Economic sanctions and the suspension of the activities of companies have not yet led to a significant increase in unemployment, as most companies retain their employees and continue to pay them all or part of their wages. There are risks of a gradual rise in unemployment amid the decline in hiring, notes Victor Lyashok, candidate of economic sciences, senior researcher at the Department of Pension System Research and Actuarial Forecasting of the Social Sphere, INSAP RANEPA.

There is practically no real-time official statistical data to assess the situation in the labor market. The results of the March labor force survey will not be available until mid to late April. Real-time data available to the Ministry of Labor and Social Protection comes only from large and medium-sized enterprises where less than half of all employed in Russia work.

Publicly available information suggests that the current impact of sanctions on the labor market is as follows.

Firstly, faced with the disruption of the already familiar production chains, business began to reduce output and, in some cases, to stop production altogether. For example, in the absence of a sufficient supply of components (primarily electronic chips, which are in short supply worldwide), AvtoVAZ is sending its employees to downtime with a corresponding reduction in wages. Whereas in the near future it is not possible to restore the old chains or set up new ones in the near future, other large and medium-sized businesses will resort to similar solutions.

Secondly, many foreign companies have suspended their activities in Russia. Although there are no exact data, individual cases (IKEA, McDonald's, various car assembly plants – Renault, Ford Sollers, Hyundai, Nissan, Toyota, Avtotor Holding) show that companies retain employees and continue to pay them full or partial wages in accordance with Russian legislation on idle pay – 2/3 of the average wage. Having said that, the segment of such companies in the Russian labor market is relatively low – no more than 1 million employees even when taking into account related Russian enterprises, such as farms producing products to be sold directly to McDonald's.

In view of this, the sanctions have not yet led to a hike in unemployment, as it was in March-April 2020, when its level rose by 1.4 p.p. in two months. Rather, one should expect a slow rise in unemployment, as enterprises will first put workers on administrative leave, and only then, if the current situation persists, will they resort to layoffs.

In late February and early March, the number of voluntary resignations might even decrease, as employees will try to hold on to their current jobs as long as possible amid uncertainty. This is exactly the picture observed in the Russian labor market in 2020. Nevertheless, as hiring in Russia has declined sharply since late February, the unemployment rate will gradually go up.

A drop in the number of hires in the absence of a significant influx of job seekers has been noted by Russia's largest private employment agency, HeadHunter. According to the company, in the three weeks between February 14–20 and March 7–13, the number of active CVs declined by 12.6%. Meanwhile, the number of CVs created or updated in the past 60 days increased by 8.3%, consistent with the seasonal dynamics of the past few years. As a result, the hh.index, which demonstrates the ratio of the number of active CVs to the number of current job openings, rose from 3.9 in mid-February to 4.8 in the second week of March.

The largest decrease in the number of vacancies was observed in the metropolitan regions: Moscow and Moscow region – 17.7%, St. Petersburg and Leningrad region – 14.9% ( data).

First of all, there were fewer vacancies in such professional spheres as insurance (-48%), automobile business (-27%), personnel management (-22%); to a lesser extent - in security (-3%), medicine and pharmaceutics (-6%). The number of vacancies in the civil service and non-profit organizations grew by 21% during the same period.

The phone survey conducted by INSAP RANEPA in the second week of March,[1] also demonstrated no increase in the rate of the unemployed compared to the January survey. Only about 3% of swage earners noted that at the time of the survey they had been placed on paid, partially paid or involuntary unpaid leave at their main job, and another 2% had been placed on reduced working hours. Only 3% of workers reported wage delays for February. In general, such values are common for the Russian labor market.

Most workers are cautiously optimistic about the future; 78% of them rate the risk of losing their job next month as low or very low; 73% of respondents expect their pay to be flat or even higher in March; 80% of workers think they will work as usual in March, while 3% think they may lose their job; 7% have difficulty in answering; the remaining 9% think they will be moved to various vacation or reduced workday options.

Consequently, the growth of unemployment in the spring months will be limited. However, if economic sanctions remain in place and Russian and foreign organizations suspend their activities, in the summer months we can expect a gradual increase in the number of layoffs and the introduction by enterprises of more stringent mechanisms to reduce labor costs: transfers not to downtime, where businesses have to pay a large share of wages, but to unpaid administrative leave; small businesses may also resort to wage delays.

At present, it is almost impossible to predict the extent of unemployment because there are too many unknown externalities. Moreover, it seems that the accuracy of all open forecasts is very low now. Nevertheless, we can expect wages to fall in real terms for most Russian workers as early as March. The economic sanctions will have a negative impact on most areas of the Russian economy one way or another, so a drop in wages will be felt by almost all employed in Russia.



[1] The survey was conducted on March 9-10, 2022, with a sample size of 1,630 respondents. Russian citizens aged 18 years and older from all regions of Russia were surveyed. Quotas per strata were distributed according to Rosstat data.