Economic Mirror: Current Situation in Russian Labour Market

A cooldown in the economy leads to a cooldown in the labour market. How do structural economic shifts affect the labour market? What kinds of specialists are in short supply? How will wage dynamics change in the near future? These questions were discussed at the Financial Congress of the Bank of Russia. Econs presents highlights of the discussion.

The labour market session opened with its moderator, Alexandr Morozov, Director of the Research and Forecasting Department of the Bank of Russia, inviting the audience to take part in a survey and share their opinions regarding the current level of wages in the Russian economy. The survey revealed that views are polarised: the level of wages is considered either high due to labour shortages (42.3%) or low due to poor labour productivity (30.8%). According to Morozov, this means that views on the labour market situation depend on whether it is looked at from the macroeconomic or microeconomic perspective.

On the one hand, most people are employed, which makes wages and labour market conditions personally relevant to them. On the other hand, these issues have macroeconomic implications. ‘Those who are well-versed in modern economics know about the Phillips curve, which shows the relationship between the unemployment rate and inflation or between unemployment and wage growth. When an economy deviates from the equilibrium, it experiences either overheating or underheating,’ noted Morozov. He compared the labour market to a mirror, as it reflects the situation in the economy. However, it is a rearview mirror, because it shows what happens in the economy with a certain time lag, offering little insight into the future.

At one of the earlier sessions of the Financial Congress, its participants pointed out that investments in fixed capital (machinery, equipment, or buildings) do not deliver high returns and that labour productivity has the most potential in this regard. Morozov recalled that to unlock this potential, economies must prioritise human capital (link in Russian) investments, that is, in education, healthcare, and social security. ‘In the long term, economic growth requires investing in human capital,’ he concluded.

Denis Davydov, Deputy Head of the Far Eastern Main Branch of the Bank of Russia:

– By late 2024, about 70% of enterprises were short of workers, while nearly a third reported plans to bump up their staffing levels in 2025. Facing such labour shortages, employers had to increase the workload of their employees and offer financial incentives to retain them. Consequently, wages soared, outpacing both inflation and labour productivity growth.

Early 2025 saw some signs of stabilisation, as the number of vacant jobs stopped rising and even started to decrease in certain sectors. The growth of wages outstripping that of productivity has begun to visibly strain operational indicators, gradually exhausting employers’ capacities to raise wages further. In the second half of 2025 Q2, the signs of a gradual stabilisation persisted, while more and more companies reported cuts in the number of work shifts. Overall, businesses are still planning pay increases in 2025, but at much slower rates than in 2023 and 2024.

To boost workers’ motivation, companies could use incentive stock options allowing employees to purchase equity stakes, usually at a certain discount. These should perhaps primarily be offered to employees in top management whose decisions directly impact companies’ performance. However, companies that show a lot of potential and strong performance, such as in telecom, IT, software development, and retail, might extend these incentives to line managers and even rank-and-file employees.

Natalia Zubarevich, Professor in the Department of Economic and Social Geography of Russia, Faculty of Geography, Lomonosov Moscow State University: 

– We have been discussing labour market challenges for quite a long time, but we have to finally recognise that the labour market is transforming and that the problems it faces are steadily becoming less acute. The market’s adjustment to the changing environment can be observed across all domains, from industries to the education system to the employment of older workers. In the coal industry, 60% of enterprises are unprofitable. In Kuzbass, 110,000 people work in coal production and related sectors, which is more than required, so there is no labour shortage. Contrastingly, construction companies are struggling because up to 40% of their entry-level positions were occupied by labour migrants who are now leaving these jobs, although the core of technically skilled workers will remain in the sector. As for the defence industry, it has drawn early retirees back into employment, partially alleviating labour market pressures.

We are currently witnessing a drastic transformation of the education system: 40% of school graduates in Russia now opt for secondary vocational education and thus will start working earlier than they would have after graduating from university. Therefore, the trend above at least mitigates the problem caused by the 30% decline in the number of young workers compared to the 35-year-old group, although it does not fully resolve it. Major Russian enterprises have a long-established practice of grooming young employees who are studying for their vocational or higher degrees: starting from the second year, they attract young workers through paid internships. Small businesses and the services sector, however, face greater challenges. With low-skilled jobs and uncompetitive wages, they will see a reduction in the number of employees.

As for incentives and bonuses, I have observed the following at the factories that I have visited. At the level of blue-collar workers, wages plus social benefits and bonuses (including end-of-year bonuses) prove effective. I have seen no employee stock options being used in these cases. Similarly, private companies and corporations like Rostec offer substantial monetary rewards instead of equity incentives. Nevertheless, it is probably not the best idea to extrapolate the experience of the IT sector to other economic sectors. Owners who believe they can sustain their businesses invest in whatever reduces the cost of their products. I assume, however, that not all large business owners in Russia can boast this confidence. As long as the risks of what has been happening over the last three years are increasing, Russian owners of large or even medium-sized businesses will hesitate when it comes to investment. Therefore, the stability of property rights is of critical importance in Russia today. Without this cornerstone, we will not achieve any progress.

Dmitry Markelov, Director of Government Relations and Corporate Governance at HeadHunter:

– The number of vacancies is declining, while the number of CVs submitted has been rising since late 2024. Our platform calculates the hh index (link in Russian), which is the ratio of the total number of active CVs to the total number of job openings. Currently, we are seeing the perfect ratio of 5.5 CVs per one job on average. Nevertheless, we still cannot say that there is a shift to an employer’s market happening, as the shortage of workers remains one of the key problems in the labour market.

Moscow and the Central and Volga Federal Districts continue to occupy leading positions in terms of the number of both vacancies and CVs. Acute personnel deficits are observed in retail, healthcare, and pharmaceuticals. That said, the number of job seekers facing difficulties with getting employed continues to decline, having dropped from 56% in 2025 Q1 to 38% in 2025 Q2. Consequently, most of them – around 54% – refuse to lower their pay expectations. Approximately 40% of employers raised wages in 2025 H1, with the same percentage planning to do so by the end of the year.

We can also see rather healthy competition in the financial sector, namely 6.7 CVs per one vacant job, with no signs of a shift to an employer’s market or high competition for jobs among those seeking them. We expect the dynamics of labour supply and demand to remain the same in the financial sector in 2025.

When it comes to increasing labour productivity, the main problem is not importing sophisticated machinery, which might still be possible even amid the sanctions, but finding workers to operate and repair it. The lack of competencies and skills required by businesses is staggering: according to our estimates, around 93% of employers in the market are experiencing a shortage of the qualifications required. Until this problem is resolved, business efficiency will continue to be low due to underqualified workers.

Elena Akhmedova, Chief Economist at Euler Research Technologies:

– There is a widespread opinion that manufacturing has been the main beneficiary of the structural shifts in the labour market over the last few years. However, according to the statistics, agricultural and construction companies are surpassing manufacturing enterprises in terms of real wage growth. Partially, this might be caused by the strongest productivity gains in these two sectors. The mining and quarrying sector is trailing behind as regards wage growth, not least because labour productivity has decreased quite notably in this industry.

It is important to emphasise that the cooldown in the labour market is not a catastrophe. The labour market will adjust, first of all, through lower additional demand for labour, that is, through a reduction in the number of job openings, rather than through layoffs. It is only after this that the unemployment rate might go up, but it is more likely to return to its norm, i.e. to 2017–2019 levels. This means that unemployment will be just a little higher than the current record low of 2.2%. This adjustment will also manifest itself through the alignment of wage dynamics with labour productivity dynamics, which might be exactly what the economy needs.