Wage reform in the Soviet Union, 1956–1962

The prevalence of storming meant that the ability to offer bonus payments was vital to the everyday operation of Soviet industry, and as a result the reforms ultimately failed to create a more efficient system.

During the period of Stalinism, the Soviet Union attempted to achieve economic growth through increased industrial production.

[1] Factories and industrial enterprises were actively encouraged to "achieve at whatever cost",[2] with a strong emphasis placed on overfulfilling stated targets so as to produce as much as possible.

[4] This was usually the result of a lack of industrial materials that left factories without the resources to complete production until new supplies arrived at the end of the month.

Each Soviet ministry or government department would set its own rates and wage scales for work in the factories or enterprises for which they were responsible.

Factory managers, who did not want these workers to lose out to their piece-rate colleagues, often manipulated output figures to ensure that they would (on paper) overfulfill their targets and therefore receive their bonuses.

The purpose of de-Stalinization included not only ending the use of terror and the Gulag system that had existed under Stalin, but also reforming the economic policies of the Soviet Union.

[12] In the 1950s, the Soviet economy had begun to fall behind schedule in the output of several key materials including coal, iron and cement, and worker productivity was not growing at the rate expected.

[17] It was also hoped that the reforms would help to reduce the levels of waste and misallocation of labour that were frequently found in Soviet industry.

[19] Wage increases were restricted to the lowest paid jobs, as Soviet leader Nikita Khrushchev sought to be seen as the "friend to the underdog".

Progressive piece-rates, where rates increased as outputs grew, were ended, and workers were paid a one-off bonus upon overachieving a quota.

[26] Whilst the reform did remove some of the peculiarities of the Stalinist era, the overall impact of program created additional problems for the Soviet worker.

[32] In one case, a manager of a concrete factory was sentenced to eight months corrective labour after being found guilty of using the reforms as a pretext to extract unpaid overtime from workers.

[17] Filtzer wrote that wider issues in Soviet industry and relations between managers and workers are important in understanding the failure.

[33] Filtzer noted a myriad of issues in Soviet production that had meant a more formal bonus system was unworkable in the Soviet Union: irregular availability of supplies that were often of variable quality, an irrational division of labour and a reliance on "storming" that made it difficult to motivate workers through a more conventional payments system.

[34] In such cases, it was vital to have the ability to offer additional overtime payments and even use bribes or "palm-greasing" to incentivise workers to meet monthly quotas on time.

[37] This had led to a situation where workers who could not count on a Western-style meritocracy (where they might expect to find their pay and conditions improve with promotions) would instead have to rely on the decisions of managers to give bonuses and overtime payments if they wanted to increase their wages.

Because managers needed to be able to give rewards and bonuses at their own discretion, sticking to a centrally directed system of wages was very difficult.

The wage reform of 1956–1962 was a failure, as it could neither fix nor improve the economic conflict between workers and the elite in the Soviet Union.

[38] On the shop floor, workers continued to directly bargain with low-level management over effort, wages and what "skill" they would exert.

In particular, Filtzer notes that Soviet workers were constantly forced into a position of exerting more skill than was officially called for in plans or quotas.

[39] Filtzer wrote that Mikhail Gorbachev attempted a very similar series of wage reforms in 1986 (Perestroika), which ultimately failed and had to be replaced with a decentralised system in 1991.