Analysts expect staff shortages and wage surpluses until 2030

A fresh review of the Russian labor market by the consulting company Yakov and Partners records major changes in recent years, including an accelerated growth in the shortage of workers who can be quickly introduced into expanding domestic production, and an increase in wages in the regions that is faster than the national rate. It is expected that a deficit of 2–4 million employees will remain in the Russian Federation until at least 2030. The rise in labor costs in the Russian Federation will likely significantly limit the already low attractiveness of Russian companies for foreign investment, as has been happening in China in recent years – however, caused by the departure of foreign suppliers due to the Russian military operation in Ukraine, the commodity shortage will shift the economy to relying on domestic demand according to the same Chinese model.

A review of the Russian labor market published today by the consulting company Yakov and Partners describes relatively long trends in employment over the past five years (since 2018) and a forecast for their development until 2030, the most important of which is the expectation of a gradual increase in the labor shortage to a value of 2–4 million people, of which 90% are qualified employees who support the work. At the same time, “data on vacancies, offered salaries and unemployment for 2018–2023 indicate that a labor shortage has already arrived,” the authors note: over five years, the number of vacancies published by Russian employers has grown 1.8 times, and the process is accelerating—August set a record for this indicator (1.2 million), and leading data indicate that the trend will continue in the fall of 2023 (see “Kommersant” dated December 1). The need for workers grew most rapidly in the Central, Ural and Far Eastern Federal Districts (108, 96% and 94% compared to 2018).

Competition for workers is also fueled by rising wages: Over the same five years, median wages offered doubled, outpacing “GDP, inflation and CPI growth over the same period,” the study says.

At the same time, a trend towards the equalization of wages on a federal scale was also identified – while the growth rate of wages in individual regions was 85–114%, in Moscow they amounted to 51%, which reduced the gap in the maximum offered rates from almost three to two times. In terms of industry, competition for workers is concentrated in construction and industry, where the number of vacancies has increased by 2.1 and 2.4 times, and salary offers by 2.6 and 2.1 times, respectively. A separate story is the growing competition for employees who are ready to start working right away. “Offered salaries for specialists with three years of experience have increased by 25% more than for specialists without experience,” analysts note. In industry and construction, such demand is even higher: the increase in offered salaries for young employees with experience there was 2.5 and 3 times, respectively. We note, however, that earlier Kommersant’s interlocutors noted that the demand for qualified labor has not yet caused a noticeable increase in the salaries offered to employees without experience (see “Kommersant” dated November 13), however, attempts at a corporate solution to the problem of obtaining and confirming such experience by new employees entering the market are also recorded (see “Kommersant” dated December 2).

Analysts explain the forecast of a future increase in the labor shortage by a combination of demographic and economic factors, estimating it at 2–4 million people on the horizon in 2030 and noting that “up to 90% of the labor shortage will be among semi-skilled workers.”

At the same time, covering the deficit will require, according to Yakov and Partners, an increase in labor productivity by 2.4% per year, which, in turn, should be ensured by more intensive measures to increase it: the actual increase in the indicator over the past five years was half as much necessary. The only industry in which the authors of the review see a reserve for increasing output per employee through digitalization of the sector is the agro-industrial complex, the depth of penetration of new trends into which is still low. However, as Kommersant noted earlier, other industries are also vying for agricultural personnel, which is why the village will have to retain them by developing social programs in the village (see “Kommersant” dated July 4).

One of the general economic consequences of the picture observed in the labor market due to the increase in wages outpacing output growth will be an increase in the share of the wage fund in GDP, which may push the Russian Federation to repeat the Chinese path of economic transformation based on the domestic market and demand. Let us recall that the rapid growth of household incomes over the past decades has gradually deprived China of its status as a “country of cheap labor” and caused a shift in the interest of foreign investors to create new industries towards the economies of India and Bangladesh. However, in the Russian Federation the volume of unsatisfied domestic demand after the departure of foreign suppliers with the start of the military operation in Ukraine remains high (in China the authorities have to stimulate it), and one cannot count on a new influx of interest in the Russian economy from investors from developed countries until 2030.

Oleg Sapozhkov