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The labor market has become more comfortable: what a record drop in unemployment in Russia has to do with it

Photo by Michael Parulava on Unsplash

The situation on the Russian labor market continues to improve gradually. This was revealed by Deputy Prime Minister Tatyana Golikova on Monday, March 27.

According to her, over the past week the number of workers on idle time dropped by 10 thousand to 33 thousand. In turn, the number of part-time workers decreased to 41 thousand.

“The number of unemployed registered in the employment centers decreased by another 7 thousand for a week. The number of vacancies in employment centers is 1.6 million, which exceeds the number of unemployed almost three times and the level of registered unemployment is 0.7%,” said Golikova.

As it follows from the government materials, today there are about 540 thousand unemployed Russians, officially registered at employment centers. For comparison, a year ago the value was about 665 thousand, and in March 2021 – 1.75 million, according to the Federal State Statistics Service.

Authorities attribute the observed decrease to measures previously taken to support the labor market. This refers, for example, to the organization of public and temporary work, as well as measures to encourage employers to hire certain categories of citizens.

“We have concluded contracts for participation in the temporary and paid public works for 32 thousand people and already 21 thousand people have started working. More than 8 thousand employers for 55 thousand jobs have already applied for participation. According to the results 6.6 thousand people were employed, which is 1.6 thousand more than two weeks ago,” – said the Cabinet.

As Rosstat experts calculated by the methodology of the International Labor Organization, in January 2023, there were about 2.7 million unemployed people in Russia. We are talking about 3.6% of the working-age population, which was the lowest indicator for the entire post-Soviet period. Even before the coronavirus pandemic, it was 4.7%.

The country’s leadership managed to achieve a record drop in unemployment even against the backdrop of unprecedented external pressure, as President Vladimir Putin said earlier. According to him, the West tried to “squeeze Russia’s economy” with its sanctions in order, among other things, to hit the population’s incomes and “make its citizens suffer. However, in the end, this calculus did not come true, the head of state stressed.

“The Russian economy and the system of government proved to be much stronger than it was believed in the West… We did not let the labor market sag, on the contrary, we managed to reduce unemployment in modern conditions. Today – amid such great difficulties on all sides – our labor market has become more comfortable than it was before,” Putin noted in his message to the Federal Assembly on February 21.

In addition to government programs to support employment, the Western sanctions themselves have partly contributed to the decline in unemployment. Svetlana Bessarab, a member of the State Duma Committee on Labor, Social Policy, and Veterans Affairs, expressed this view in an interview with .

The deputy explained that after a number of unfriendly countries decided to stop supplying Moscow with certain goods and components, domestic production in Russia intensified. As a result, companies began to hire more employees.

“Earlier we simply did not produce some products, but now, due to the policy of import substitution, production is growing and the need for jobs is also increasing. I think this trend will continue as we increase our own production capacity,” Bessarab added.

According to S&P Global, in February 2023 the composite business activity index (PMI) in the Russian manufacturing and services sector rose from January’s 49.7 to 53.1 points. The last time such a high index could be observed was in June 2021.

It should be noted that the indicator reflects the real state of a particular industry. The value above 50 points indicates a favorable economic situation, while below 50 points – stagnation of the sector.

“The recovery of business activity is also reflected in the labor market. Real wages continue to rise across a wide range of industries with unemployment historically minimal. Underemployment continues to decline and demand for workers in a wide range of professions is increasing,” said Elvira Nabiullina, head of the Central Bank of Russia, during a press conference on March 17.

At the same time, according to the Central Bank, against the background of the effects of partial mobilization and the continuing growth in corporate demand for labor in many industries, labor shortages are intensifying today. Under these conditions, unemployment in Russia is likely to decline further, according to Andrei Klepach, Chief Economist at VEB.RF.

“In terms of labor resources, unemployment (projected in 2023. – ) is minuscule – 3.5-3.6%. I think it’s still going to go down this year as people get involved in the war effort and the construction that’s going on in the four new entities. There is a labor deficit and it will increase,” TASS quoted Klepach as saying.

According to the analytical service of audit and consulting network FinExpertiza, if at the end of 2021 there was an average of 2.1 vacancies per unemployed in Russia, at the end of 2022, the value increased to 2.5. This figure was the highest in the last 17 years.

“It is worth noting that most companies have solved the issues of staffing shortages at this point. Nevertheless, the problem is still quite acute in labor-deficient sectors. These are, for example, light industry, machine building, food production and military-industrial complex,” Olga Lebedinskaya, associate professor of statistics at Plekhanov Russian University of Economics, said in a conversation with .

In her opinion, the shortage of personnel observed in a number of industries may lead to a more robust growth in wages. In an interview with , Georgy Ostapkovich, director of the Center for Conjunctural Research at the Institute of Statistical Studies and Knowledge Economy at the National Research University Higher School of Economics, expressed a similar point of view.

According to him, in the face of growing domestic competition, some companies may indeed begin to offer more favorable financial terms for qualified employees. At the same time, in order to fight the labor shortage the country’s leadership needs to be more active in training the necessary personnel.

“The fact is that we have a lot of ordinary workers, but we are short of highly qualified personnel. This is especially true in science-intensive fields, where previously we mainly relied on foreign partners. Investment in human capital is important now. The authorities need to decide what economy will be in the country in the coming years, and under these demands to prepare new professionals, as well as retrain people from other spheres,” – concluded Ostapkovich.

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