Russia’s army and its weapons factories are sucking in a growing number of workers as Moscow braces for a long war in Ukraine, leaving civilian sectors with painful labour shortages and destabilising the broader economy.
“The labour market is extremely tight,” the head of a big Russian mining company told the Financial Times. “It is not just the mobilisation, or people fleeing Russia. The main problem is arms production,” the person said.
The labour shortages have helped expose weaknesses in the Russian economy that contradict the rosy picture painted by the Kremlin.
President Vladimir Putin has repeatedly pointed to Russia’s rising gross domestic product as proof of its economic health and the failure of either war or western sanctions to inflict serious damage. But economists say the figures are flattered by big increases in defence spending and conceal structural problems that could be destabilising in the longer term.
Russia is not alone among industrialised economies in having a very tight labour market, and the fact that its population is ageing and shrinking only worsens the shortages.
But the war makes Russia’s crisis particularly severe. Last year, 300,000 men were suddenly mobilised for fighting after Ukraine had stopped the Russian invasion in its tracks. Hundreds of thousands more, most of them educated young men, fled abroad to avoid conscription, an exodus that badly hit IT and other sectors reliant on highly skilled labour.
Moscow’s decision to move the economy on to a war footing in anticipation of a protracted conflict has aggravated the situation, according to economists and Russian business people. With defence companies working at full pelt to supply the armed forces, civilian industries are struggling to source workers.
“The state is diverting its financial resources to the defence sector, and the people are following,” said Ruben Enikolopov, a research professor with Pompeu Fabra University (UPF) in Barcelona.
Workers in the defence sector can be exempt from military service, making jobs in such companies particularly attractive for men who want to avoid being drafted.
Russia’s unemployment rate has fallen to 3 per cent, its lowest level in 30 years, leaving businesses struggling to find workers for the labour-intensive industries that dominate the country’s economy.
The precise extent of the war-related increases in production and of the number of defence sector workers is difficult to estimate from the available data, but “we have seen a 30-40 per cent surge in [the purchasing managers’ index] in military-related industries since January 2023”, said Pavel Luzin, a non-resident senior fellow at the Center for European Policy Analysis.
Last month, the Russian government said it aimed to spend Rbs10.8tn ($108bn), or about 6 per cent of GDP, on defence next year, three times the amount allocated in 2021, the last year before the invasion, and 70 per cent more than was originally planned for this year. Independent analysts say the real numbers are probably even higher if estimates of classified expenditure are included.
One illustration of the shortage of workers can be found in the increasing length of the working week in Russia. It has reached its longest levels in a decade, analysts at the FinExpertiza consultancy wrote. Many factories have started operating in three shifts, a reminder of Soviet times.
“The Russian labour market and the whole economy is working at its limit, it has been squeezed to its maximum capacity and it simply cannot produce more,” UPF’s Enikolopov said.
In the Nizhny Novgorod region, for example, authorities report an unprecedented labour shortage, the local edition of the Kommersant newspaper reported. The number of registered unemployed fell 27 per cent in September and there are 17,000 vacancies in manufacturing in the region. Of those, 7,500 are in defence industries and demand is growing, with 1,600 positions added in the past year.
Putin acknowledged the problem this summer. “The labour shortage is beginning to have some effect on small and medium-sized enterprises, and not in the best way,” he said during a meeting with manufacturing bosses in the Kremlin.
A chorus of federal officials chimed in after Putin. In September, economy minister Maxim Reshetnikov described labour shortages as “the biggest internal risk for the Russian economy”.
Oleg Deripaska, the metals and mining tycoon, agreed that defence companies were attracting workers from other sectors. “State capitalism has money, capital and orders. They have money, they will recruit, they will compete,” he told the FT.
The underlying problem, however, was a lack of investment in automation and technology, Deripaska said, describing the labour shortages as a temporary phenomenon. “Don’t [believe] that it’s because of war . . . No. It’s the lack of investment.”
The brain drain triggered by the war has been particularly acute in IT. Many of Russia’s top coders and programmers fled the country, and even special exemptions from military service introduced for IT workers have not reversed the flow.
Russia is short of 500,000-700,000 IT workers, the minister for digital development said in August, while one manager in the telecoms sector said senior professionals were “a rare commodity”. Asked about the tight labour market in general, he said it was a “shitshow, yes”.
The owner of a Russian employment agency said there were lots of IT job applicants but most of them were juniors who did not qualify for the vacancies. “It’s worst with cyber security specialists: they’re suddenly in insane demand in all government structures,” the person said. “But you can’t get them anywhere.”
Even weapons makers are feeling the pinch, despite luring staff from other sectors. Officials say the defence industry is short of 400,000 workers.
Rostec, the vast state-owned umbrella company that encompasses the country’s main arms producers and employs nearly 600,000 people, is looking for new recruits. “We are short of people, we need to hire around 25-30,000,” Rostec chief Sergei Chemezov said in an interview last week with the government’s news channel Russia 24.
This admission followed dozens of local news reports — reminiscent of the Soviet era — about workers shifting to weapons factories: “Cooks and cashiers are being put to work on the military factory floor,” one read.
Another report quoted the human resources director of a military aviation plant in Siberia who needed to hire 3,000 more staff. “Having higher education is probably a bit irrelevant now . . . Honestly, you have two hands, two legs, eyes and ears? You’re in.”
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