Russia has no labor force deficit

There is a wide-spread point of view among experts that Russia is facing labor force deficit. In particular, Sergei Aleksashenko, Director of Macroeconomic Research at Higher School of Economics, National Research University, expressed such a view in his interview to Ekho Moskvy (Echo of Moscow) radio station on May 22. According to Aleksashenko, Russia should employ migrant labor on a large scale.
The reality is more complicated though. According to the Federal State Statistics Service, total labor force increased from 65.2 to 69.8 million in Russia in the years 2000 thru 2010. Workers in the unqualified labor force sector totaled 8.7 million in 2000 . The number was reduced to 7.5 million persons by 2002 . This figure has remained unchanged over the past eight years: unqualified labor force was the same (7.5 million persons) in 2010 . The foregoing data show that Russia is facing labor force in no other than skilled labor force segment. The unqualified labor force segment has no such deficit, but large-scale migration from Central Asian republics discourages the restructuring of the unqualified labor force sector.

Russia is far behind developed countries in terms of labor productivity. According to the Organization for Economic Cooperation and Development (OECD), average output per hour in Russia was just $21.5 in 2011, being far below the level in the United States ($60.2), Germany ($55.8) and France ($57.7). It means that higher labor productivity is the key potential growth driver for the Russian economy. However, there are five factors that prevent this.


First, the Russian labor market is heavily overregulated. In particular, this is supported by the OECD employment protection legislation index which ranks labor markets within a range of 0 (low regulation) and 6 (high regulation). In 2008, the Russian labor legislation scored 2.77 in the full-time workers segment, being far beyond the scores in the United States (0.56), Great Britain (1.17) and Australia (1.37).


Second, state companies are dominating in the Russian economy. Royal Dutch Shell has 87,000 employees worldwide against 168,000 employees at state-owned Rosneft. The fact that state corporation Gazprom has 404,000, Rostec State Corporation 900,000 and Russian Railways 1,750,000 employees speaks for itself. A total of 4.2 million persons are employed at the communal service sector .


Third, bureaucratic agencies are overstaffed in Russia. According to Rosstat, a total of 737,700 persons were employed at federal and regional agencies in 2012. Municipal officers totaled 336,300 persons. A tota l of 1.1 million persons were employed at the Ministry of the Interior of Russia.


Fourth, a draft-based system of army recruitment is still in force in Russia. Every year about 300,000 young people find themselves off the labor market.


Fifth, internal population mobility is very low in Russia. According to the Demography Institute at Higher School of Economics, a total of 4.3 million persons were involved in internal migration in the former Russian Soviet Federative Socialist Republic in 1990 against 2.1 million persons in Russia in 2010.


Such measures as restructuring of state corporations, deep restructuring of the bureaucratic apparatus, abolishing the draft-based system of army recruitment, radical liberalization of the labor market, provision of incentives for internal migration will have a strong effect on the Russian labor market. Imposing restrictions migrants from Middle Asian and South Caucasian republics will not prevent economic growth. Instead, it will encourage technological modernization of the industries in which semiskilled workers are employed. In addition, entrance visas for nationals from OECD member countries should be abolished. Modernization is impossible unless Russia is open for developed countries.


Rodionov K.V. - a junior researcher at Institutional Development Department