MAGNITOGORSK, U.S.S.R. -- This is, above all, a company town and, as even Mayor Mikhail Lysenko -- a former steelworker -- happily admits, its master is the giant steel plant, or kombinat.
Of the city's 200,000 workers, 150,000 are employed in metalworking, 62,000 of them at the kombinat. Even the trolley lines and the city's heating plant belong to the kombinat, which also provides housing, clinics and sport facilities for its workers.
In 1985, the plant was put on a "self-financing" experiment, which as of next January will be applied nationally. In theory, the plant should become self-sufficient, paying for its own costs, keeping its own profits and deciding itself how to distribute them.
In practice, the kombinat is still probing the limits of its new independence from its overlords, the Ministry of Heavy Metallurgy and Gosplan, the state planning committee. Already a debate has sprung up over how to divide profits from production that is above that planned by the state. The ministry wants half; the plant is willing to part with 25 percent.
"We need a strict division of rights and responsibilities between ourselves and the ministry," said the kombinat's chief economist, Yuri Levin, "so that the state gets its share and we get ours."
The plant now is paying 2.6 billion rubles -- about one-half of its profits for the last five years -- for a massive reconstruction project designed to replace the old-fashioned, polluting open hearth blast furnaces with a modern conveyor-belt system. With what is left, the plant pays for new housing and other social amenities. "For that, we still don't have enough," Levin said.
The problems at the kombinat had become apparent during the last five-year plan, the 11th in Soviet history. While the plant's productivity had risen 28 percent between 1971 and 1976, it went up only 3 percent between 1981 and 1986.
Under the new self-financing conditions, Magnitogorsk appears to have turned the corner. In 1986, its productivity grew 3 percent -- as much in one year as had been achieved in the previous five. According to Levin, the plant's goal now is to improve the quality of steel and bring in higher prices.
The new conditions have also put greater emphasis on timely deliveries on contracts, a chronic problem in Soviet industry. So far this year, Magnitogorsk has had to pay 3 million rubles in fines for failing to meet delivery schedules.
One of the main aspects of the reform was to eliminate "wage-leveling," a system that had dampened initiative and productivity on the shop floor. Now, after several experiments, the kombinat has instituted a new salary system under which a good worker can earn up to 200 rubles a month more than poor workers. The average pay is 256 rubles a month, but for skilled workers it is closer to 500.
"The experiment gave us courage to try this out," said Levin. "We could take bold risks."
The experimenting still goes on. Recently the plant was approached by a group of 900 workers who want to go onto a contract system. The contract, which provides them with necessary materials, obliges them to increase production from 260,000 to 300,000 rolls of steel. In return, they will distribute the increased earnings among themselves. By Levin's estimate the system will increase productivity by 50 percent, and salaries by 11 percent.
Over time, the new conditions and the new pressures on the Magnitogorsk steel works are going to lead to fundamental changes. As the aging plant is modernized and operations go into automated systems, as brigades increase productivity and trim the size of their crews, the number of workers needed here is going to decrease -- by 25 percent by the year 2000, according to Levin's predictions.
Nationally, the same phenomenon is likely to occur as plants and factories across the country keep a closer watch on profits and begin to shed excess workers. Soviet economists, vigorously stressing that this will be done without unemployment, have predicted that the number of dislocated workers could reach 16 million to 20 million. How these workers will be relocated, and how they react, is one of the major unanswered questions of Gorbachev's economic reforms.
In the short term, the new system here has slowed average yearly pay raises: In the last five-year plan, to the managers' current regret, wages went up an average of 6 percent, outstripping the growth in productivity. Now, Levin says, the two are irrevocably linked.