“We will have to get used to the chronic labor shortage”
The domestic labor market has turned into a market for job seekers. Now it is no longer the employer, but the applicant who dictates his demands, while unemployment is at an abnormally low level, unprecedented in world history. Today, more than 90% of companies belonging to almost all sectors of the economy experience personnel shortages of varying degrees of severity. The situation is fraught with a lot of risks: this is an acceleration of inflation due to higher wages, a slowdown in GDP growth, and disruption of production plans. We talked about the essence of the phenomenon with Rostislav Kapelyushnikov, chief researcher at IMEMO RAS, deputy head of the Center for Labor Research at the Higher School of Economics.
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— I’ll start from afar: since 1992, the level of general unemployment has been determined in Russia in the same way as everywhere else in the world — in accordance with the criteria of the International Labor Organization. A sample survey of the population is carried out monthly; about 800 thousand respondents are recruited per year. A person is recognized as unemployed if he says three things — that he does not have a job, that he is looking for one and is ready to start it. Next, the results of this survey are statistically processed, and averaged results for the entire country are displayed. Today we have a long series of indicators that reflect a retrospective picture of more than 30 years. In principle, throughout the nineties the level of general unemployment grew, reaching its highest point in the first months of 1999. After which it began to decline at different speeds (sometimes faster, sometimes slower), but during crises it always jumped up, as happens in any “normal” economies.
We can distinguish at least four economic crises: the financial crisis of 2008–2009, the first sanctions crisis of 2014–2015, the coronavirus crisis of 2020, and the second sanctions crisis of 2022. So, the second sanctions crisis is surprising in that there was no jump in unemployment: it continued to decline, reaching today an absolute minimum of 2.8% (registered unemployment is 0.5%). This is a champion indicator not only for the domestic labor market, but also in an intercountry context.
— That in the Russian employment sector the demand for workers significantly exceeds the supply. The main explanation that suggests itself is: the economy is overheated, a lot of money was poured into it, and unemployment has artificially decreased. In the classic scenario, this is a short-term episode, after which both the economy and unemployment return to their usual state, back to normal. In economics, a special term has been coined for this – the natural rate of unemployment; for most countries it is estimated at 3-4%. However, today the imbalance towards demand is becoming a chronic phenomenon in Russia. This is no longer a temporary deviation from the norm: we are talking about a persistently low level of unemployment — for many years to come. If a crisis suddenly hits the Russian economy, unemployment will, of course, go up, but most likely it will be a small increase from a very low level. And when the crisis is over, unemployment will again return to those phenomenally low values that the labor market has been demonstrating for the last couple of years.
— It seems that I am alone in this conclusion. The vast majority of observers associate the rapid growth of vacancies exclusively with the events of 2022 — with mobilization, relocation, as well as with the active injection of budget money into certain sectors of the economy, primarily in the military-industrial complex. To expand production, these industries began to place increased demand for labor. But in fact, the explosive growth of vacancies began earlier — in 2020, and was associated with the beginning of a structural restructuring of the economy under the influence of the pandemic. As a result, we have two counter processes. On the one hand, the supply of labor has become shallow, while demand, on the contrary, has increased as a result of government actions. Visible manifestations of this discrepancy are record low unemployment and unprecedentedly high vacancy rates. Now it is close to 7%, whereas before the beginning of the 2020s it did not exceed 3-3.5%. In recent years, when the country experienced the shocks of the coronavirus crisis and the second sanctions crisis, the rate of available jobs increased by 2-2.5 times. Instead of falling. In this situation, people no longer held on to their jobs with a stranglehold, but became much more willing to migrate from one enterprise to another. By the way, the covid pandemic has had a similar impact on the labor markets of many other countries. For example, in the US the vacancy rate peaked at 7.2%.
— If we talk about dynamics, it is impossible to single out just one hotspot: since 2020, the increase in the number of vacancies has covered absolutely all industries. The personnel situation has become much more tense everywhere than it was five to seven years ago. But if we compare the indicators for different sectors as of today, we will see: in some places the “deficit” is very pronounced, and in others it is much weaker. From a sectoral perspective, the main surprise is that the unmet demand for labor is felt more in the service sector than in industry, which, on the contrary, has a lower vacancy rate. This is a rather unusual thing that is not talked about: many people see industry as the focus of the problems caused by the shortage of workers. Although in reality it is not she who is in the most vulnerable position today, but certain sectors of the service sector. For example, hotel and restaurant business, car service, chain supermarkets. At the same time, the level of vacancies in education is relatively low.
— This should be dealt with very carefully. I have my own calculation algorithms: I use monthly (not annual) official indicators of the dynamics of real wages and free them from seasonality. It is clear that in December of every year, salaries always jump by 25-30% (13th salary), and in January they fall due to the Christmas holidays. In order to form a more or less plausible picture of the dynamics, it is necessary to exclude all such monthly fluctuations. It turned out that in the period from the second quarter of 2020 until approximately the second quarter of 2023, real wages actually stood still. Small fluctuations up and down, caused by various moments of crisis, occurred close to the level that was reached in March 2020, when the pandemic arrived in Russia.
And at the beginning of 2023, we saw a sharp, unconditional break from this plateau. According to official annual data, the increase in real wages last year amounted to a completely unimaginable 7.8% for the past few years. If the dynamics of real wages remains as active, then it is possible that the overhang of vacancies will slowly begin to subside.
< p>— In general, in the economy, the unmet demand for manual workers today is higher (both qualified and unskilled) than for intellectual workers — mid- and high-skilled specialists, office workers, and traders. Moreover, traders in this case are an exception: they are not engaged in physical labor, but at the same time they are extremely in demand. As for the picture for individual professions, it is extremely heterogeneous. For example, food preparation assistants (the same workers at fast food outlets) are among the most scarce professions and at the same time belong to the group of unskilled workers. Both among the leaders in demand and among outsiders, you will find specialties of any kind and level of training — white-collar and blue-collar, qualified and unskilled.
— On the one hand, workers’ salaries are highly likely to steadily increase. Many enterprises and businesses will have to either reduce production volumes or leave the market altogether, since they will not be able to afford such expensive labor. In this case, the number of vacancies will decrease somewhat. However, it is unlikely to reach the low values observed before the early 2020s. This is what happened last year in the United States: the canopy decreased from 7.2% to 5.7%.
— Today this is the only remaining reserve through which the Russian workforce can be replenished. All other sources are almost completely exhausted, there is nowhere to take people from. However, the authorities (federal and local) and the population are doing — for obvious reasons — the maximum possible to narrow this source, if not completely block it. By limiting the employment of migrants and demonstrating a high level of xenophobia, society is depriving the Russian economy of its last reserve of labor force replenishment. This, of course, does not mean that the process of labor migration itself is without costs and brings complete benefits. However, the employment sector needs foreign workers. Moreover, these people, under any circumstances, are not able to compensate for the critical losses that are expected in the next 15-20 years for purely demographic reasons.
— Numerous older generations will leave the labor market, and a small number of younger generations will enter it. Population decline and aging – these two processes run parallel courses and in the future lead to a shallower labor market. Firstly, there are fewer and fewer people who work and pay contributions to social funds, and more and more people who need to pay pensions. This is a huge burden on the economy and budget. Sooner or later, all countries without exception will face this universal problem. Since existing models of pension systems are a time bomb, governments are trying to delay the inevitable moment of explosion as much as possible. Secondly, population aging means fewer youth cohorts, and youth are the main source of innovation. The fewer young people you have, the fewer potential innovators, and the lower labor productivity and economic growth rates.
2017 2023 Difference, p.p.
Total 2.7 6.9 +4.2
Agriculture 2.1 8.6 +6.5
Mining 1.4 4.9 +3.5
Manufacturing industries 1.5 6.5 +5, ConstructionTransportation and storage 3.7 3.0 6.2 + 2.2 Administrative activities 4.8 14.4 +9.6
Public administration 5.8 12.1 +6.3
Education 1.0 2.6 +1.5< /p>
Healthcare 3.8 5.9 +2.1
Culture, sports, entertainment 2.3 5.4 +3.1
Source: Rosstat and calculations by Kapelyushnikov R.I.