbut its availabilitywhen neededdue to fundingconstraints. Another problem, particularlyfor the high wage and benefit coal sector workers,is the level of incomemaintenance benefits and their relativelylimited duration. As a result, coal pensionerscontinue to work as they cannotlive on their pensions. 40 in the system as______documentedby the SA,it }; appears appropriatethat : .. : X JNRS- Bw )JUOV M promises for additional r i: . - .; nd compensation should Epj ~ ~p i Ih tecletieaeet wt NG thrfr. only be made when uwicn radoptbfowagai ()topy .lero financially and averagmontly wa frcihE Cro wr tte mie wenma mplye economically feasible. rece eso _;(os opesto oVecide d iir Similarly, it may bee

financial feasibility of bag ooalexies,an aiiso perishe nes; prvsino the promisesmade in th PYlfft rgatWDUadwoenihdidr ae hee year f past several years, topa 2miimm onhl pnsonfo he anrl fp i ioef .e including those .. t~tpyhuin etfrodaprren;()t concerning free .aed gurnest ak i la ocnhm ehs;{b~ fe eehn relocation homes for a .;~ v~in fo ace:(II!et dcaso heweled

portion of the affected .(2)ss th ireotndi ehelhcne(L)oniaioofms

them as needed to create .j7.~ W _ . L~preto h ag ud ftews

the implemnatio of ; PC~1 of =elaheticost. coa sector restructuring . S.: sigeedin 199 DUin the penodwh; p,rogra (box 5).~ th inneini oetonat esofhe3rnet eeto. wer

(c Do not ase flse ~ euUiadeooi ofrainfrmn lsiewsgiv_ h)-opes. It is important _, ~ not to raise expcations A ; tg v

of compensation.Tariff and(v>houbs orelc l ose.iyti4~Sls ,oi hnGto agreementsmade in the . w n< jreWzvsneddfrteseppce ereatal past were not followed afocte - and fewof the m______.__:.___:___C______...... relocationpromises were kept. These all reduce trust in "the system" and substantiallycontributed to the uncertainty currently felt by mine communities(Box 6).

(d) Local governmentsneed to continue social programs and services. Case studies and survey

46Clearly,a financial frameworkis necessaryand people's prioritiesneed to be better understoodwith respect to alternative cushioningmechanisms such as support to social programs. The next phase of SA aims at a better understandingof these priorities. 41 resultsshow high demand for continuingthe social servicesonce providedby the coal associations. A substantial portionof these servicesand relevant assets already have been transferred to local governments4. The recent divestiture of the bulk of social assets was not fiscally coordinated, resultingin the emergenceof problemsin housingin and other social assets. Giventhe economic realities experiencedthroughout Russia, it would be unrealisticto expect that the Federal or the local governmentscould continueto providehealth, education,and other social servicesat levels previouslyavailable to the citizens. With no further support from the mines in the provisioningof medical services, heating and cooking energy, and scholarships, etc., many households are adverselyaffected even when their membersremain employed.At the moment,this problem is at least as important as more traditional social problems deriving from rising unemploymentand inadequate social protection. For non-housingsocial assets, regional authorities implemented varioustypes of cost savings measureswhich were conductedon a non-coordinated,case-by-case basis. The Government,therefore, should explore the feasibilityof continuingkey social servicesto communities.This can be done by ensuringthat a substantialportion of the remainingsubsidies to the sector will be allocatedto supportthe managementof transferredsocial assets. An additional problem that would need to be addressed in this context is to enforce budgetary arrangements ensuringthat support to the communitiesis not divested at the regional level or to lower priority objectivesat the local level.

DiscouraseGovernment-Funded Voluntarv Relocation

78. The propensity for and expectationof receivingstate support for free housing and relocating is strong in Vorkuta, but not in Kemerovo,Rostov, and Tula. These expectationsarise mainly due to four separatePresidential decrees that have promisedhomes to minersto be affectedby mine closures. This also was an importantfactor that contributedto continuedimmigration to Vorkutafrom other parts of Russiaas well as CentralAsia and Ukraine. Even in settlementscreated to servea specificmine now being closed, there is a large number of recent immigranthouseholds. 4s For example,according to the SA, in Vorkuta, about five percentof the householdshave immigratedin the past five years.These expectationswere fueled by the relocation homes provided to many miners from Halmer-Yu(box 7). When householdattitudes toward voluntary relocation, as defined as a free home elsewhere,were investigated, 62 percent of the householdsin Vorkuta and 12 percent in Kiselovsk mentionedthat they were ready to move to another location if there was an opportunity (figure 9). With respect to the respondents'reasons for wantingto relocate, family and health concems were as importantas housingproblems and expectationsthat such a move would bring additional monetary benefits.49 In Sovetski settlement in Vorkuta, where housing

4 "By January1, 1994,aU kindergartens in Dimitrovawere transfered to the municipality.It was agreed,however, that kindergarten No.31 would continueto be supportedby the mine. The decisionto transferkindergartens was based on the PresidentialDecree N1702(dated 12/30/1992)and not discussedwith mineemployees or unions.

4 This is not surprisingbecause, with the exceptionof those livingin Vorkuta,the majority of whom expectto receive housing throughvoluntary relocation, very few peopleintend to leave,even whenthey lose theirjobs. In Tula, peoplesay they would move only if they have to and manyworkers have been commutingto Moscowwhile keeping their families in Tula. The residentsof the privatehousing stock in Tula are interestedin rentingpart of theiraccommodations to thosewho are immigratingto this region. The potentialfor privatehome ownership and the scarcityof housingelsewhere account for the generallylow demandfor relocation.

49The lack of altemativeemployment opportunities in Vorkutaand downwardmultiplier effects of downsizingin the coal sector mean that people may well have to move to other parts of Russia in search of work. Regional labor mobility is not a new Figure 9 VORKUTA KISELOVSK Desire Yes tMoeYes 62% to Move 12%

No No 38% 88%

100% Top 4 Reasons for Household Desire to Move 100 900- _ II100 90 90 80 7 - 80 70 63% - 70 60 -5%53% -60 50 - 47% 47% 47% 43% 40% 50 40 -_40 30 - s 2n3d 4h1t2 r t 30 20 -- 20 10 - 10

Compens. Healths Housing BetterJob Housing Compens. Health Family Reasons Problems Problems Reasons Reasons 42 conditionsare reportedto be very bad, the desireto move is the most intense. Only a fifth in Vorkutaand no one in Kiselovskhad registeredto relocate(that is, to demandfree housingelsewhere in Russia). More importantly,non-miners were somewhatmore eager to relocatethan miners (table 10). And the number of non-miners who have already registeredto move was almost equal the numberof minerswho BOX7: HALMER-MINECLOSUREANRELOWCTION registered. Hakner-Yubis -a mine Sloated. twoihours north.by4-trainofthe Arctic city of Vorkuta Dueto. the harshclimate Otf'.b region,all of the housingstructures haveo beea in 79. Due to the active Nsenoiodisrepa'r. As early s thelae 198Oj t wa tkof closingthe1mine... .By 1993,eit struggleof the Fund for Social jh'm cbc taof R osoIado he ras 'the model" ohad in The mine had 1,5073workers; the settlementof4,10 pepea almo te,cusivelyassociated with Guarantees together with the mine.t Disabled Miners Fund and Veteransthe North,of the considering:kIn rclocatio% Voktuiauoli and the Halmer-YuMineAdministation directedthe Fundof SocialGuarantees to:suivey'1almr-Yu.residents ahoutt-heir location Government has approved preferences. The.survey showed d;that270 fmilis '(49people)0wanted to leave the small funds for relocation for Vorkutaregion. Thist forprory relocationconsistedofe most vulnerablegroups: house,holdsu. single moihers, pensioners and laid ofl workers. Bythie begining o 1994, 600 families Vorkuta wouseholds.eonthis list A artof terelocationprocess, residentswere given a optunit to Accordingly, the disabled and sfly southarnd:reviewtwo to three apartmentsbe fore beingmoved. osugol,Vorkutaugol, their families, those pensioners V Ciblefornacing thenew housigand transportingresidents toevalaetenwhuigsts who have worked for more than 20 years in the mines and have The experience ta howe er, walmer-Yu,wanot a. sucessful on ite.It been on the waiting list for demonstratedthat.relocation was extremelyx expesive (over'140billion rubles, :thusfar) eIfollowed a unique oursenot necessarilyconnected tothelel requirementsfor aclosing,:0 relocation, and interested and createdfalse expectations9for workers.other at oher mines whichmay or will close in former gulag prisoners may addition,many,ofthe Hlmer-Yu residentswere not reloced.. Rosugolhad plannedfor benefit from this program over alworkers195, 360 familiesto relocate'by were.Julystill registered:1995,however,as residentsthis pl0:did of the not settlement;: mateaaliae.out. Atof thethese, end 76of the next five years. The scope *sesto the nt; 1615fmfamilieswereprovidingsuppo familiesrecived aparmnts of these activities, however, is in CentrlRussia andcouldleave;but werein courttyngto reeive disabilitypaents, and128remainedbecause Itheir housing had notbeenompleted.: limited and a broad based promise of financing of ForMerHatmer-Yu :residents are. now located:inseealy i regions of Russia voluntary relocation is not although manyhavenotedtthey wo.uldhaveprefe realocate to their family home v:olunargeneiw*ylocatedin other countries.:For example,thereI it a large numberof Ukrainian affordable. nationaresidingin6 theArctic, butaIlakofhotusing coupledwith iTefacth thatRussiawill 40fnotiransier the ortransercosttsioountly,:,pensionis appetarsto holdback workers from course. 7taldngthis

Theimpact of th6ehalmerYu' ex'perenceon other workersainthe: North is i.mportanthi March1995,the Inter- nclhCai6 Committeevisited Vorkutaand following: a participator process,it wasiagreedthiatonypeople who'workedinmines to be closed:for ;::9ten yearsor more hadThe rigt.toe relocated.::..0'0:.. '-:: |- .- 't g ):i';) :: :0: : :

concept to the residents of Vorkuta, the majority of whom were not born in the area. However, movement on a large scale in a depressed national economy with bleak employment prospects and critical housing shortages is a daunting prospect. 43 Table 10 Readinessto Move AmongMiners and Non-miners(% of respondents)

Vorkuta Kiselovsk Miners Non-miners Miners Non-miners Ready 68.8 58 12.5 10.3 Not Ready 29 38.1 82.8 87.6 Unsure 22 3.9 4.7 2.1 Total# of 93 307 64 330 respondents

80. Recommendationsfor the Coal Sector RestructurinaProgm. In light of these findings, the following recommendationslargely discourage large-scale assistance for government financed free relocationhomes.

(a) Avoid government-fundedvoluntary relocation. Government-providedvoluntary relocation homesshould not be providedto thosewho have lost theirjobs, specialcategories of miners,50or to non-minersfor severalreasons because: (i) the overalldemand for relocationis not high; rather, it is locationspecific; (ii) demandfor voluntaryrelocation is not limitedto minersonly; especiallyin Vorkuta, non-miningfamilies ask for "social justice" and expect the same treatment as that extendedto miners; (iii) institutionaland financialarrangements for large-scalerelocation would pose large problemsand would be difficult to sustain;and (iv) even limited applicationswould create false wage/compensationexpectations among laborersin the future and reduce the future economic viabilityof coal production.Nonetheless, under the existing Labor Law, there are provisionsfor relocationtravel support.Workers who are laid off wouldreceive cash compensation for the transportationof up to five tons of their householdeffects to a new locationif they choose to resettle. These entitlementsunder the Law should continue to be providedto the affected workersand their families.

(b) Several proposals regardingrelocation programsthat would provide free housingto groups of affectedpopulations were developedfor Vorkuta(and sharedwith the Bank missions). One of these proposalswas designedby the miningassociation and the other was put forwardby the Fund for Social Guarantees.51These were intendedto cover those pensionerswho have worked in the soOne proposal is to provide relocation assistance only to miners with 10 years or longer mining experience in Vorkuta. Another proposal is to relocate pensioners and the disabled who had worked 20 years. The experience is to grant such assistance to all mining families in settlements connected to a mine in Halmer-Yu.

51 For the remote non-viable coal areas, relocation programs will be important. Relocation is difficult given the shortage of housing and the costs involved. Prior efforts have had difficulties including some abuses. There is a relocation program involving Vorkuta and Tula that is yet to be implemented. The proposal by the Fund for Social Guarantees proposal for relocation in Vorkuta also appear to have merit and should be given careful consideration. The IACC has instructed the Federal Employment Service and other concerned agencies to address the relocation issue, particularly its financing. 44 mining sector at least for 20 years and/or who are particularly vulnerable (for example, the disabled). Even at this limitedscale, however,publicly financed provisioning of relocation homes poses severalproblems:

* It is not equitableto confinerelocation homes to coal sectoremployees exclusively when many other workers,and often with lower pay, also support the coal sector by providing health, education,and other services.

* The number of householdswho meet the criteria for relocationhousing entitlement (disabled and thosewith 20 years work experiencein the mines)would increaseevery year. Attemptsto deny them similarsupport would not be equitable.

* The relocationprogram is justified by its supporterswith the argumentthat good housingis in short supply and that relocatingsome 11,000 families from Vorkuta would free housing for those miners who are on the waiting list for a new housingallocation. Nonetheless,allocating the resources to be used for relocation homes to a comprehensivehousing maintenance programin Vorkutacould createemploymnent and benefitmany more familiesin Vorkuta.

* Constructionof relocation homes, especially when undertaken by the public sector or by mining associations,is costly. For example,according to official estimates relocating 11,000 to 12,000families in Vorkutawould cost from US$300to US$500million. Accordingto the SA resultsand the expectationsarticulated by workers,relocating this numberwould mean that the households requiring relocation homes would increase by 1,200 yearly as additional householdsmeet the criteria for relocation. The financial sustainabilityof such a relocation housingprogram, therefore, would be questionable.

* Familymembers of those who qualify for a limitedrelocation program would not necessarily benefit from relocation, especially because the relocation program would be designed for populationswho would no longer be active in the job market. In fact, there is evidencethat familieswho were providedwith free relocationhomes recentlyas a result of a mine closure, returned to Vorkuta once the legalities concerningtheir ownership of these homes were clarified.

* There is a lack of managementcapacity to handle a major relocation housingprogram, as demonstratedby the Halmer-Yurelocation process. People have used their own initiativein the past and couldcontinue to do so with relocationcosts far belowthat of the public sector.

(c) Consider government support to voluntary relocation programs when there are environmentalhazards associated with mining operationsor a mine closing, and affected householdsrequire relocationto a physicallysafer location.Field visits undertakenduring the course of the SA uncoveredhousing made unsafe as a result of miningoperations. This suggests the need to providerelocation services (definedas govermmentprovided free housing) for physical safety purposesto be extendedto affectedhouseholds whether or not their membershave lost their jobs due to mine closuresor significantdownsizing. Further, such support should be availableto 45 families whether or not their membersare employed in mines or in other sector activities.In addition,the relocation of householdssubject to environmentalhazards associated with coal operationsshould be a pre-conditionfor closing any mine. The promisesmade to residents of northem regions and to Vorkutans for free relocation housing elsewhere in Russia should be reviewedfrom the perspectiveof financialfeasibility and social equity as well as in terms of the implicationsfor the coal sector restructuringobjectives. Rather than financing free relocation homesfor a limitednumber of miners,the restructuringprogram might focus on designingpolicies and regulationsto enhance free movement of workers and their families and to promote geographicalmobility in and out of the coal basins. As indicated by the World Bank report "Vorkuta- A Town in the Far North," ".. there is nowherein the world which providesworkers with a free house virtually anywhere in the country when economic conditions force job- shedding, and it is difficult to see why Russia should be an exception."52 For each mine, relocationcosts shouldbe estimatedand includedin the overallcosts of mine closures. If hazards are present in mines not subject to closure, the affectedhousehold also should be relocated.It shouldbe possiblefor the restructuringprogram to supportsuch relocationregardless of the status of the mine. Municipalitiesthat are askedto assumemaintenance responsibility for the housing stock of enterprisescan put forward proposalsfor environmentallyinduced relocation. Moreover, financingthis type of relocationactivity within the coal basins would contributeto employment generation.

RecognizeHigh Levelsof PerceivedVulnerability

81. Notwithstandingthe actual findingson vulnerablegroups above, perceived vulnerability in the two regionsis high; nearlya third of the householdsexpect to losetheir jobs withina year (figure 10). Feelings of vulnerabilityare higher,however, in Kiselovskwhere the majorityof the interviewswere conductedin mine settlementslocated near mines that were closed. Further,when askedwhether mine closuresin their communitieswould affectthem and their familiespersonally, nearly 60 percentof Vorkutarespondents and 72 percentof Kiselovsk respondentsprovided an affirmativeanswer. A more importantaspect of the findings,however, is that more than a quarter of the residentsin coal regions do not feel threatenedand these more confidentpeople are the minersthemselves. In both Vorkutaand Kiselovsk,some six to seven percentof the miners feel such a personalthreat. One out of three or four employeesworking in other sectors, on the other hand, feel that they are in immediatedanger. Similarly,younger working women and womenheads of householdsperceive the threat of restructuringto be large and immediate.

52 This is not to deny that living conditionsin the Far North are exceptionallysevere, and workers'former expectations that their high wageswould enablethem to save enoughto allowthem to buy or build a housefor themselveselsewhere when they retired are no longer satisfied. The erosion of past saving as a result of rapid inflation and the unavailabilityof financialassets for savers have adverselyaffected people throughout Russia. In any case, a relocationpackage cannot be fulfilledfor more than a handfulof workers.Even if VorkutaUgolwould be willingto pay for such relocation,large additionalsubsidies from the central government,which it is unlikelyor not able to provide,would be needed. 46

Figure 10: Worker Vulnerability

. , : : : a~~~~~~~~Unsure KiselovskNon-miners * Probablywill not losejob .11111Probably will lose job nextyear

KiselovskMiners

VorkutaNon-miners

VorkutaMiners

0 10 20 30 40 50 60 % of respondents

82. Notwithstanding their perceived vulnerability, many support coal sector restructunng BOX 8: PROCEDURESFOR MINE CLOSURES provided that procedures are followed (box 8). About a half of Accordingto the "Basic Trends" document, a mine closure should respondents disagree with coal proceed through the following steps: (1) the technical-economic confirmation(TEC) of the closure should be availableand approvedby both sector restructuring regardless of labor unions; (2) the TEC should be discussed by the Rosugol Expert the mannet in which this is done, Commission and the discussion should result in a protocol signed by but 54 percent of Vorkuta representativesof Rosugol, the Association,the closing mine, and both labor residents and a third of Kiselovsk unions; and (3) the TEC and a program of closure should be submittedto the respondents, will support what Inter-AgencyConinission for approvalbefore the actual closure takes place. they undertand of the govenment The Commissionalso should make a decision about the sourcesof financing for the closure, and on this basis, Rosugol should submit to the Govermnent restructuiing efforts without a request to start financing;(4) Rosugolshould issue an order about closing conditions. When asked whether and allocateappropriate financingfor it; (5) the Governmentshould issue a they would agree or disagree with Decree on mine closure and the related financingprocedure; and (6) a legal the statement that mines should successor of the mine should be defined to provide payments according to not be closed, 91 percent of the disabilityclaims. Vorkuta respondents and 92 percent of Kiselovsk respondents said that non-viable mines should close only when employers are offered equivalent work (table 11). Slightly less (83 percent and 81 percent, respectively) said that unprofitable mines should be closed provided that workers are offered material compensation. Vorkuta, where there is a higher rate of unemploymentthan in Kiselovsk, indicated greater support to reform. Nonetheless, two-thirds of the Kiselovsk respondents did not want the mines to close under any circumstances,perhaps as a result of their recent negative experience with mine closures. More of the single-women headed households than any other group had greater uncertainty about the conditions under which the reform program had to be implemented. 47 83. When the same questionwas posed in a differentway that imcludedprotection for the workers, there was visibly more support for PR=41 - -- reforn. For example,over 90 percent agreed : - i that unprofitable mines should be closed w n,,ee c en providedthere is compensationto workersand : d T - s t irregularities-- as those seen in some of the o t t e mines closed-- are not allowed (box 9). Most =m h l respondents (90.8 percent) in Vorkuta think -f-o t of th mi that unprofitable mines should be closed only s. On September 2,v i ee.''n'a if workers receive anotherjob of equal value themie i tiseai onsike in another place; 44.5 percent,however, think - that unprofitablemines shouldprobably close. :: n O Also in Vorkuta, five percent of the o P s d Vorut respondents think that unprofitable mesorr t should close even when workers receive e ee -b t Wig i minimalcompensation. 3

84. In Kiselovsk, by contrast, a much s ot eidhi nds As higher percentage (67 percent) think that the S- s , t a m h mines should not close under any a provid circumstances.Nonetheless, 92 percentof the respondentswould agree that they should be - closed if workersreceive anotherjob of equal value. Eighty-onepercent of the respondentsin Kiselovskthink that unprofitablemines should close if workersreceive material compensation.

Table 11 OpinionsRegarding Mine Closures(% of respondents)

Vorkuta Kiselovsk

______lAgree Disagree Unsure Agree Disagree Unsure Minesshould not closeunder any 44 34 22 67 18 15 circumstances Non-viablemines should close only if 91 2 7 92 3 5 workersreceive an equivalent job Non-viablemines should be closed if 83 10 7 81 12 7 workersreceive material compensation Non-viablemines should be closed if 5 82 13 14 65 19 workersreceive minimal compensation Non-viablemines should be closedand 0.5 95 4.5 4 91_ workersshould not get any compensation . ==.- 48 85. A very large percentof households(85.5 percentin Vorkutaand 71 percent in Kiselovsk)state that there is a need for governmentsupport (figure 11). The residentsof Kiselovskhave lower expectationsof their government. This may be basedon their recentexperience with mine closureswhere little assistance was provided. It also may be attributedto the lower politicalprofile of Kiselovsk.

IncreaseTrust in the System

86. Mine communitiesdo not tust coal sector institutions, and there is little tr in the "system" .. . -. W:,:-:S WA at large53 (figure 12). About a fifth of the CIIE...... KAYA ...... households do not trust anyone and another . quarter are uncertain about who can be trusted. . A i Clearly, the majority of respondents think that no .. .. tgf one single organizationis worthy of tut: only i_eic w gi h - five percent are able to trust Rosugol, less than rt eioiie ya three percent trust the regional coal companies, Ral g i three percent are able to tt the regional ...... r i ...... tOte government,less than eight percenttrust unions, 2 =j a and less than two percent trust the employment m e ia t, i e service. The results of systematic surveys are e td irt goi tt b supported by case studies. The origins of the lack ...... a .T of trust can be traced in part to the many mine > mamer iE. closings that are occurring without notice (box , h * l a e ibotinE

10). ii .om t

87. Awareness of international organizations and the World Bank also is low in both Kiselovsk and Vorkuta. Few people know about the role of international assistance in transition and sector reforms and those who are informed maintain negative views and have little trust that assistance from such organizations will benefit them directly or indirectly. Although the PPU's efforts during the past several months, especially the participation specialists' efforts, might have changed these perceptions to an extent, it is clear

Concernsalso exist as to the adequacyof the delivery systems which providethe benefits and servicesavailable through the legal socialsafety net An in-depthreview of the FederalEmployment Service's operational capacity in the coal areas is necessary. In addition, there are financial constraints for the employment service. The future financial pressures on the employmentfund are not just from the pendingcoal industry layoffs but will also be from projectedincreased unemployment throughoutthe economy. Registeredunemployment in 1997 is expected to rise to 3.7 million, a 1.3 million or 60 percent increasefrom the end of 1995. The fundingsituation of the employmentfund is crucialto the coal sector. Even if tax collection strengtheningmeasures are adopted,the fund would barelybe able to pay the unemploymentbenefits let alone provideproactive labor market servicesto the redundantcoal sectorworkers.

54Themajority of laid-offemployees look forjobs independently,and do not applyto federalemployment centers. Theoretically,it is betterto look for a job via the employmentservice because the servicepays unemploymentbenefits. Nonetheless,it is hard to acually receivethat benefit For exarnple,a mechanic/operatorwas offeredajob as a tractordriver on the surface;the wageis 5 to 6 times lower than he received underground,he rejected that job and received no benefit as his refusal was consideredto be unreasonable. Figure 11

Do not need government social assistance (9%) Do not need government social assistance (10%) Undecided (3%) Undecided (6%)

Need government social assistance (88%) Need government social assistance (84%)

Do not need government social assistance (25%) Do not need government social assistance (21%) Undecided (9%) Undecided (6%)

Need government social assistance (66%) Need government social assistance (73%) Organizations Trusted to Distribute Money and Benefits Figure 12

Employment Service (2%) Nobody (14%) Others (2%) CioalCompanies (3%)

- l_fifiKomiRepublic (2.5%) Special Commission (38%) Rosugol (5%)

MineAdm(8.5%) Unsure (25%) Trade unions (8%) City Adm. (4%)

Nobody (23%) \Others e (8%) Coal Companies (1 %)

Komi Republic (3%) Rosugol (6%) Employment Service (2%)

Special Commission (22%) Mine Adm. (3%)

Trade Unions (8%) City Adm. (2%) Unsure (29%) 49 that continuousefforts in this regard are needed.

88. Notwithstandingthe general lack of trust in existing insfitutions,38 percent of households in Vorkutaand 22 percentin Kiselovskwill trust a multi-stakeholdercommission.55 If such a commission gains the people's trust in its operations,those who are skeptical and/or uncertaincan be convincedto changetheir views.

89. Recommendationsfor the Coal Sector RestructuringProgram. In light of the pervasive lack of trust, restructuringshould be used to establishmechanisms by which the public'svoices can be heard in the courseof designing,implementing, and monitoringthe social impactsof the program.

(a) Use a participatorystructure such as the Coal Commissionto meet existing expectationsand broadenthe trust in the system. A detaileddescription of how such a fund could be establishedand operatedalready has been developedby the PPU.

(b) Work with the Unionof Coal City Mayorsto ensure that local level committeesare composedof multiple stakeholders.As proposed in the SA undertaken in August 1995, carrying out this recommendationwill generatetrust alongthe lines proposedby the affectedpopulations.

(c) Ensure that "continuoussocial impact monitoring"as proposedis put in place. This shouldbe carriedout by an independentgroup of experts/scholars.

(d) Developa participatoryframework for the coal restructuringprocess. Such a frameworkshould take into considerationsome of the conflictsamong stakeholdersand empoweraffected populations with sufficientinformation concerning their rights and entitlements. This frameworkalso shouldbe designed to ensure transparency in reform implementation so that all stakeholders can make appropriatechanges to their responsesto reform. Funds need to be made availableto support public information,public relations (PR), and otherforms of public participation.

90. The proposedparticipation activities are based on the resultsof the SA. Their objectivesare to:

* Provide miners, their families, and communitieswith adequate and timely information about the content of the coal sector reform program and reform implementationarrangements; and maintain and strengthen support for the reform program both in the affected regions and in the country at large.

* Provide miners with adequate information about their entitlements under the restructuring arrangements and mechanisms for legal recourse; ensure transparency in implementation

5 Employmentservice as well as local and regional organizationswould not be only part of the multi-stakeholdercommittees supportedby the people.Since these organizuions'independent support would also be neededfor restructuring,the next phases of SA will attemptto gain a betterunderstanding of the sourcesof mistrustand howtrust can be enhanced.Focus groupmeetings and otherparticipatory SA instrumentswould be usedfor this purpose. 50 arrangements,help avoid discriminatorypractices, and support equitable treatment of all affected social groups (particularlyvulnerable groups such as the disabled).

* Clarify the roles and responsibilities of local, regional, and Federal institutions in the implementationof reforms, in the delivery of social safety packages defined by the Government Restructuring Program, and in the provision of services envisioned under the Implementation Assistance Project; help create trust in these institutions;and clarify the supportive roles of the international agencies supportingthe GovernmentRestructuring Program and contributingto the financingof the ImplementationAssistance Project.

* Facilitate the participation of key stakeholders in decisions concerning the design and implementationof sector reform; and help strengthenthe capacity of labor organizations,NGOs and local institutions to ensure that the interests of miners, their families, and communities are adequately voiced and taken into account.

* Support inter-agency commissions at Federal and local levels to ensure that miners and communitiesare cushionedfrom adverseimpacts of reform implementation.

* Support regional and local governments in managing assets transferred from coal sector associations to municipalities and to initiate locally appropriate actions to respond to reform impacts.

91. The basic elements of the generalframework for the participationstrategy include:

• Information/communicationsupport, focusing primarily on the empowermentthrough information of the miners, their families and their communities; support to institutions responsible for the provision of such information;assistance in clarifyingtheir roles and responsibilities;and assistance enhancingtransparency in reform implementation.

* Public relations support to create and sustain a constituency for reform and to help broaden ownershipof reform objectives;and publicand governmentrelations support for legislativechanges that may be put in place to enhancegeographical and job mobility.

* Supportto consultative local institutionsrepresenting the interests of key stakeholders,particularly miners and their communities.

* ContinuousSA and social impactmonitoring to have feedbackfrom the most directly affected populations.

92. Specificactions to supportthe objectivesand general strategy of participation is presented below in terms of institutional arrangementsand may include support to the Inter-Agency Coal Commission (ICC), local governments,trade Unions,NGOs, and private coal companies.

93. NGOs and unions need seed moneyto facilitate their organizationalgrowth and to supporttheir own programs.Formal requests,therefore, should be made to Unions, municipalities,NGOs, and private 51 coal companiesto put forward formal requestsfor the use of funds allocated for their support. Because the Ministryof Economyis the Secretariatfor ICC,the PPU couldprepare the ICCproposal.

94. PublicRelations. The informationand communicationrequirements of each groupof stakeholders are different;consequently, the messages,use of the media, mediumof communication,and the feedback mechanismsto be set in place differ substantiallyfrom one groupto the other, as summarizedbelow. They should be designed in detail by the participation/informationspecialist(s) of the PPU during project preparation.The primaryobjective of the PR functionsshould be to establisha constituencyfor coal sector reform and to ensurethat the proposeddonor supportto the Government'sprogram is consistentwith the Basic Trends document. The main target groups for PR activities(including political lobby fimctions) consistof (a) the public at large (throughthe nationaland regionaVlocalmedia), (b) seniorpolicy makers (Duma and other federal ministriesthrough the Inter-AgencyCoal Commission),and (c) unions. The implementationof these functionsthrough the media at the nationaland regional/locallevels will be costly. The establishmentof a Coal Sector MediaNetwork during the programpreparation stage (throughthe communicationsspecialist recruited to the PPU)is advisableso that PR functionscould be sustainedand expandedduring program implementation. Specific PR activitiescould consist of:

(a) Familiarizingthe public with the Basic Trends documentafter its appropriateclarification and amplification;explaining Government's coal sector restructuringprogram and showinghow the peoplewill be protectedonce the restructuringprogram is systematicallylaunched.

(b) Familiarizingthe publicwith the costs of "no restructuring"or delayedrestructuring.

(c) Making public the establishmentof the mechanismfor restructuringsubsidies and showinghow these subsidieswill reduce practicesthat leave the workers,their families, and the communities unprotected.

(d) Definingthe role of the donorsin supportingthe restructuringprogram as well as documentingand making clear that externalsupport to the program, includingfrom the World Bank, emphasizes support of the social safety net elements (for example, facilitatingtransfer of social assets in a mannerconsistent with interestsof the affectedfamilies, supporting community-based programs to enhance employmentand generatedevelopment within the coal basins, establishingpolicies to remove constraintsto labor mobility, ensuring that while subsidiesto the sector are reduced, remainingsubsidies will be usedfor workerprotection).

(e) Providinginformation on internationalexperience in respondingto coal sectorrestructuring.

(f) Preparingfact sheetsand press releaseson a regularbasis.

(g) Identifyingand undertakinghigh level lobbyingin supportingthe proposedmodalities for coal sectorrestructuring.

(h) Evaluatingthe positionsof bothunions and formulatinga PR approachto respondto their concerns (especially those pertainingto the role of the subsidy restructuring,Rosugol, regional mining associations,and localparticipatory schemes). 52

95. It is importantthat relationshipswith trade unions are not confined to PR activities; as outlined below,close collaborationwith the unionswill be neededto launchthe reform and ensurethat miners,their families, and members of affected communitiesare protected. Consultation requirements for loan preparationcould consistof: (a) bi-lateraldiscussions and (b) a workshopwith ample media coverageto clarifyarrangements for Governmentscoal sector restructuringprogram and proposed modalitiesfor donor supportto the program.

96. Participation requirements for restructuringcannot only be confined to public relations (PR) functionswhich consistof one-wayflows of informationfrom policy makersto generatepublic supportfor the sectorrestructuring program. Otherpotentially more importantfunctions of the participationas well as informationand communicationsactivities to support projectpreparation and implementationare to: (a) ensurethat those typically"voiceless" are empoweredand have a clear understandingof their entitlements and prospectsfor re-adjustment and (b) clarify stakeholderresponsibilities so as to facilitate worker and communityaccess to restructuringprograms. This integratedapproach to participationwill allow efficient functioningof the scheme for restructuringsubsidies, ensure continuoussupport to the Governmentcoal sectorreform program, and enhancegovernance in restructuringimplementation.

97. For each group of stakeholders,an appropriateparticipation framework should be formulated. The frameworkshould ensure that the interestsof each group are taken into considerationin project designand implementation.The followingforms of participationare recommendedfor the followingmain groups of stakeholders:

(a) Miners and their Families. While miners are the most directly affected by the coal sector reform program, they have very little informationabout the reform agenda and its potential effects on them. The most basic and immediatemeasure to be taken to ensurethat miners and their families are protected in the course of sector restructuringis to provide them with informationand to establish feedback mechanisms so that the sector managers receive information from them on whether the resourcesintended to compensateworkers do indeed reach them. Several types of informationare needed by miners:

* Full list of entitlementsunder the Law and various decrees and tariff agreements, including pension levels, lump sum arrangements,etc.; workers should also be informed about their entitlementsconcerning legal noticerequirements concerning mine closures.

* Status of policy debate about key issues of concer, includingwhether or not miners from Northern areas can receive their pension payments with the coefficient should they live elsewhere.

* Clarificationof statusof relocationpromises.

* Progressof restructuringin the sector, emergingproblems and proposed measuresto deal with them.

* New opportunitiesoffered by restructuringsubsidies (such as job placement, counseling, 53 micro-enterprisedevelopments, etc.) and by other agenciesdesigned to create alternativejob opportunities,including transparent possibilities of placementin operatingmines.

* Rights and responsibilitiesof institutions involved in the execution of the Government restructuringprogram, includingthe Ministry of Economy, the Inter-AgencyCommission, Rosugol,regional mining associations, unions and managersof individualmining enterprises.

* Mechanismsof recourseif at anytime socialassistance mechanisms fail.

Vulnerablegrups. While the restructuningagenda may focus on activeworkers of the mines, the problemsof vulnerablegroups, such as the disabled,cannot be ignored. It is thereforecritical to undertake a comprehensivereview of issues of concern to these groups and identify and communicatesolutions.

Communities.There are severalcommunity specific issues of concern to the restructuringprocess. These affect the considerationof the social safety net for miners, constituencyformation for the reformprogram as well as being directlyrelevant for labor productivityin viablemines. The issues include:

(a) managementand operationof social assets especially in isolatedcommunities with heavy relianceon individualmining enterprises to be closeddown;

(b) impacts on workers and families not employed in mines, but supporting the mining operations;

(c) entitlementsof vulnerablegroups who rely heavilyon mines;and

(d) new infiastructure,including transport, that needs to be providedto some of the isolated miningcommunities so that their workerscould maintaintheir accessto their homeswhen they take up employmentin other mines or sectors outsidetheir communities.Currently, there are no estimatesfor these social costs, nor is there sufficientdialogue on the issues themselves. Consequently,there is need for public debate on these issues such as inviting proposalsfrom local communitiesto deal with issues of asset transfersand infrastructure requirements.

Trde Unions. Trade union participationin all aspects of the coal sector restructuringprogram is critical. The unionsmust have a good understandingof the goals, responsibilities,and limitations of the restructuringprogram, and receive timely and regular informationon its implementation. Equally important is close collaborationwith the unions with respect to the social and environmentalmonitoring of the restructuringactivities. Collaborationalso is desirable in the empowermentof the workers on issues outlined above and setting up feedback mechanismsto respond to emerging issues. The Inter-AgencyCommission also may wish to consider direct collaborationwith the Union in specific information/communicationareas, including the joint preparationand disseminationof informationrelevant to miners. For effectiveimplementation and for the success of the restructuringprogram, full ownership by the unions of the principles is 54 important.

Local/RegionalGovermments and other Local Institutions. Local government involvement is importantfor two reasons: (a) municipalitiesor regional governments are expected to assume housing, infrastructure, and some other productive assets belonging to coal companies, but institutionaland financial capacity for these new responsibilitiesis restricted. In their new roles, the local institutions may need information support and this has to be assessed during loan preparation;(b) community-basedsocial problems that arise as a result of the restructuringprogram require local and participatorysolutions. While informationfrom these local agenciesis needed,it is importantto build capacity at the local levelto ensurethat proposalsare technically,socially, and financiallysound before submissionto the Inter-AgencyCommission.

Mine Managem. The lessonslearned indicate that mine managersshould be clearly informedof the proceduresto be set in place for restructuringimplementation. Principles concemingpayment to workers, legal notificationrequirements, mine closure procedures,and liquidationof social assets shouldhave greaterclarity and transparency.

Regional Mining Associations and Rosugol. The current roles of Rosugol and the regional associationsare being redefined. In addition, there are indicationsthat some of the individual mines are in the process of redefining their relationship with the regional organizations. Mechanisms of information exchange, cooperation, and collaboration with these parties are importantto develop.

InteragencyCoal Commission.The Commissionpresently incorporatesa participatoryfiamework for definingthe coal sector reform agenda and its pace. There are several key issues identifiedin this early stage of SA that require review and call for the preparationof concreteproposals which can be supportedby the Commission.These include:

(a) Regional variations in legal entitlements of mine workers and the politicalfinancial difficultiesentailed in the applicationof differentialtreatment to workers affectedby the restructuringprogram in differentcoal basins.

(b) Legal difficultiesin the transferof entitlementsrecognized under the law from one region to the other.

(c) Lack of adequate knowledge and policies to deal with community wide impacts of restructuing.

(d) Sharpdifferences in stakeholderinterests and unclarityin institutionalarrangements.

(e) lack of legal mechanismsto honor pensionersrights whether they stay in their original communitiesor opt to move out of the coal regions.

(f) legal rigiditiesthat hinder labormarket and housingmobility. 55 References

"RussianFederation - Poverty in Russia:An Assessment,"World Bank Report no. 14110,June 1995.

"Russian Federation- Social ProtectionDuring Transitionand Beyond," World Bank Reportno. 11748, February 1994.

"RussianFederation - Restructuringthe Coal Industry:Putting People First," World Bank Report no. 13187-RU,December 12, 1994.

World Bank Pre-AppraisalMission for Coal SectorAdjustment Loan (SECAL),March - April 1996.

New York Times, December 11, 1995.

1 Annex 1

SamplingMethod

Data on Pre-SelectedParticipants

1. The survey samplingcriteria requires a surveypool in Vorkutaand surroundingtowns of about400 respondents,300 of which should reside in miningtowns and 100 of which should be city residents. Selectedparticipants should be adult residentsof Vorkutaand surroundingmining towns who fall underthe city's administration. Vorkuta's total population as of September 1, 1995 (according to the city administration'smost recent data) is approximately192,100; 137,400 residents are over 18 years of age.

2. A three-stepsystematic sampling process was used. The first stepwas to selectthe townsin which the surveywould be conducted. As the suggestedsurvey size was not too large, it was determinedthat the pilot survey would be conductedin two miningtowns. The programdirectives required the inclusionof Vorkutain the studyas well. Amongthe miningtowns, Oktyabrski and Sovetskiwere selectedas the most typical in terms of distancefrom the city, population,and that both are locatednear closingmines. At the sametime, however,there are someprincipal differences between the towns; while Oktyabrskiis not seen as viable and the relocationprocess alreadybegun as hopes of improvingliving conditionshave been abandoned,Sovetski is better-equippedand will not be subjectto closing,according to city administration.

3. In orderto obtain comparativedata, the samnenumber of peoplewould be surveyedin each mining town; 150 residentsin each. In Vorkuta,100 people wouldbe interviewed.At the first stage of sampling, typical towns were selected.The secondstage of samplingwas based on voting districts(as each of the selectedsettlements is a votingdistrict). In Vorkutathere are 31 votingdistricts.

4. Each interviewhad a list of 20 people in a selectedvoting districtso as to avoid cross-surveying. The numberof respondentsin each districtwas the same becausethe number of registeredvoters in these districtswas approximatelythe same(2,000-2,500 people). Therefore,five votingdistricts were selectedin Vorkutato survey 100respondents.

5. All voting districtsare numberedand the numbers increasedepending upon location (from the railway stationto new districtsof the city). Every sixthdistrict was selected(districts #5, 1,17,24, 31). Thus, at the second stage of sampling,a systenatic samplingwith even distributionwas applied. The samplingbased on voting districtsprovides for even distributionof respondentsas these districtswere formedaccording to populationdensity.

6. For the third stage,a systematicsampling was applied(selection of respondentswithin voting lists). The list of registeredvoters over 18 containingnames, addresses, and dates of birth were used. The full name and address of respondentswere put in data sheetsfor pre-selectedparticipants (date of birth was not put in data sheet for pre-selected;the interviewerhad to find it out so that the supervisorcould checkto see if the participantswere interviewed).For systematicsampling, the total numberof registeredvoters was dividedby the numberof peopleto be surveyed.

7. For example, the number of voters in Oktyabrskisettlement (excluding military regimentsand 2 hospitals)is 1,3555. To preparea list of 150 respondents,every ninth person was selected(1,355: 150). There also was a list of extra names (this made the total list 1.5 times larger than the initial list) in cases when a person was on vacation,in the hospital,moved to another place, died, etc. The lists which were used for samplingwere basedon the resultsof the January22, 1995election. Every sixth adult residentof the Oktyabrskisettlement was selectedin the list of respondents.

8. In the Sovetskisettlement, there are 4,046 voters. to make a list of 150 respondents,every 26th personwas selected(4046: 150). Includinga list of extra names,every seventeenth person was selected. In Vorkuta,the samnplingwas basedon the sameprinciples: 30 people from each voting district(plus a list of extra names);in differentvoting districtsevery 89th, 85th, 73rd, 74th registeredvoter was selected. All selectedvoters are evenlydistributed throughout the votingdistrict.

9. All data sheets for pre-selectedparticipants contained full names and addresses includingextra names. The names on the main list were substitutedfor extra names in a number of cases (for example, refusal to answer, sickness,death, long-termabsences). Using the three stages of systematicsampling resultedin a good representativenesswithin the total numberof VorkutaPopulation and populationof the settlements. If we assumethat the suggestedsampling is equal to random sampling (which is possible consideringthe method), then the planned average/standarddeviation is 2.5 percent. The maximum deviationis 4.9 percentfor the levelof significance0.05.

10. Samplingin Kiselovskwas carriedout in the same manner;a systematicsampling using voters lists was applied. Initially,the settlementsclose to the closingmines (Surtaikhaand Cherkasovskaya)were selected. Unfortunately,the lists did not reflectthe full reality of the currentsetting as they were compiled during the elections of 1993. Nonetheless,there were no other lists that could be more precise. One hundredfifty in the selectedsettlements were to be surveyedas well as 100 people in other districtsof the city. This reflectedthe structureof the populationof the selecteddistricts. The results,however, require some explanation.First, there was a correlationamong age groups;half of the populationis over 56 years of age becausethese settlementsare the oldest in the city. They were constructedin the 1940sand 1950s and housingthere is of a low standard. Youngfamilies have movedto new districtsof the city; only those who settledlong ago remainin the settlements.

Sampling Restrictions

11. In samplingparticipants, we used voterslists of January 1995. Subsequently(within the next eight months),some people reachedvoting age, or some registeredvoters died. Consequently,the majorityof participantsselected are middleage.

12. So called "closeddistricts were not includedin the lists(military zones, hospitals) for two reasons: (1) militaryofficers are not permanentcity residents, and hospitalpatients do not represent a constant categoryand so not live there, and (2) patients' lists of these segmentsof the populationare not available, and thoseavailable do not containaddresses. Prisonerlists of those now serving in the city were "closed" and not available. Others who are not includedin the lists are mentallyretarded individualsand people withouta permanentaddress.

13. Systematicsampling based on voter registrationlists assumes that families with many children 3 (2,3,4, and more) are presentedmore frequentlyon the lists. As there was no statisticson categoriesof the populationthat fit into these groups,it was impossibleto estimatethe level of the samplingdeviation. Even consideringthe existingsurvey restrictions,however, the results received will be true for all families in Vorkutawithin the representativenessdeviation mentioned above.

Vorkuta: RegionalSpecifics

14. Representativenessof the survey reveals some social and demographicaspects of the selected groupwhich are typical for the Vorkutapopulation as a whole. The settlementsselected are "typical;"the data received is from miners' settlements surroundingVorkuta which will be greatly influencedby the restructuringprocess of the coal industry.

15. Vorkuta itself has other industrial enterprises, administrative organizations, several high educationalinstitutions, and vocationalschools. The expertsvisiting the region noticedthat people born in Komior Vorkutaare more "settled"than peoplewho movedto Vorkutafor high salaries.

16. Interviewswith local experts showed that there were certain differencesbetween the selected settlements.In some of the settlements(for example,Sovetski), housing is of a relativelyhigh standard-- new buildings with all conveniences,and a developed social and cultural infrastructure. By contrast, Oktyabrskisettlement is an exampleof a settlementwith poor housingconditions. The majorityof families live in barracktype housingwhere there is no seweragethroughout the settlement.

17. Accordingto statistics,Vorkuta is noted by its negativepopulation growth. People of workingage move to other regionsof Russiawhere the climateis better. The populationof the settlementnear Vorkuta differs from that of VorkutaCity. The main differenceis determinedby the employmentstructure. The surveyrevealed that the settlementsgreatly depend on the mines. The number of miners' families in the settlementsis three timeshigher than in the city.