Transformation or deformation: why low unemployment in Russia is deceptive
The Russian labor market has been in the spotlight over the past few years. The country faced record low unemployment, which was accompanied by a shortage of staff and rising salaries — for the first time in a long time, real incomes of the population began to grow. All this fits into the concept of overheating the economy and the labor sector. But not everything is so clear — many parameters of the Russian labor market are assessed very superficially, experts say. How serious this deficit is, how long low unemployment will last, and whether there has been a real transformation of the labor market were discussed in the report and thematic webinar of the Expert RA rating agency. Details can be found in the Izvestia article.
"Unnatural" unemployment
The years 2023-2025 were a period of unprecedented low unemployment in Russia. According to Rosstat, the unemployment rate in the Russian Federation in March 2025 was 2.3%, which is a historical minimum. For comparison, a year ago the figure was 2.8%, and the average unemployment rate over the past five years has exceeded 4%. Such record low unemployment is one of the key elements of an overheating economy — an attempt to meet increased demand leads to an increase in hiring. In Russia in 2023-2025, this process was also reinforced by additional factors: the reduction of the working-age population due to the massive recruitment of personnel into the defense industry and the army, as well as emigration after 2022.
The labor market is used as an indicator of overheating of the economy. The shortage of personnel has become one of the key factors for maintaining high levels of nominal and real key rates over the past year. Economists explain this by the "Phillips curve," which suggests that lower unemployment is associated with higher capacity utilization due to the existence of a positive output gap in the economy, which in turn generates inflationary pressure (the more unemployment deviates from its "natural" level, the higher inflation). For 2024, the "natural" unemployment rate is estimated at 4.5%.
At the same time, Expert RA notes that the situation in the regions is extremely uneven. Despite similar trends, the unemployment rate in some regions of the Russian Federation is higher than in others. It is very high in the North Caucasus Federal District, primarily in the republics of Ingushetia (26.4%) and Dagestan (11.2%). Record low unemployment is observed in Moscow — at the level of 1%. It remains extremely low in the Central Federal District as a whole (at 1.8%), the Ural (1.9%) and Volga (1.9%) federal districts.
The most acute shortage of personnel is in manufacturing and trading companies, medicine, tourism and logistics. Judging by the report of the Bank of Russia, the shortage of low—skilled personnel is emphasized - workers, couriers, drivers, etc. The report notes an increase in the average number of hours actually worked. The HH index calculated by HeadHunter, the ratio of the number of active resumes to the number of active vacancies, has remained in the range of 3.0—3.9 for most of the time, which, according to HeadHunter's interpretation, means a shortage of applicants. In recent months, however, it has started to grow.
There are several reasons for this situation, according to Expert RA. This is not only about freedom and the outflow of people into the defense industry. It is also worth adding a longer-term demographic problem, tougher migration policy, and, finally, the entry into the labor market of generation Z, which is less loyal to employers: most of them are ready to change jobs for better conditions. At the same time, due to competition for personnel, companies are forced to increase salaries at a rate exceeding productivity growth. However, there is a slowdown here too: according to Rosstat, the average accrued salary in 2024 was 88 thousand rubles before taxes. Forecasts for real wage growth remain quite optimistic. According to the forecast of the Ministry of Economic Development, real wages will grow by 7% in 2025, and according to a macroeconomic survey by the Bank of Russia, analysts expect real wages to increase by only 2.9% this year.
Unemployed self-employed
Nevertheless, according to Alexander Safonov, a professor at the Financial University under the Government of the Russian Federation, estimates of the overheating of the market often appeal to very superficial data. "Advanced statistics" shows a slightly different picture. He noted that the lag in labor productivity from wages is largely a myth due to the fact that economists did not evaluate these two schedules over longer periods: higher wage growth in relation to productivity can compensate for the reverse situation in the previous time period.
According to him, the average annual number of people employed in Russia remains at a fairly high level, so it's not worth saying that "everything is gone." In 2023, there were just under 73 million people employed, just a few hundred thousand more than a year ago. Russia has lost some cheap foreign labor due to the depreciation of the ruble and the tightening of migration policy, which forced employers to raise wages following inflation. As for the employment structure, it has not changed radically over the past 6-7 years, so it is premature to talk about a serious transformation.
You can also look at the employment structure by age — nothing has fundamentally changed there over the past eight years. The share of workers over the age of 65 has increased slightly, while the share of those aged 55-59 has fallen slightly, but otherwise the same pattern is observed as in the last decade. The really serious change was the reduction in the number of workers over the age of able-bodied, which was caused by the level of morbidity and mortality during the covid period. In addition, the number of working pensioners has halved (largely due to the increase in the retirement age).
Alexander Safonov believes that the main "transformation" of the market has been the growth in the number of self-employed (by 7 times in less than 5 years). There is a gradual reduction in the number of people working under employment contracts, which applies to small, medium, and large businesses. All this is happening against the background of tax optimization — the smaller the wage fund, the more profitable it is to pay taxes. At the same time, according to the Federal Tax Service, 52% of those who have registered as self-employed have zero income over the past year. That is, encouraging self-employment does not always help people find work, and it is not always clear what these millions of people are doing. It is quite difficult to assess the potential of citizens who can be attracted to the labor market. All this leads to distortions in unemployment statistics, and this should be kept in mind.
"Manual management" of the labor market
Therefore, the expert believes, references to the "Phillips curve" have no serious basis, since the labor market, especially in the regions, is often manually controlled. Back in the 1990s, artificial retention of employees for economic and political reasons was commonplace. All this leads to the fact that there is no such effect of inflation and crises on employment dynamics. You can only understand what is really going on from the inside. But the natural situation there, for example, is the ban of governors on mass dismissals — another major distorting factor.
This leads to an unobvious problem hidden behind the apparent shortage of labor and hidden unemployment: in Russia, there has always been a problem of incomplete working time. The reasons for this may vary — for example, the downtime of a particular enterprise or part of it. But now, Safonov noted, the phenomenon of part-time work by agreement of the employee and the employer is widespread. The number of such employees has increased by almost one and a half times compared to 2017.
This is more profitable for the employer, since in case of downtime, the employer must pay two-thirds of the rate, and according to the agreement, you pay as much as agreed. There is also a phenomenon in our country that originated in tsarist times, when businesses stopped during the sowing and harvesting period. In some places in Siberia and the Far East, this has been preserved even now: people work in their garden or collect wild plants.
Finally, the number of people who have been granted vacations at their own expense is growing — now their number exceeds 3.5 million. And Russia has a huge workforce turnover, accounting for 25-30% of its total number. This is the highest rate in Europe. This fact is explained by the fact that many people in Russia are not satisfied with their jobs.
All these facts show that traditional employment analysis is difficult to carry out in the absence of verified data. On the other hand, it clearly demonstrates the hidden reserves of the labor market. Another thing is that no one really has an understanding of how to use these reserves, experts say.
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