After mass conscription in Russia, there are not enough workers to fill vacancies. Photo: AP Photo/Alexander Zemlyanichenko
Vladimir Putin's problems are growing. The Russian president is still reeling from a mutiny launched this month by the Wagner mercenary group.
The Kremlin is burning through its rainy day fund to finance an invasion of Ukraine, and the country has been forced to sell oil at a discount. such as India and China.
But another problem is becoming one of the biggest threats facing the Russian economy. After the mass conscription and the exodus of talented Russians, frightened by the consequences of the war, there were simply not enough workers to fill the existing jobs.
Goldman Sachs describes this as «the toughest constraint on the Russian economy,» even ahead of sanctions-related restrictions on capital or technology. There are more than two vacancies for every Russian worker, so the job market is twice as dense as in the UK, where wages have skyrocketed.
Some workers have fled. The rest died on the front line. Many are still fighting. This has caused companies to «scream» about a lack of young people to fill vacancies, one economist said. And this is a problem that even the head of the country's central bank has warned that it will provoke inflation.
0307 Labor shortage is hurting the economy
“Whatever happens with the war, the consequences of the reduction of the labor force for the Russian economy are extremely negative,” says Liam Peach of Capital Economics.
Putin, who called Russia's demographic problem one of the few things that does not give him sleep at night openly talks about it. In a typical 13-minute rant before a meeting with top Kremlin officials, he acknowledged that the country's top leadership constantly discusses the «lack of staff.» />The shortage of skilled workers is one of Putin's biggest challenges, along with sanctions and oil rebates. Photo: Gavriil Grigorov/Pool Sputnik labor force after he invaded Ukraine as economic activity waned.
In an effort to retain their best talent, many employers have asked workers to shorten their working hours. The bosses were happy because they kept skilled personnel on their books, and the workers were happy because at least they had money in the bank during the initial downturn.
But experts say the policy helped fuel the current crisis, with an acute shortage in industries where they are urgently needed, turning into a chronic ailment.
“Now the situation is fundamentally different,” said the President of Russia. “There are simply not enough workers in many areas.”
Some are unlikely to ever return. The Russian Ministry of Communications admitted that about 10% of its IT staff left the country in 2022 and never returned. Hundreds of thousands of Russia's brightest and best professionals have followed suit.
The problems facing the Russian economy were revealed in a report released by the central bank earlier this year, which warned that about half of companies were facing difficulties deficit.
Engineers, machinists, welders and builders remain the most in demand. Enticed by the Kremlin's promises of higher wages, engineers and construction workers living near the occupied territories in southern Ukraine have been enlisted to rebuild critical infrastructure destroyed during the war. And although the central bank claims that only 6% of companies blame the mobilization campaign last fall for the lack of workers, many companies are changing production to support the war economy.
The blue-collar workers, accustomed to the manufacture of automobiles, turned to the manufacture of weapons. After all, money matters. Wage increases in manufacturing, from petrochemicals to food, are currently averaging around 20%.
Welders — one of the groups most in demand workers, especially in the occupied territories of Ukraine. Photo: Andrey Rudakov/Bloomberg
According to some Russian businessmen, these estimates are modest. “Sometimes they have to pay twice as much,” says one executive who recently fled the country.
The minimum wage will also rise by 18.5 per cent next year to almost 20,000 rubles (£200). ) per month, which is 10 percent more than planned.
This threatens wage growth. — A price spiral in an already weakening economy. Official data shows inflation is now just 2.5 percent, held back by cheap energy, and unemployment is at an all-time low of 3.2 percent, which Peach says is a reflection of a shrinking workforce, not a booming country. .
“Usually Russia has struggled to achieve high wage growth,” says Peach. “But wage growth is currently in double digits, the fastest steady pace in about a decade.”
2,706 rubles at a 15-month low.
Luke Jones, who worked as a recruitment consultant in Russia. For more than two decades, the country's economic plight has been aggravated by a culture that values face-to-face communication and despises working from home.
“During the pandemic, very few Russian companies allowed people to work from home because they were not expected to do anything. not going to do it,” he says. «No trust».
Some relented in the face of a labor crisis. At the St. Petersburg Economic Forum this month, HR directors talked about increasing remote work and automation. Manufacturing companies have said they are increasingly hiring women and older workers in jobs traditionally held by working-age men.
Jones, who moved to India after the war, adds that some Russians are not even tempted by higher wages. , because many of them are tied to the place of their birth.
“Russians are not very mobile,” he says. “So while some people will cross the country looking for work, Russians tend not to, because many usually have an apartment inherited from the former Soviet government. So if they need to move, they have to rent. That's one of the reasons why so many migrants come from the countries of the former USSR.»
But, as the central bank emphasizes, even a 30% increase in internal migration in on an annualized basis was “not enough to make up for the shortage of personnel in the regions.”
0307 The demographic crisis deepens
The Kremlin has tried other tactics to attract people, including making permanent residence easier.
“Obtaining Russian citizenship has become much easier,” Jones says.
Nabiullina, managing director Russia's central bank signaled that a shortage of workers and the accompanying inflationary threat meant policymakers were unlikely to be able to keep interest rates at 7.5% for long. They peaked at 20% after his invasion of Ukraine.
“Pro-inflationary risks in the labor market are increasing,” she said this month. “Substantial labor shortages could cause productivity growth to lag real wage growth.”
Capital Economics believes that the economy will continue to suffer from labor shortages even with a population of 145 million.
Putin called in 300,000 reservists last fall, a major escalation in a waning invasion. Peach says it will be difficult for him to do the same again.
“I don't think the Russian economy can withstand another mobilization. There are simply no resources,” he says.
“The Russian economy has been experiencing quite serious demographic problems for some time now. And if you just take another 300,000 people out of the workforce, I think you'll end up with an economy that is really struggling with labor shortages and inflation. And the central bank will be forced to respond with much higher interest rates.”
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