Putin’s Russia runs out of workers as war hits economy

Vladimir Putin is pointing to Russia’s ultra-low unemployment rate as evidence of economic strength. But the figure may expose a far more serious problem: Russia is running short of workers as the war in Ukraine drains its labour force and pushes wages higher.

The jobs boom is becoming a crisis

Unemployment has fallen to just 2.1%, but economists warn that such a low rate reflects a workforce under extreme pressure. Russia’s labour shortage has deep roots in the demographic collapse of the 1990s, but the war has dramatically intensified the problem.

Hundreds of thousands of men have been pulled towards the military, while the defence industry has expanded rapidly. Employment in military production has reportedly risen by around half a million since 2021, forcing the sector, railways and other state employers to raise wages to attract workers.

Military pay is squeezing civilian Russia

The Kremlin’s recruitment drive is adding another distortion. Contract soldiers can earn dramatically more than ordinary workers, creating intense competition for labour and leaving civilian businesses struggling to retain staff.

The government’s options are narrowing. Prison labour has shrunk as the prison population fell from about 465,000 in 2021 to 282,000, while bringing more women into physically demanding jobs cannot solve a shortage affecting the economy as a whole.

Migration should fill the gap — but Putin is closing the door

Russia’s biggest potential source of new workers is migration, particularly from Central Asia. Yet since the 2024 Crocus City Hall terrorist attack, Moscow has imposed tougher restrictions on migrants, pushing numbers down just as the economy needs them most.

Work permits for tens of thousands of Chinese and Indian workers have done little to close the gap. Meanwhile, the reported loss of Russian soldiers through death and serious injury has further tightened the labour market.

The war economy is approaching a dangerous limit

The labour crisis is colliding with falling export revenues and a widening budget deficit. The longer the war continues, the greater the risk that Russia’s economic pressures become structural rather than temporary.

Putin can present 2.1% unemployment as a triumph. But if factories cannot find workers, civilian companies cannot compete with the state and migration is restricted, the same number begins to look less like economic strength — and more like a warning.

Putin’s Russia: A land that has ‘run out of workers’