Magnitka sank?

Where to go if the factory is over?

Magnet on the bottom. Magnitogorsk was one of the first in Russia to feel the weight of global financial problems. Today, it may well become a classic example for textbooks on crisis economics.

Magnitogorsk, March 2009. The pipes of the metallurgical plant smoke, as before. But there is no crowding in the city's Employment Center: in Magnitogorsk there are layoffs, the plant is only 60% loaded. However, until recently, as eyewitnesses say, it was much worse here. When unemployment began to rise in the city in October,¹ the queue at the Employment Center stretched for a month in advance. The mayor's office urgently seconded six employees to the service, and today the queue has decreased to 3-4 days. It's true that people don't get much better than this...

First casualties

The whole life of the 400,000-strong city revolves around Russia's largest enterprise for the production of ferrous metals - the Magnitogorsk Iron and Steel Works (MMK), which produces 11 million tons of products per year. 30 thousand people work directly at the plant, and the same number are employed in service industries. Until recently, Magnitogorsk has been a successful single-industry town: ferrous metallurgy has been developing very actively due to the good price situation on the world market. In 2000, the last open-hearth furnace was dismantled at MMK. Now the plant has modern steel production. Thanks to the enterprise, the average salary in the city - about 25 thousand rubles - is the highest in the region. In the 2000s, business in the service sector began to actively develop in Magnitogorsk: entertainment centers, cinemas, restaurants, fitness clubs, and travel agencies appeared one after another. With the onset of the crisis in the fall of 2008, everything changed very quickly. Metallurgical production in the Chelyabinsk region has fallen by 30% over the past six months. And although the leadership of Magnitogorsk claims that not a single blast furnace has been stopped,² the city immediately felt the costs of the crisis. The entire sphere of market services was on the verge of ruin, the main enterprise is actively undergoing layoffs. But it's still half the trouble. At the turn of 2007-2008, a construction boom began in the city, the price per square meter in new buildings was quite acceptable - about $ 1 thousand. Factory management, entrepreneurs and the most qualified "blue-collar" actively acquired such apartments using mortgages. Now construction has stopped, and people are at a loss: they do not understand how to repay their debts. There is nothing to pay with: the reduction in wages in recent months is the main problem in Magnitogorsk. In metallurgy, as in all profitable Russian export industries, a very specific wage system was formed in successful years. It consists of a basic tariff and all kinds of allowances and premiums. In metallurgy, the base tariff part is no more than 40%. And if an employee, as happens at MMK, is put on 2/3 of the salary, this means that he is paid 2/3 of the tariff, not the salary. That is, real wages are reduced by 3-4 times. Russian metallurgy is still a very labor-intensive production, unlike in Western countries, where the level of automation is much higher. Therefore, a huge number of people are still employed at Magnitogorsk. And although the crisis should sanitize excess employment, large-scale enterprises cannot go for large-scale layoffs: this is closely monitored by the regional executive power and the "government's eye" represented by the prosecutor. Therefore, a variety of dismissal schemes are invented to circumvent tough labor laws. For example, the plant is trying to reduce costs through auxiliary production. They are taken out for outsourcing, formalized as separate legal entities, no longer associated with the plant. Accordingly, people working there, who are not needed by the plant, legally find themselves outside it. Then they can be fearlessly dismissed without bearing responsibility. The movement of workers within the enterprise is also used - for example, for the construction of a rolling mill-5000, which will produce billets of large diameter pipes. Business wants to keep the core of qualified personnel, but they are forced to keep everyone, not wanting to see that the reduction is inevitable.

Life for 1000 rubles

Due to the reduction of the tax base this year, the budget of the city, as well as the entire Chelyabinsk region, may decrease by 20%, which will create problems in the work of the entire social sphere. There is no official data on the unemployment rate in Magnitogorsk, but according to local experts, it has risen to about 12% (according to the methodology of the International Labor Organization). For comparison: in Russia as a whole, unemployment (according to the ILO) from the summer of 2008 to February 2009 increased from 5 to 8%. The employment service of Magnitogorsk was not ready for mass layoffs at the plant. After the loud statements of the federal government that the maximum amount of unemployment benefits increased to 4900 rubles, people who lost their jobs began to demand this amount. And no one bothered to explain to them that only the "ceiling" of the maximum unemployment benefit, which workers with high previous wages, dismissed according to all the rules, are entitled to receive, has been increased. Therefore, most of those who have registered with the Magnitogorsk employment service receive benefits of only 800-1000 rubles. It is clear that one cannot live on such money. Meanwhile, finding a job in Magnitogorsk is becoming increasingly difficult. The public works hoped for by the federal authorities are futile: with a sharp decline in public investment, there is nowhere to find facilities where they could be carried out, and not all the unemployed are ready for hard physical labor, say, on road construction. However, the townspeople try not to lose their presence of mind. They still go skiing, go to the water park, actively support their favorite hockey team Metallurg. The plane to Magnitogorsk and back was packed to capacity, even at the inflated price of 16 thousand rubles by the monopolist-carrier (you can fly from Moscow to London with this money). In other words, many strive to live a normal life. There is a chance that the metallurgical cities have already experienced the worst recession and hit the "bottom". Three months have lain on it, and so far the consequences of this recession are relatively tolerable, despite a 30% drop in production. But one must understand that both the metallurgical plants and the business that served the needs of their employees still had “fat” - due to the fact that the last 3-4 years were very successful for the Russian metallurgy. So far, these reserves partly save the situation. As far as they are enough, no one will undertake to say today. And one can only hope that there will be no second “bottom”.

1 The management of the Magnitogorsk Iron and Steel Works announced the reduction of 3,000 people.

2 According to media reports, 6 out of 8 furnaces were operating at MMK in February.

OAO Magnitogorsk Iron and Steel Works is the largest iron and steel enterprise in Russia. The plant was built by the whole country, in difficult natural conditions, in record time: the first builders arrived on March 10, 1929, and on February 1, 1932, the first cast iron was already produced. Today, the share of MMK's products on the Russian market is about 20%. MMK is a complex with a full production cycle - from the preparation of iron ore raw materials to the deep processing of ferrous metals. About 40% of Magnitogorsk's products are exported. In 2008, MMK produced 11 million tons of steel products, and its revenue increased by 19% and amounted to 226 billion rubles (in 2007 - 190 billion). MMK's net profit in 2008 was 10 billion rubles.