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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 Today)

(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 nation’s 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 nation’s 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 nation’s means of production - to build and equip factories, railroads and ships, manufacture machine tools and agricultural implements, open up new mines and oil wells?

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 for savings.

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 Roosevelt’s 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 and management.