“Bus number 7 was not running this morning”Olga Slatina wrote on social media from the Sverdlovsk region in Russia’s Ural Mountains. “The station master said he wouldn’t be there as there was no one to work.”

Slatina’s bus driver might just be sick that day in late October. But a growing labor shortage is affecting all walks of life since Moscow sent troops to Ukraine in February 2022, companies, workers, recruitment agencies and officials say.

Heavy recruitments by the armed forces and defense industries have drawn workers away from civilian businesses, as has migration to the West, pushing unemployment to a record low of 2.3 percent, Rosstat statistics agency data showed on Wednesday.

Huge increases in defense spending helped Russia defy early predictions at home and in the West for a catastrophic economic collapse in 2022, with only a small contraction that year.

The economy rebounded in 2023, but labor shortages, interest rates, at 21%, and high inflation are showing some of the cracks.

President Vladimir Putin has singled out labor shortages as a major economic problem and has made boosting Russia’s labor productivity index one of his key national development goals. Russia is also seeking to encourage women to have more children.

Sverdlovsk, home to many defense factories, had 54,912 job vacancies in early October, compared with 8,762 unemployed, according to the region’s labor department.

In the Central Federal District, home to about 40 million people in western Russia, there are nine vacancies for every unemployed person, the president’s special envoy to the region said on Tuesday.

Russian recruitment company Superjob said vacancies across Russia rose 1.7 times in two years and 2.5 times in industry, while the central bank says 73% of Russian businesses are understaffed.

“Staff shortages have become a global phenomenon, occupying almost all parts of the economic system,” Rostislav Kapelyusnikov, deputy director of the labor research center at the Moscow Higher School of Economics (HSE), said in a report.

Reuters interviewed more than 12 companies, workers, recruiters and economists about industries as diverse as construction, agriculture and IT. The persistent theme was that workers are scarce and the prospects for finding more are bleak.

“There are no men”

Russia’s low birth rate has long caused labor shortage headaches in Russia, but the launch of what Moscow calls a “special military operation” has resulted in tens of thousands of potential workers joining the military and many more immigrating.

At the same time, the defense sector started hiring rapidly.

“You had a kind of semi-dead factory in your area, producing shock absorber springs for some defense installations, for tanks, phytolife. And now the orders are pouring in – a lot of springs are needed,” commented a worker at an industrial company who asked not to be named because of the sensitivity of the matter.

Another person who works in a civilian business said that many people were finding work assembling drones in the Alabuga special economic zone of the Tatarstan region.

“The salary there is many times higher,” he said. “A friend who worked there said they can’t even spend the money because they work all the time.”

Armament orders cannot go unfulfilled and demand for personnel will only slow when the orders are placed, Andrei Gartung, head of a forging and pressing plant in Chelyabinsk, told Reuters.

No reduction is expected anytime soon. Former president Dmitry Medvedev, now vice-chairman of the Security Council, promised officials “a lot of work” during a visit to tank maker UralVagonZavod last week.

Natalia Zubarevich, a professor at Moscow State University, explained that it is difficult for civilian industries to compete.

“There are no restrictions on the defense industries – they’ve been given crazy funding so they can raise wages and go after workers,” he said.

In Sverdlovsk, those who sign up to fight in Ukraine receive a one-time signing bonus of 2.1 million rubles ($18,560), nearly 25 times the average Russian monthly salary.

A spokesman for a local recruitment agency said its clients had lost workers on the front line. “They say: “Once there were 100 people working, but now there are no men.”

Builders, farmers, even policemen

The shortage is acute in manufacturing, logistics and IT, recruiters say, but the effects are most felt in construction, driving prices higher and hitting deadlines and quality, according to Lydia Katashkina, Human Resources Director at Glavstrove .

Sergei Pakhomov, director of the development company Urals Golos Group, commented that the company had to decide whether or not to take on new projects.

“Not because there is no money, but there will be enough people to come to the construction site to work,” he clarified, predicting that the problem will worsen in the next five years.

About 200,000 people, or 3.3% of all agricultural workers, will leave the sector in 2023.

Agricultural producers’ association InterAgroTech said the shortage affects every aspect of farming, from sowing to harvesting, affecting crop quality and safety.

The shortage is also severe at the Interior Ministry, which runs the police, Valentina Matvienko, speaker of the upper house of the Russian parliament, said this week. The ministry said the number of vacancies had doubled in two years to 173,800, or 18.8% of the total workforce, by early November.

“What quality of work, what kind of law and order can we talk about, including immigration, drug trafficking and more?” Matvienko wondered.

Lack of immigrants

Companies such as leading supermarket chain X5 are keen to go digital, but as the central bank noted, Western sanctions make it difficult to import relevant equipment from abroad.

Economy Minister Maxim Resetnikov last week called on the regions to hire young people, pensioners and people with disabilities, as well as to lift restrictions on overtime work.

But restrictions on potential migrant workers remain, even though business lobby RSPP said two-thirds of companies are struggling to attract the foreign workers they say they need.

Andrei Kostin, CEO of VTB Bank VTBR.MM, made it clear this week that without immigrants the Russian economy would not breathe.

“It’s easy to chase them away, but it takes someone to work.”

Economists and recruiters expect Russia’s labor problems to intensify, a factor that could contribute to slowing growth.

Russia’s economy ministry expects GDP growth to slow from an estimated 3.9% this year to 2.5% next year.
The shortage of doctors could rise to 40-45%, from 25.7% today, in the next five to seven years, said Mark Denisov, commissioner for human rights in the Krasnoyarsk region.

Russian authorities say the economy needs an extra 2.4 million people in manufacturing, transport, healthcare, social services, scientific research and IT by 2030.

“We still don’t understand where we will find them,” Deputy Prime Minister Dmitry Chernyshenko said in June. “Now we all believe that artificial intelligence will save us, because what else can?”