Bloomberg: Russia Faces New Problem Because Of War

An abnormal situation arose in the country.

The war against Ukraine, the mobilization and the massive outflow of Russians abroad have created an anomalous situation in the Russian labor market — unemployment is at multi-year lows, and companies complain about a shortage of qualified personnel. Experts note that such trends will contribute to new problems for the Russian economy, which are unlikely to be solved promptly, writes Bloomberg.

The publication notes that about a third of the sectors of the Russian economy at the end of 2022 recorded a decrease in the number of workers, but overall employment, as the agency notes, on the contrary, increased. The fact is that Rosstat, to whose data the agency refers, considers those who went to military service to be employed, and their number in 2022 increased by about 400 thousand people, although the partial mobilization, which Vladimir Putin spoke about, assumed the conscription of 300 thousand.

Bloomberg Economics economist Alexander Isakov is confident that the number of people employed in the army in 2022 exceeded half a million, since Rosstat does not take into account citizens who went to war as part of private military structures, for example, Wagner PMCs, as well as volunteers who do not fall into official statistics. The outflow of able-bodied men into the army has had a negative impact on the labor market, which has already begun to experience a shortage of qualified personnel. Another reason for the shortage is the mass exodus of Russians abroad. The number of those who left Russia is estimated at least 500 thousand people.

Moreover, the agency predicts that in 2023 the Russian army will be increased by about 400,000 more people who will leave the labor market and only exacerbate the shortage of personnel. Another factor of pressure on the labor market is the goal of the country's leadership to increase the size of the army from the current 1.15 million people to 1.5 million by 2026. At the end of January, unemployment in the country dropped to 3.6%, which is a record low in the history of observations. At the same time, the shortage of personnel is already hurting the economy — companies are forced to compete for employees in order to attract qualified personnel.

“Low unemployment, combined with a shortage of personnel, slows down the processes of structural transformation of the economy. There are either no people, or they are afraid to change jobs in the current circumstances,” says Natalya Danina, head of the analytical department of HeadHunter.

In previous crises, the unemployment rate rose by an average of 2.4%, but this is not observed now. The Russian authorities flaunt these figures as economic achievements and evidence of stability, but even the Bank of Russia has previously warned that the recovery of the economy will be limited by difficulties in the labor market, the agency notes. The positive moment on the labor market was seen only in the public sector, close to the military industry and construction, where increased public investment led to an increase in incomes and employment.