Abstract
This article discusses the use of informal practices in negotiating welfare with state institutions in Azerbaijan. One of the effects of transition to market economies in the post-socialist countries has been the partial withdrawal of the state from welfare provision and residualization of welfare. Recent research has shown that informal practices play an important role in “structuring welfare from below” (Morris & Polese, 2014b) across post-socialist realm. Based on in-depth interviews with engineers at different periods of their careers, namely mid-career, working pensioners, and engineering students, this article demonstrates how formal and informal institutions and practices are strategically used by individuals, families, and low level bureaucrats to achieve desired career and welfare goals. Rather than compensating for the deficiencies of formal rules and institutions, formal and informal are intertwined and merged and are actively employed both by the citizens and state institutions.
Introduction
Former Soviet Union and Central and Eastern European countries have been at the center of research on informality and informalization for some time. Both scholarly and lay observers of the region have noted the rampant growth of a wide range of informal practices, including self-provision and mutual aid, the rise of the informal economy and what is generally known as the corruption of the public sector. In much research, this growth of informal practices has been directly linked to transition and the transitological paradigm: the withdrawal of the state from much of the activities it used to perform in socialist times and weak market institutions were seen as the main reasons behind the spread of informality. This perspective essentially follows the developmental approach to informality adopted by international organizations from the 1970s onwards. The concept of ‘informal economy’ itself was coined by anthropologist Keith Hart (1973), in his work on the urban poor in Ghana, and referred to the diverse activities of the self-employed. As the concept became institutionalized in the framework of international development organizations, the informal economy became understood as a feature of poverty and underdevelopment, characterized by low productivity, low levels of skills and technology, and low capacity for accumulation (Portes & Haller, 2005: 404). From this perspective, the growth of informality in post-socialist countries is seen as a temporary phenomenon that is supposed to go away, or at least diminish, as transition moves towards completion, the new state and market institutions take root, and state–society relations assume a more or less permanent shape. However, this ‘optimistic’ view has not been materializing. Instead, recent research shows that informality in post-socialist countries is as pervasive as ever, taking on new forms that can also be found elsewhere in Western Europe and beyond (Giordano & Hayoz, 2013; Morris & Polese, 2014a; Polese, Morris, Kovacs, & Harboe, in press). Rather than a transitional stage on the path to development, post-socialist informality is assuming the forms of ‘informalization’ as described by Castells and Portes (1989), who noted how formal structures of the state or established market institutions increasingly use informal practices.
Because of its spread and variety of forms, informality has been difficult to define and conceptualize. As Misztal (2002: 18) notes “the concept of informality often seems to be treated as a very convenient device, used to explain almost everything that is new or points to new trends or new fashion”. In social science, informality is one of the most interdisciplinary concepts, addressed differently by anthropology, sociology, and political science. With regards to post-socialist informality, several frameworks can be identified: informality as self-provision; the informal economy and informal employment, and informality within state institutions, which usually includes corruption and patron–client relationships (Börzel & Pamuk, 2012; Clarke, 2002; Karklins, 2005; Stefes, 2005; Williams, 2008; Williams & Nadin, 2011). Interpersonal networks, from family and mutual aid to patron-client ties within political elites, has been another popular topic for research on informality as it is one of the main mechanisms through which informality operates (Ledeneva, 1998, 2008; Lonkila, 2010).
In recent years, this research on post-socialist informality has begun to extend beyond these traditional spheres towards the informal provision of social welfare. This is a very important addition to the debate, as welfare provision remains an area from which the post-socialist state did not withdraw as much as it did from the regulation of economy and the labor market. Yet, as recent research demonstrates, informal welfare provision is used to fill in the large area between what “the state claims to do” and what it is “doing in reality” (Polese et al., in press). At the same time, the public sector which is still responsible for state welfare provision, is itself permeated by informal practices and corruption.
In this paper, I wish to contribute to this debate by looking into how engineers in Azerbaijan use informal practices in shaping their work and welfare strategies. I take as a point of departure Soviet ‘cradle-to-grave’ universal welfare provision, which included, in addition to pensions and other social benefits, free healthcare, childcare, and education (Cook, 1993). Despite post-Soviet residualization of state welfare provision, people's expectations of what are the desired living standards, and what should be the role of the state in providing them, remain largely shaped by Soviet practices (Cook, 2007; Lipsmeyer, 2003). When the state does not fulfill those expectations, individuals and families do not simply give up on their expectations, but try to ‘fill in the gaps’ on their own to achieve the desired standards of living. Informal practices play an important role in the repertoire of actions aimed at achieving these desired outcomes.
I build on a basic understanding of informality as a form of social action that aims to avoid or circumvent existing formal regulations to bring down transaction costs (Böröcz, 2000). Informal is also generally understood in relation to the formal, whether it is seen as the product of formalization (Stark, 1989), or as complementing the formal (Polese et al., 2014), or making up for the deficiencies of the formal institutions and procedures (Helmke & Levitsky, 2004; Ledeneva, 1998). In this paper, my focus is on the ways in which individuals and families interact with state institutions and strategically combine both formal and informal practices to achieve desired welfare outcomes. In this, I follow Anne Swidler's (1986: 277) definition of strategy as “a general way of organizing action […] that might allow one to reach several different life goals”. Consequently, instead of limiting myself to a particular type of informal practice such as informal employment or the use of interpersonal networks, I look at any informal practices that are used by or applied to my informants for such welfare-related strategic purposes.
Engineers are an interesting group to look at from the point of view of informality. Previously a Soviet ‘default profession’ along with doctors and teachers, in the post-Soviet period engineers were socially dislocated to a greater extent compared to other Soviet professionals due to the processes of deindustrialization. Their engagement with the informal economy and other informal practices has differed in significant respects from those of doctors and teachers. Thus, doctors and teachers, while severely underfunded, for the most part retained their jobs in the public sector, and used out-of-pocket informal payments or private medical or tutoring practice to complement their declining incomes (Morris & Polese, 2014b; Osipian, 2009; Polese, 2008; Rzayeva, 2013; Temple & Petrov, 2004). Engineers on the other hand experienced unemployment to a greater extent, as many of their workplaces were either closed or downsized in the course of post-Soviet deindustrialization. Instead of supplementing their incomes with informal payments for their formal work, former engineers were more prone to taking up employment in the informal sector as a primary livelihood strategy. Taxi-driving and various work in the construction sector are two paradigmatic informal occupations for former male engineers across post-Soviet space, while female engineers usually engaged in domestic work, childcare, and sometimes tutoring. But even for those few engineers who were able to retain their jobs in the public sector, the specificity of engineering work rarely allowed them to partake in the practices of informal out-of-pocket payments that is so widely spread both in the educational and healthcare settings. Instead, they often combined formal jobs with other, non-professional income-generating activities. In Azerbaijan, this dynamic was especially interesting as post-socialist deindustrialization in manufacturing sector was combined with expanding employment opportunities in oil industry and construction sectors.
Despite consistent reports of high levels of informal and shadow economies (Schneider, 2009; Yoon, Reilly, Krstic, & Bernabe, 2003), the research on informality in Azerbaijan remains rather limited. Here, I focus on three types of informal practices: household livelihood strategies, state-driven informalization of both employment and provision of social benefits in the public sector, and informal practices in higher engineering education. Each of these types of practices pertains to engineers at different stages of their careers, and engages with a different aspect of welfare provision in post-Soviet Azerbaijan: the first deals with mid-career engineers whose careers were interrupted by the transition, but who had to continue to provide informal support and care for their parents and children at the time when state provision of pensions and childcare services became inadequate. The second deals with working pensioners who are at the same time recipients of social benefits, particularly old-age pensions. The last type of informal practices deals with prospective engineers at the stage of entering the profession and the labor force (students), and who are in the process of receiving public higher education. Each of these groups is engaged with state institutions in a different way, and yet all of them share a pattern of strategically combining formal and informal practices in order to achieve desired, or at least more or less acceptable, standards of living and quality of life.
This article is structured as follows: In the following section I discuss the existing state-of-the art with regards to informalization of social welfare in post-socialist states. Second, I provide a brief account of the social welfare context of Azerbaijan, including information on formal and informal employment, education, and the social protection system. Third, I present empirical material on the use of informal practices by engineers in Azerbaijan in their livelihood strategies, in public sector jobs, and in professional education. I conclude with a brief discussion of the implication of these informal practices for state–society relations and the new ‘social contract’ in Azerbaijan.
Welfare in Central and Eastern Europe and former Soviet Union: Similarities and differences
The issue of informality in the post-socialist welfare has entered the debate somewhat from a back door. From the beginning of transition and the rollback of welfare regimes in the post-socialist countries, the main question welfare scholars had been asking was ‘in what direction are the post-socialist welfare states developing?’ Thus, much of the research on post-socialist welfare state in 1990s and early 2000s focused on the classification of welfare state regimes in Central Eastern Europe and former Soviet Union: on whether they are converging with welfare state regimes of Western Europe and on the extent to which these regimes continue to be influenced by socialist legacies (Aidukaite, 2006; Deacon, 2000; Fenger, 2007; Toots & Backmann, 2010; Wagener, 2002). It was generally accepted that the welfare state in post-socialist countries can be characterized by the residualization of welfare states and the individualization of social risks following the adoption of neo-liberal policies (Babajanian, 2008; Ferge, 1997; Polese et al., 2014). At the beginning of the transition in the early 1990s, all of the states in the region started out with comparatively generous welfare state provisions, which had been consequently reduced and contracted, resulting in most cases in inadequate welfare coverage. Within this broad common trend there have been significant differences. Scholars have developed several typologies of welfare states and welfare regimes in the region, and identified different, but sometimes overlapping types of welfare regimes: former USSR type (including Belarus, Estonia, Latvia, Lithuania, Russia and Ukraine), developing welfare state type (Georgia, Romania and Moldova) (Fenger, 2007), Baltic type (Toots & Backmann, 2010). Welfare regime approach (Esping-Andersen, 1990) has been the dominant framework of analysis. Welfare regime refers to “the institutional arrangements, rules and understandings that guide and shape concurrent social policy decisions, expenditure developments, problem definitions, and even the respond-and-demand structure of citizens and welfare consumers” (Esping-Andersen, 1990: 80).
However, the welfare regime approach has been criticized for excessive emphasis on policy (Polese et al., 2014). Scholars working in the ethnographic tradition have underlined the mismatch between formally adopted national or regional policies and their implementation. These policies may often be modified, sabotaged, or even boycotted by street-level bureaucrats, other interest groups and cultural norms (Haggard & Kaufman, 2008; Pascall & Manning, 2000; Polese et al., 2014). While the legacy of strong state institutionalization had prevented development of formal non-state welfare actors (such as market and non-profit actors), reliance on the private sphere networks such as family or regional ties gave rise to alternative and parallel structures of welfare provision that complement or compete with the state. These informal structures ‘fill the gap’ between what the state ‘claims to do’ vs what it ‘is doing in reality’ (Polese et al., 2014). Thus, the paradox of post-socialist welfare provision is that the partial withdrawal of the state produced informalization rather than proliferation of multiple-actor welfare systems. This informalization is connected to the processes of ‘domestication’ and ‘privatization’ of the state that had been noted by many ethnographers working in the region (Polese, 2008; Stenning, Smith, Rochovská, & Świątek, 2010).
The importance of informality in welfare provision and the insufficient attention to these practices in existing research becomes especially obvious when one looks at welfare in the Caucasus and Central Asia. To date, most research has focused on CEE countries and the European part of the former Soviet Union, with relatively little attention paid to the Caucasus and Central Asia, with the exception of Georgia. Most of the countries of this region, including Azerbaijan, Turkmenistan, Tajikistan, or Uzbekistan, were considered ‘laggards’ in terms of social policy reform (Deacon, 2000), and rarely merited individual focus. However, the few available studies on the Caucasus and Central Asia suggest that the concepts of welfare state and welfare regime are not easily applicable to these countries (Babajanian, 2008; Collier & Way, 2004; Gugushvili, 2010; Habibov & Fan, 2007; Urinboyev, 2011). The welfare mix in these countries includes components that are rarely taken into account by the welfare state regime approach, such as family support, mutual aid networks, remittances of labor migrants, international aid, or local self-governance institutions such as Uzbek mahalla (Babajanian, 2008; Gugushvili, 2010; Urinboyev, 2011). Many of these elements are either informal (mutual support networks, remittances) or located at the border of the formal and the informal (mahalla system in Uzbekistan). While there exist some analytical frameworks inclusive of informal practices in welfare, such as ‘informal security regime’ (Wood & Gough, 2006) and ‘welfare pentagon’ (de Neubourg, 2002), 1 they had been developed in different contexts of the developing world and do not take into account the specific institutional legacy of socialist welfare states (Babajanian, 2008; Urinboyev, 2011). The relative lack of empirical studies and the inadequacy of the existing theoretical models suggest a need for both more contextual empirical research and better theorizing that explores the role of informality in the welfare provision in the Eastern part of the post-socialist realm.
Informal security regime refers to a type of institutional arrangement where people meet their security needs through community and family relationships. Wood and Gough (2006) contend that such arrangements, which are mostly found in the countries of Latin America and South Asia, are usually based on clientelistic relationships, where people trade their short term security for long term dependency and vulnerability. ‘Welfare pentagon’ is a model of welfare comprised of five core institutions: family, markets, social networks, membership institutions and public authorities.
In this article, I aim to provide both a description of the way in which formal and informal practices are intertwined in provision of welfare in Azerbaijan, and a conceptualization of the relationship between the two. But before proceeding to the empirical material on which this research is based, a short description of the formal system of social protection in Azerbaijan is in order.
Formal social protection system in Azerbaijan shares many similarities with other post-socialist and especially post-Soviet countries. Like elsewhere in the region, after the sharp decline in GDP in the 1990s, the social welfare system has been residualized and many of the previously public services became re-commodified. This process has been especially visible in the area of social services, such as housing, childcare, healthcare and education. Previously, these services were either free or heavily subsidized, often provided through state owned enterprises. In the post-socialist period, these schemes were either suspended or significantly reduced. Even formally free public services, such as primary healthcare and education usually require out-of-pocket informal payments (Lepisto & Kazimzade, 2008; Rzayeva, 2013; Temple & Petrov, 2004). At the same time, further strain was put on the social welfare system in Azerbaijan by the emergence of large numbers of refugees, internally displaced persons (IDPs), and war veterans following the military conflict in Nagorno-Karabakh. 2 These groups became the primary target groups of social assistance benefits including free access to public services and even housing assistance (Habibov & Fan, 2007).
The term ‘Internally Displaced Persons’, or ‘IDPs’, refers to people who had been forced to flee their homes, usually in the result of an armed conflict, but did not cross international borders in their flight. In Azerbaijan, following the armed conflict with Armenia over Nagorno-Karabakh region in 1989–1994, there are over 600,000 IDPs (UNHCR).
Currently, the formal social protection system in Azerbaijan is made up of two components: social insurance, which includes various pensions (old age, disability, survivor) and unemployment benefits, and social assistance (various cash benefits, tax subsidies, etc., which target specific categories of people who are expected to be at a greater risk of poverty, such as families with small children, IDPs, refugees and, war veterans and their families, and people with disabilities). The largest of the existing social protection programs is the old age pension, which covers 61% of all welfare recipients (Habibov & Fan, 2007: 53). At the other end of the spectrum is the unemployment benefits program, with almost negligible coverage of 0.19% of welfare recipients (Habibov & Fan, 2007: 53). Overall, the social protection system has been characterized as providing wide, but thin coverage (Aliyev, Valiyev, & Rustamova, 2011: 75; Falkingham & Vlachantoni, 2012).
Azerbaijan's social protection system carries significant Soviet institutional legacies. In particular, the method of collection of contributions for old age pensions is very similar to the Soviet one, with 22% of gross wages contributed by the employer and 3% by the employee (Aliyev et al., 2011: 112). However, pension reform, implemented in consultation with international organizations such as the IMF, World Bank and UNDP, has been underway since 2006. According to this reform, the amount of base pension has already been increased to 85 AZN (76 euro) making it the second most generous base pension in former Soviet Union after Kazakhstan (Aliyev et al.: 112). Another element of the reform is change of the retirement age: currently, it is 58 and 63 years for women and men, respectively, but it will reach 60 and 65 in 2016 (Law on Pensions, 2006). This is a considerable increase from the generous Soviet retirement entitlement at 55 (women) and 60 (men). The purpose of this change is to cope with the combined pressure of shrinking contributions, mainly due to increasing informal labor (more on this below) and population aging, and the stable number of those entitled to old-age pensions. A specific problem of the social protection system in Azerbaijan is the large number of refugees and IDPs (about 1 million people) as well as war veterans, due to the Karabakh conflict, all of whom are recipients of various forms of social assistance. This assistance includes cash transfers, tax privileges and various state subsidies, such as free education, basic healthcare etc.
The existing formal social protection system remains an important safety net, especially for the poor, but it is not suited to either alleviate poverty or to provide adequate living standards. Interestingly, although the state in Azerbaijan formally did not withdraw from the provision of welfare, the family is legally recognized as a welfare provider. Article 34 of the Constitution of Azerbaijan states that it is the “responsibility of children is to respect parents and look after them. Children who are of age (18) and capable of working must support disabled parents” (Constitution). Thus, it is expected that the deficiencies in the state provision should be filled by families. The reliance on family networks is neither new nor specific to Azerbaijan. However, in post-Soviet Azerbaijan, this is often seen as part of Azerbaijani traditional culture and ‘national mentality’ and, unlike in many post-Soviet contexts, codified. Family values form the central notions of this mentality, while family networks serve as the main basis for social organization and for the provision and financing of many forms of social welfare (Heyat, 2002; Kaneff & Yalçın-Heckmann, 2003; Tohidi, 1997).
Another problem with the state system of social protection in Azerbaijan is that it only receives contributions from formal economic activities. Yet, existing macroeconomic research indicates that Azerbaijan has one of the largest informal economies in the region, at around 60% of GDP (Schneider, 2009). Even this figure is likely to be an underestimation, as macroeconomic indicators usually underestimate real size of informal sector (Morris & Polese, 2014a: 2). Azerbaijan also has large participation of the labor force in the informal sector, estimated at 38% of the total labor force in 2001 (Yoon et al., 2003).
Existing research on informality in Azerbaijan suggests that it is a pervasive phenomenon with deep roots going back at least to the Soviet period (Grossman, 1989; Mars & Altman, 1983; Suny, 1989; Zemtsov, 1976). Yet the specific forms of informality and mechanisms of informalization remain little understood despite growing number of empirical studies (Auty & De Soysa, 2006; Börzel & Pamuk, 2012; Dedeoglu, 2011; Guliyev, 2012; Lepisto & Kazimzade, 2008; Safiyev, 2013; Silova, Johnson, & Heyneman, 2007; Stefes, 2005; Yalçın-Heckmann, 2010, 2013; Yalçin-Heckmann & Aivazishvili, 2012). Most of the existing research focuses either on informal economy (Dedeoglu, 2011; Yalçın-Heckmann, 2010, 2013; Yalçin-Heckmann & Aivazishvili, 2012) or on corruption and the patron-client relations in the political sphere (Auty & De Soysa, 2006; Börzel & Pamuk, 2012; Guliyev, 2012; Stefes, 2005), creates a misguided impression of the autonomy of the two spheres. In this respect, a micro-level study of informal practices related to welfare provision is especially useful for understanding the ways in which informal practices link the state, economy and society in Azerbaijan.
The empirical material on which this paper is based comes from a larger study on the transformation of the engineering profession in post-Soviet Azerbaijan. The study includes semi-structured biographical interviews with 42 engineers, conducted between December 2010 and March 2013. 39 Interviews were conducted in Baku, and three in Houston, TX, USA, which is the most popular destination for internationally mobile Azerbaijani engineers working in the oil industry. The sample included “Soviet” and “post-Soviet” cohorts (34 and 8 engineers, respectively), referring to the period in which these engineers entered their profession, with the aim to trace changes and continuities in recruitment practices, the organization of professional activities, transnational links and work attitudes in the post-Soviet period. Slightly over a third of the interviewees were female (15 out of 42). The interviews lasted between 45 min and 3 h, with an average interview lasting about 1 h. 19 of the interviews are fully recorded; they were then transcribed and manually coded. When interviewees declined the request to be recorded, I took extensive notes and later reconstructed the interviews from memory and field notes.
Although informality was not the primary focus of the study, it attracted my attention early on during the research as it figured prominently in engineers’ accounts of their work and personal lives in the post-Soviet period. Most of the Soviet-educated engineers who had previously worked in industrial enterprises had been informally self-employed for more or less prolonged periods of time in the post-Soviet period. Among those employed in the public sector, mostly research institutes, various formal and informal consulting, as well as moonlighting, were common. Both of these groups of engineers have skillfully combined work and welfare, both formal and informal. For the younger, post-Soviet generation of engineers, informal practices in education were of a great concern, not the other forms of informal activities that their older peers described.
Although only a third of my interviewees were female, in this article I use more examples from female informants than from males. This is because during the interviews men tended to emphasize the content of their work and their professional achievements, while women focused more on relationships and provided more coherent narratives of engagement with welfare state which are better suited for presentation in this article. Yet all of the examples I site here are also corroborated by the interviews with male engineers, and the practices I describe are common for both men and women.
‘Bricolage’ of formal and informal: Coping strategies and a ‘decent’ life
Household strategies for poverty alleviation are perhaps the most researched area of informality, both in post-socialist contexts and beyond (Clarke, 2002; Mrozowicki, 2011; Stenning, 2005; Stenning et al., 2010). Many of these strategies, including those that have to do with welfare provision, such as informal childcare by grandparents or support of the elderly by younger generations, are found all over the world (Polese et al., 2014; Strangleman, 2001). Here, I present a rather typical post-Soviet example of livelihood strategy of a family of two engineers, Nadir and Lena. 3 My focus however is not on their survival strategy per se, but on the ways in which formal and informal, work and social assistance, public and private sources are all strategically combined in order to achieve a ‘decent life’.
All names are anonymized.
Nadir and Lena are both engineers, who married and had two children in 1980s. Nadir, a mechanical engineer, who had been the primary breadwinner for his family by the beginning of transition, became unemployed in 1990 when the defense industry plant where he had been working, closed down. During his unemployment, although he never officially registered as unemployed, he engaged in a variety of informal jobs, including a job at a shoe-making workshop and moonlighting as part of an apartment refurbishment brigade repairing air conditioners. In 1992, he returned to formal employment as a chief engineer at another industrial plant. But the formal job often did not pay at all, and he frequently had to resort to informal work again. Between 1990 and 1992, while Nadir had no formal employment, his wife Lena remained securely formally employed at a manufacturing plant, where she received a meager salary and sometimes in-kind food provision instead of salary. However, once Nadir had found formal job, Lena began to work informally, first as a waitress in a cafe, and then as a cleaning lady for a British expatriate. In the meantime, she had been formally registered as an employee (‘gave her labor book’ 4 ) at yet another state enterprise. She did not go to work there, neither did she receive any salary from this official workplace, but this was seen as necessary for keeping uninterrupted working experience (stazh) – a condition for qualifying for an old age state pension when the time came. In 1997 Lena had found a new formal job, as an advertisement manager with a small newspaper, which she continued to combine with informal house-cleaning. The informal work was the primary source of income. Throughout these years, they also relied on the house work, help with childcare, as well as the small old-age pension of Nadir's mother, until she passed away in 2000. In 2003, Nadir was offered a formal job in a private enterprise owned by a former colleague from one of the industrial plants where he used to work before. As Lena's income became less important for the family, in 2004 she left employment altogether and became a home-maker. This time, Lena did not seek to have her ‘labor book’ registered anywhere, as she had already accumulated the number of years of working experience necessary for a public old-age pension. At the same time she is not registered as unemployed – she simply became invisible to the formal benefit system.
‘Labor book’ refers to an official document where all formal employment experience is recorded. The labor book is issued to an employee at her first formal job and is later used for calculating pension upon retirement.
In a way, this is a post-socialist success story: this family managed to overcome poverty, partially return to professional work, and overall re-establish their middle class status – something that few of the de-professionalized engineers I interviewed were able to do. Of course, this was done at the expense of Lena's career, a sacrifice she accepts humbly despite regrets of leaving professional employment. This story also supports the developmental perspective on informal work: once formal jobs are sufficiently well paid, people no longer hold on to their informal employment. Yet, here I am more interested in the bricolage of formal and informal that this family had been forging for many years. First, we can observe a change in the meaning of formal employment in the public sector: during transition, it ceased being the primary source of employment or income, yet it remained important as the primary link to the state and the social protection system. Thus, while Nadir was formally unemployed but generated income through informal jobs, Lena held on to her formal work, however meagerly paid. At that time, she made no attempt to seek informal work herself – as it would have been too risky to leave the family without the security of at least one formal job. Only when Nadir found permanent formal job did she finally leave hers and engaged in informal income-generating activities. And even then, she maintained a fictitious formal employment relationship simply to ensure future claims to social benefits. Despite the general disillusionment with the state, and its withdrawal from its Soviet-time welfare and job creating functions, which both Nadir and Lena strongly disapproved of, they did not stop relying on the state as a minimal safety net. The practice of keeping one's labor book at some public sector organization, which seems to be rather widespread, is particularly interesting in this regard. The potential accumulation of pensionable years appears to be more important than formal unemployment benefits. 5 In this sense, the state is seen as a better guarantor of financial security across the lifecourse, 6 than a provider of immediate support in case of failures of market mechanisms of employment.
Unemployment benefits in Azerbaijan are calculated as 70% of average monthly wages in the 12 months prior to registering as unemployed, but cannot exceed the average monthly salary. Unemployment benefits can be paid no longer than 26 weeks in any 12 months period (Aliyev et al., 62). In the first half of 2014 average salary in Azerbaijan was estimated at AZN438 (USD559) (Macroeconomic Indicators, 2014).
I am grateful to anonymous reviewer for pointing out this issue.
The second important feature of this formal/informal strategizing is that it went beyond mere survival and provision of subsistence minimum. Throughout the transition, a major concern for Nadir and Lena had been the education and upbringing of their two children. At the most difficult times they continued to pay for private lessons and extracurricular activities of their children, such as music and sport, filling in for a withdrawn and disinterested welfare state. Previously, these services were either provided free of charge or highly subsidized; but as they became commodities Nadir and Lena did not simply withdraw their children from them, but rather made an extra effort to provide for what they saw as necessary for the future of their children, for their having ‘decent lives’. Often, these activities had to be paid for at the expense of food and other necessities. Their notion of ‘decent life’ is clearly a middle-class one; maintaining social class position of their children through education. Yet, not all of the Soviet-time entitlements have been treated in this way – for example, Nadir and Lena had given up the practice of family vacations, but not of the extracurricular activities of their children. This represents resistance to the residualization of social welfare, when some, but not all, of the previously available social services are deemed as more important than others.
These household-centered strategies of formal/informal bricolage would, however, be impossible without the cooperation of employers who act in the capacity of low level bureaucrats in public sector workplaces. In the above example, it was the employers who had arranged for Lena's formal registration, as well as supported and encouraged informal income generating activities of Nadir. Here, the informal relations are important, as well as the willingness of employer/bureaucrat to engage in needs/means or merit testing. My next example directly addresses the informalizing practices of state bureaucracies.
As mentioned above, in Azerbaijan the official retirement age is set at 58 years old for women and 63 years old for men. However, many retirement age employees prefer not to retire but to continue to work for as long as their health allows, because pensions are low and do not provide for the same standard of living as salaries. Employees of state enterprises who reach this age are rarely required to leave their jobs immediately. Rather, they enter a space of ambiguity, where management can easily give or take away their jobs, and they have little influence over the process. A formal adjustment that allows this is the annually renewable contract – a practice that began to be introduced in the public sector in the early 2000s instead of traditional Soviet open-ended employment contracts. 7 At the time of introducing this novelty, it was presented as a simple formality, and indeed in most cases the underemployed and underpaid public sector employees simply signed a new contract every year without any change in their status, salary, or working conditions. Yet, this practice has created an opportunity for the administration to regulate their staff without the need for any formal lay-offs. Decisions about the employment of retirement age professionals are solely at the discretion of the administration, and there are no formal rules on whose contracts can or cannot be renewed, or who can be asked to become a consultant. Public sector employers utilize different forms of flexible working arrangements for retirement age professionals, including consulting contracts and part-time work. Of about 14 retirement age professionals who had been working in the public sector that I interviewed, five described working under such flexible working arrangements. But in some cases these arrangements reach a point of absurdity, when formal (i.e. employer, job title, job description) and informal (actual work done) contracts are two different things.
Several of my interviewees as well as other acquaintances from public sector mentioned this practice. There is no such requirement in the Labor Code (Labor Code, 1999), and the open-ended contract is still possible. Yet, this has been a de-facto practice.
The case in point here is Aliya (born 1944), a power engineer with 50 years of experience in an energy-related production association. Upon reaching her retirement age in 2001, Aliya continued to work in her old workplace, and received her full salary and half of her age related pension, as per Azerbaijani labor regulations. In 2004 her open-ended contract was changed to an annual one, without any visible change in her life: it was renewed year after year. Then, in 2009, there was an administrative decision at the top level of management not to renew the contracts with all those who had reached retirement age, from cleaners to top specialists. So along with other retirement age employees, Aliya was released from her job. However, two months after her formal retirement Aliya was invited by the management to sign a new employment contract. Interestingly, the new contract was not with the production association, but with a research institute, which, although institutionally related to the production association, is a separate legal entity. Her new position was ‘senior researcher’, and her salary was set at two thirds of what she used to receive at the production association. However, despite having a different job title, different salary and different employer, Aliya continues to work at her old workplace and to do exactly the same work she did before. This was not an individual case – all ‘valuable specialists’ were offered similar contracts with the research institute, she said.
It is difficult to classify Aliya's working arrangement as belonging to the informal economy in the sense that it is neither undocumented nor unregulated work. She has a formal job, receives official salary, and her formal employer pays regular taxes and welfare benefits. Rather, this case resembles Soviet-time practices of false or fictitious accounting. The best researched example of such practices was pripiski, or paddling official production figures to show over-fulfillment of plans (Barsukova & Radaev, 2012), but fictitious reporting actually went beyond that and encompassed all spheres of economy, including labor and wages practices. Interviews and anecdotal evidence suggests that in the post-Soviet public sector in Azerbaijan such fictitious reporting is still practiced, although it is not possible to assess its prevalence. Other examples of similar practices are labor-book keeping that I mentioned above, or envelope wages which are usually discussed in the framework of tax evasion in the private sector (see Williams, 2008). However, in Azerbaijan, this practice also takes place in the public sector workplaces, including state-owned companies and the bureaucratic apparatus (Safiyev, 2013, author's interviews). Here, the purpose is not so much tax evasion, but the reallocation of informally collected revenues.
Returning to the working arrangements of retirement age professionals, it is important to note that their access to welfare is an important consideration for the employers who choose flexible arrangement options. Pensions provide regular and stable income; although this income is insufficient for providing adequate living standards, it is a significant contribution that is used by employers to justify lower salaries. In this sense, the employers are engaged in the means-testing of their employees. On the other hand, in making decisions about employment of such retirement age professionals, administration becomes involved in the ‘evaluation of personhood’ (Polese et al., 2014) of former full time employees, as they consider their family situations and engage in informal needs-testing in addition to assessing professional qualifications. An example of such an approach can be observed in the case of Fahriyya (born in 1940), a chemical research engineer who had experience of flexible work, working at different times under part-time contract and under consulting contracts. In her capacity as the chief of a laboratory (while employed part-time) she was also a low level bureaucrat and was involved in making employment decisions. After their research institute was closed in 2009, Fahriyya found employment for a former colleague, also of retirement age. This included a part-time job at another research institute as well as consulting on two different projects. In making these decisions, Fahriyya's considerations included not only the evaluation of professional qualifications of this colleague but also of her personal circumstances. Thus, the colleague in question recently became a grandmother and needed a job that would allow her to provide childcare assistance to her daughter. The research institute where Fahriyya found her job was located close to her home and thus fit this purpose well.
The examples provided here are important for several reasons. First, they demonstrate how formal welfare is made part of informal considerations about access to work and the specifics of the employment contract. The arrangements I discussed in this section challenge the generally assumed relationship between paid work and welfare benefits, where work, or ability to work, determine access to state welfare. Here, we see just the opposite: access to state benefits (Aliya) or welfare needs (Fahriyya's protege) determine access to certain kinds of employment. It is important to note that the reversal of this work–welfare relationship is informal, and depends on the discretion of the management rather than any formal rules. Second, these work-pension arrangements show how the legacies of both formal (pension system) and informal (fictitious reporting) Soviet institutions continue to shape work and welfare practices in post-Soviet Azerbaijan. In constructing these arrangements, bureaucrats and employees do not create something anew, but rather make use of time-tested repertoires of action. Finally, the cases described here shift attention from the individuals who seek to maximize their welfare outcomes to the complex arrangements that take place between public sector employers and individual employees, as well as their families.
Informal practices in post-socialist public educational systems are well known and researched (Morris & Polese, 2014b; Osipian, 2009; Silova & Bray, 2005; Silova et al., 2007; Temple & Petrov, 2004). In particular, corruption, i.e. the practice of informal payments for grades, exams and degrees is a widespread problem in many of these countries (Osipian, 2009; Temple & Petrov, 2004). Scholars have focused on different countries and different aspects of these payments (Morris & Polese, 2014b; Osipian, 2009; Temple & Petrov, 2004). Overall, corruption in education, and especially in higher education has been shown to be detrimental for social cohesion (Silova et al., 2007); in addition, it leads to devaluation of formal credentials as well as production of credentialed but incompetent professionals (Temple & Petrov, 2004). Azerbaijan is a country where corruption in public higher education is especially common: while in Ukraine and Russia it is reported to be possible to graduate without ever paying any informal payments, in Azerbaijan this is considered near to impossible (Temple & Petrov, 2004: 90, author's interviews). General public opinion agrees that Azerbaijan's higher education system is in decline and in a deep crisis, and this refers to all public higher educational institutions and most of private ones regardless of specialization (Temple & Petrov, 2004; author's interviews). In many cases, people report that informal payments are not just an option, but rather that they are actively demanded by instructors.
Yet, despite the proliferation of bribery and the devaluation of credentials, competent professionals continue to emerge from this deeply corrupt educational system. I have interviewed four internationally successful engineers whose only formal professional education was acquired in post-Soviet Azerbaijan. Three of them who had studied in public institutions reported high levels of corruption there and admitted to have sometimes participated in those practices. Nevertheless, several of my interviewees pointed out that graduates of public engineering schools, especially the oldest one, the Oil Academy, show better results than graduates from private universities with reportedly lower levels of corruption. In this article I therefore propose to ask a different kind of question about informality in higher education: ‘how is it possible that competent professionals still emerge from a thoroughly corrupt educational system?’ The answer to this question also involves informal practices that are employed by students, instructors, and other professionals in order to circumvent the deficiencies in the education system, including both formal (underfunding, outdated technology, etc) and informal ones (bribery). The following account by Elmira, a drilling engineer currently working in a transnational engineering company (graduated from Oil Academy in 2008) is illuminating in this regard.
Elmira described her experience with formal education as ‘hell’ due to corruption. According to her estimates, between 30 and 40% of instructors did not just accept informal payments for grades when offered, but extorted them from students by various means, including direct demands, selling high grades prior to exams, giving lower grades or demanding extra work from those who refused to pay. Another 30% of instructors did not demand payments, but accepted them when offered, and only about 30% were not involved in this process. As one of the top students in her class, Elmira struggled for the first two years to study and receive good grades without payments, but then she gave up. Instead, she became a group leader (starosta) and performed a middleperson role for her group, collecting money before the exams and passing it on to instructors. This way, she was freed from the demands from instructors herself, and could concentrate on her studies. However, she found that the education provided in the academy was not sufficient. She used informal connections with peers and instructors to obtain recent literature that was unavailable in the university library; this helped her win a competition for summer internship in a transnational oil company in Baku, which in turn gave her a head start both for her studies and for future employment. After that first internship, she spent her summers working for this transnational company, and eventually was hired full time upon graduation.
Elmira, as well as other engineering students in oil related departments, was also lucky to have access to internships with international companies working in Baku's booming oil industry sector. These companies and their programs for training and career advancement are few of the available examples of more or less transparent formal structures for the young generation of engineers. For those outside of the scope of interests of the transnational oil companies, the options of professional development beyond the basics provided by formal education are limited to self-education and informal learning in the workplace. An example of such learning strategy could be found in the case of Namik, another 2008 graduate, an electrical engineer. Such students usually employ connections (often of their families) to start working informally during their studies, thus complementing outdated theoretical education with practical work experience. Building professional networks, gaining professional ‘respect’, or reputation, and learning from other professionals are crucial for their career development. On the other hand, older engineers, such as Aliya and Nadir, see mentoring the young as one of their main functions. By doing this, they see themselves as compensating for the deficiencies of the formal education system and contributing to the continuity in the transfer of knowledge from one generation to another.
These examples suggest that as corruption becomes widespread, the responsibility for providing education, understood as acquiring knowledge and skills rather than just credentials, is being shifted towards individuals: students, individual instructors, and professional mentors. In this sense, we can no longer speak of ‘system of public education’ as a unified and formalized structure, but rather about educational practices, which are becoming increasingly informalized and individualized. The important issue here is that while individuals resist devaluation of their degrees and credentials, they do not just opt out of the system, nor create collective alternative forms of education, but rather embrace the individualization of this formerly universal social right.
Conclusion
The examples presented here demonstrate that the boundary between formal and informal in Azerbaijan is very fluid and easily penetrable. Formal and informal structures, networks and procedures are closely intertwined, and although separated analytically, are inseparable in practice. In fact, people rarely attempt to separate the two, but rather employ strategies that skillfully combine formal and informal in order to achieve their desired goals such as ‘decent life’, ‘decent old age’ or ‘proper education’. In doing so, they not only try to compensate for deficiencies of formal structures, but rather interact with state actors who are themselves actively involved in reproducing informality. Social protection system on the one hand and public education on the other provide a fertile ground for such combined practices. Unlike the more closely monitored and strictly controlled civil service, in these two spheres the state at the same retains its strong presence as a chief provider of welfare and education, while allowing individual agency.
In terms of the two major changes in the post-socialist welfare provision, namely residualization and individualization of social risks, the impact of informal practices has been ambivalent. While residualization is opposed, individualization has been generally accepted. On the one hand, people resist residualization, and attempt to complement the residual state provision through informal means. This is particularly obvious in education: where students, their families, and committed professionals try to compensate for declining quality of public education through private tutoring, self-education and professional mentoring. Thus, the idea of what education should be is very different from what is really offered, especially in the public sector. At the same time, people have largely accepted that it is their own responsibility to achieve that level of education; the informal practices they engage in are targeted towards individuals and do not exert any pressure on the state to change policy. This tacit agreement between state and society may indicate an emergence of a new post-Soviet social contract in Azerbaijan (Cook, 1993), where the state refrains from enforcing its formal regulations and leaves broad space for informal activities in exchange for society refraining from demands for thorough reform. Thus, while the state no longer provides adequate welfare, it leaves open avenues for achieving these goals at one's own risk. Yet, these avenues are semi-formal in the sense that in order to achieve their goals individuals must not only engage in private activities, but also cooperate with state institutions and bureaucrats. As a result, welfare in Azerbaijan can be characterized not so much by duality of the formal and informal, but rather by interpenetration and hybridity of the two.