Russia is facing its biggest worker shortage in decades

Vladimir Putin is facing the largest worker shortage Russia has seen in decades and the crisis could cripple the country’s economy as well as its ability to wage war in Ukraine. 

Over the last three years, Russia’s population has lost two million more people than the country was expecting according to information shared by Britain’s Ministry of Defence. 

The Covid-19 Pandemic and Russia’s invasion of Ukraine were cited as the two main factors by British Intelligence that led to Moscow’s worst labor shortage since 1998. 

The war in particular seems to have wreaked havoc on Russia’s working-age population and the British Ministry of Defence noted that 1.3 million people left the country in 2022. 

Most of those who fled Russia were the country’s “younger and well-educated people” who worked in what the Ministry of Defence called the country’s “high-value industries.” 

British Intelligence cited figures from Russia’s Ministry of Communication which said roughly 10% of the country’s information technology workforce left and did not return. 

The Ministry of Defense concluded that mobilization, and the emigration related to it, combined with Russia’s aging and shrinking population were limiting its labor supply. 

“This will likely lead to a reduction in the potential growth of the Russian economy and risks stoking inflation,” the British Intelligence update added in a dire warning for Russia. 

Things haven’t been going well for the Russian economy since Putin invaded Ukraine but the situation also hasn’t gone as poorly as some economists predicted in 2022. 

In April, the International Monetary Fund projected that the Russian economy was on track to grow by a meager 0.3% in 2023 after contracting 2.2% in 2022 as per Reuters.

“That amounts to a quasi-stagnation but still looks too positive,” wrote Pierre Briancon of Reuters, who added that the price of oil was likely the reason for the optimistic outlook. 

According to Newsweek, Russia’s The Kommersant national newspaper noted nearly all industries inside Russia were struggling to find workers with some worse off than others. 

Industries like manufacturing, industrial enterprises, water supply, and mining were struggling the most according to Newsweek’s report while car sales, wholesaler traders, and the service sector were industries that were struggling the least. 

“You could say that this labor shortage and skill set shortage is going to be as damaging for Russia's future economic growth prospects as the sanctions ban on technology," Macro Advisory Ltd’s Chief Executive Officer Chris Weafer explained to Newsweek. 

Weafer has been studying the Russian economy since 1998 according to Newsweek and he said that Russia has been suffering from labor pool problems for “quite some time” but that recent events have accelerated the problem for Russian officials. 

"That exodus plus the demands of the military have brought what was an absolutely inevitable crisis forward by several years," Weafer said. 

How the current labor shortage will play out in Russia has yet to be seen but it is likely that a new round of mobilization could spark a second major emigration from the country and further deepen a crisis that could already prove disastrous for Russia.