The Russian economy is slowing down, and some of its sectors are already shrinking. At the same time, the hunger for labor is not decreasing. The gap between the demand and supply of workers remains quite large.
The emigration of opponents of the war, mobilization and the mass recruitment of people under contract into the army further complicate demographic problems. The working-age population in Russia is not growing anyway.
The fact that unemployment is at a record low is not a reason for optimism. In the current conditions, the economy cannot develop sustainably, and the authorities are even forced to admit it.
Minimal unemployment, but a record shortage of personnel
At the beginning of the year, the unemployment rate in Russia increased slightly - from a record low of 2.3% in the last three months of 2024, to 2.4%. But at the end of the first quarter of 2025, it returned to its previous level, according to Rosstat data. However, even this minimal increase of 0.1%, which is within the range of statistical error, does not change the situation - the labor shortage remains extremely large.
At a normal level of unemployment, which, according to the adviser to the chairman of the Central Bank, Kirill Tremasov, should be between 3% and 4% for Russia, the country's economy is able to achieve its potentially possible GDP - This is the theory of Milton Friedman and Edmund Phelps, for which they received the Nobel Prize.
And when unemployment is abnormally low, as it is at the moment, the economy begins to overheat - employers are forced to compete on wage levels. As DW has already written, such a competition is already underway in Russia - in the military industry. In wartime, defense industry enterprises urgently need additional labor, which is why they began to attract people from civilian sectors of production, where there is also a shortage of personnel - due to mobilization and anti-war emigration. According to some estimates, in the first two years of the war against Ukraine alone, the labor market had at least 1 million fewer people than usual.
The authorities in Russia, including Putin, have praised low unemployment as an achievement of their economic policy, but recently even they have acknowledged that there is a problem. There is not enough labor in the country, according to official data, unemployment is at a record low, but it is practically non-existent. And this is already becoming one of the factors limiting economic growth. The best way out is to increase technological independence and labor productivity," Putin said at the end of last year.
War, emigration and demography
Even before the war with Ukraine, the Russian labor market was in a difficult situation. The country's population is aging. According to the demographic forecast of Rosstat, the number of citizens of working age will remain practically the same in the coming years. At the same time, the share of those who have not reached working age will gradually decrease, i.e. fewer and fewer new workers will enter the market.
The end of the war in Ukraine may to some extent alleviate the problem with personnel, but not completely solve it. According to the UK Ministry of Defence, in April 2025 alone, the Russian army lost over 36,000 people - killed and wounded in Ukraine. At the beginning of the year, in January, the losses were even greater: over 48,000 people were killed or wounded.
At the same time, more and more new contract soldiers are going to the front - their number amounts to several tens of thousands of people per month. As Putin said at a meeting with the organization "Business Russia": "They come to us alone 50-60,000 people per month" (to conclude a contract with the Ministry of Defence - ed.). If Putin is not exaggerating and if this rate of recruitment continues throughout the year, this would mean that in a year the war could consume another 0.8% of the country's working-age population.
Why labor productivity is not growing
In the coming years, the labor shortage will be exacerbated by the shortage of qualified personnel in specific areas, predicts Dmitry Sergienkov, chairman of the Russian recruitment service hh.ru. "We do not expect the labor market to normalize and operate profitably anytime soon. Rather, it is the opposite - in five years there will be a real shortage of nearly 4 million people, and almost 90% of these 4 million will be medium- and highly qualified workers and specialists," he says.
In this sense, it is difficult to dispute Putin's claim that labor productivity needs to be increased. But the problem is that in Russia it is almost not increasing. In 2022, according to Rosstat, labor productivity fell by 3.6%. In 2023, there was an increase - but only by 1.7%. In other words, not even half of the previous decrease was compensated. There are no data for 2024 yet, but it is known that the Ministry of Economic Development expected growth of only 1.6%. If this forecast turns out to be correct, it will turn out that in 2024 labor productivity did not even reach the pre-war level.
Labor productivity in Russia should grow significantly faster - otherwise the problems will only increase. Like the hh.ru platform, the consulting company "Yakov and Partners" predicts that if productivity does not increase, by 2030 the shortage of personnel could reach 4 million people. To avoid such a development, growth would have to average about 2.4% per year. But such rates did not exist even before the war, when the technological development of companies was not hindered by the imposed international sanctions.
Author: Oleg Khokhlov