The Soviet Wage System
(The role of the Trade Unions in determining the
total wage fund as part of the economic plan)
by John Abt
John J. Abt is general counsel of the
Almagated Clothing Workers of America.
Together with other CIO delegates, he visited
the Soviet Union last year.
(Originally appeared in the March, 1947 edition of Soviet Russia
(ATO emphasis added)
There are basic differences between the wage system of the Soviet
Union and the United States. These differences arise out of the
difference between the socialist economy of the Soviet state and
our own capitalist economy. A brief explaination of this basic
difference is necessary to an understanding of the whole process
of setting Soviet wage rates.
Wages in our country are usually fixed as a result of collective
bargaining between unions and individual employers. In only a few
instances have we as yet acheived industry-wide collective
bargaining under which uniform wage scales are established.
thoughout an entire industry. And in many cases where plants
remain unorganized, wages are fixed by the employer at whatever
level he thinks will be the most profitable for himself.
Moreover, each employer decides for himself what products he will
manufacture and - subject to his ability to secure necessary
finances and to the limitations of supply and demand - how much
he will produce and at what prices he will sell. Each employer
chooses the course of action that he believes will yield him the
largest profit. Because the levels of production wages and prices
are the result of these individual and uncordinated decisions,
they tend periodically to get out of balance, resulting in
economic cycles that swing from "boom" to "bust."
Soviet economy functions in an entirely different way. There, as
we have seen, all industry, trade, and transport - all of what
are called the means of production (except agriculture) are owned
by the state. This makes it both possible and necessary for the
state to plan the national economy.
The famous Soviet five-year plans, of which three have been
completed and the fourth has begun, do just that. The first
objective of the five year plan is to set production goals for
each branch of soviet economy. This requires the making of a
series of basic decisions. What portion of the nations
resources shall be devoted to the production of consumer goods -
food, clothing, house-hold furnishings, automobiles, tobacco, cosmetics,
and the multitude of other products that people
use in their daily lives? What portion of the nations
resources shall be devoted to what may be called social of
collective goods and services - to such things as housing,
education, recreation and public health? What portion shall be
devoted to the national defense? And what portion to maintaining
and expanding the nations means of production - to build
and equip factories, railroads and ships, manufacture machine
tools and agricultural implements, open up new mines and oil
The preparation of the five year plan is not the work of
any one man or group of men. It is the result of the
collective thinking of the whole nation, a process in which the
trade unions play a highly important role.
The preparation of it is in the hands of the State Planning
Commission, on which the All-Union Central Council of Trade
Unions is well represented. But even before a draft plan is
prepared, the matter is discussed by the trade union organization
of every enterprise and by the members of every collective farm
in the land. In these discussions, the workers and farmers
propose production goals for themselves and make suggestions as
to their needs for such things as food, housing, clothing,
education and other goods and services which they believe that
the new plan should provide.
Based upon its own studies and on all of the proposals which are
sent to it, the State Planning Commission prepares a draft plan.
The draft is then submitted back to the trade union and farm
organizations for criticism and suggestions. The Commission puts
the plan into final form after considering these proposals. The
plan then goes to the Supreme Soviet, a body corresponding to our
Congress, which is elected directly by the people at a secret
ballot every four years. The Supreme Soviet approves the plan
with such modifications as it may introduce, and enacts the state
budget which embodies its provisions.
Price levels and the size of the wage fund (ie the approximate
total amount of money to be paid out in wages and salaries) are
then established by the Council of Ministers. These
determinations are are made in close consultation with the All-Union
Central Council of Trade Unions and its constituent unions. The
determining factor in making these decisions is the level of
production which will be reached under the plan. The wage fund
and prices are fixed on a basis which will yield the Soviet
people the purchasing power to buy the consumer goods and
services which they will produce under the plan, plus a surplus
The five year plan is not a static affair. It is
examined and revised quarterly and annually based upon production
results and upon the changing needs and demands of the people.
Since the total wage fund is based upon estimated production, the
overfulfillment of production schedules (and each one of the
three plans has been overfulfilled) or a decrease in production
costs permits an increase in living standards and hence in wages.
Thus, when I was in the Soviet Union, it was estimated that a one
percent decrease in the level of production costs would make
available a fund of 600 billion rubles, the great bulk of which
would be used for wage increases.
It is with this background in mind that the process of
establishing wage rates must be considered.
The basic principles which govern wages are set forth in Article
118 of the Constitution:
"Citizens have the right to work, that
is, are guarunteed the right to employment
and payment for their in accordance with its quality and quantity."
This constitution provision does two things. First, (like
President Roosevelts proposed Economic Bill of Rights), it
guaruntees every citizen the right to a remunerative job. This
guaruntee has been fully carried out. Since 1933 there has been
no unemployment in the Soviet Union.
Second, it establishes the two principles on which wages are
determined: By quantity, the Constitution means that as among
workers performing the same job, those who produce more shall
receive higher wages. By "quality" it means that
skilled workers shall be paid higher rates than those with less
skill; that heavy jobs shall be more highly paid than light ones,
and that workers in remote and newly opened-up industrial areas
where living conditions are difficult shall receive a premium
over the rates paid to established industrial centers. The
Constitution allows no other basis for determining wages. Women
are required to be paid the same rates as men for comparable jobs
and, of course, discrimination against racial or national groups
is both prohibited by law and unknown in practice.
As indicated above, the total wage fund is established for each
quarter-yearly period by the Council of Ministers in consultation
with the All-Union Central Council of Trade Unions. The same
bodies then proceed to apportion this total fund among the
various branches of industry and trade. In the next article, we
shall see how the fund for each industry is translated into wage
rates and applied on the factory and job levels by trade unions