From, May 23, 2023, Condensed text:

Back in September 2021, I wrote an article about the growing labor shortage. The Central Bank warned at the time that Russia’s labor force would shrink by 400,000 to 600,000 people a year, because the incoming generation of those born in the 1990s or early 2000s is smaller in number than the generation of 60-year-old retirees leaving the workforce. The Central Bank underestimated the problem: It’s been less than two years, and Russia is already plagued by a labor shortage. And this is hardly surprising, as Russia has lost 1 million to 1.5 million people [this past] year due to the war: 700,000 to 1 million have left the country, and at least 300,000 men – most young and healthy – have been mobilized.

Russia’s industrial sector has not seen this kind of shortage since 1996. According to a poll by the Gaidar Institute for Economic Policy, over 35% of manufacturers reported labor shortages. In January 2022, on the eve of the war, only 26% faced these problems. Keep in mind that with Western brands leaving Russia, 300,000 to 500,000 of their employees have become available. And let’s not forget that defense companies offer much higher wages and draft exemptions these days. The deficit is the worst in light industry, the report says. One would expect Russian companies to have a field day filling the void left after the exodus of Western competitors, but the problem is that they can’t find qualified workers.

This is hardly surprising.

Russia has always treated its workforce with negligence. The common thinking is that factory workers have nowhere to run, especially those living in company towns – and Russia still has quite a few of those – and that if there is a shortage of workers, you can always bring in more migrants. Before the pandemic, most janitors, construction workers and farm hands were migrants. But now Russia suddenly has a shortage of workers. Migrants left earlier, during the pandemic, and when the war started, even those who were pretty settled in Russia started to leave. Nobody wants to fight in a senseless war for another country – especially if this means your country may send you to prison for 10 years when you come home. As for workers who are Russian citizens, many of them were sent to war. How many men have been mobilized by now – 300,000? 400,000? 500,000? We don’t know.

Others were quick to figure things out and went to work for the companies that offer draft exemptions. Fortunately for them, defense factories are operating around the clock these days, and, like vacuum cleaners, they suck up whatever labor resources are still available on the market to fill their three shifts. In addition, a certain number of workers have left Russia. The popular belief is that most of the recent emigrants are IT specialists, but if we take a look at some of the popular destinations, we will see that many of the recent arrivals are actually electricians, car mechanics and welders.

Of course, many IT specialists left as well. For example, Serbia alone received between 30,000 and 100,000 IT specialists from Russia. Although most of them are young, many are already married, which means their wives left, too. And most of those women also used to have jobs.

What will businesses and the authorities do now? Well, businesses are coming up with all sorts of ideas to stay afloat. For example, [the meat-packing company] Miratorg recruits workers through creative ads. They say they are looking for “nannies” for their piglets, as well as “firm and cold-blooded chicken-catchers.” HR specialists at IT companies have to be experts in both technology and psychology these days. And, of course, wages have gone up.

With the authorities, the situation is simpler – and at the same time more complex. It is simpler because we can easily predict how government officials will respond. At first, they will do nothing. Then they will call a meeting. Then they will voice their concern. Then they will make a decision to take necessary measures.

And it is more complex because nobody knows what measures are needed. Indeed, what can you do? You can force businesses to pay higher wages. If blue-collar workers are paid more than white-collar workers, the latter will abandon their office jobs and go to factories. Actually, this is what happened in the Soviet Union: There were many cases when an engineer with a college degree would get a job as a factory worker or a truck driver because it paid more.

But this approach will hardly work in our time, because factories are privately owned and can no longer rely on government subsidies. Of course, business owners could give up some of their profits. But the problem is that they don’t have much profit as it is. And even when there is a company enjoying high profits, the government is always there, waiting to levy a windfall tax. They could try recruiting migrants, but that probably won’t work. So, the only option left to them is to stop their workers from leaving by offering them some benefits. The biggest benefit is draft exemption, but if you go around offering draft exemptions, then who will be left to mobilize?

With IT specialists and other professionals, the authorities will probably go back to the Soviet-era practice of assigning university graduates to a certain company where they will be required to work a few years to pay the country back for their free education. . . . Considering that recent amendments to the law regulating international travel essentially mean that people are no longer free to leave Russia and come back as they please, and instead a person is required to get permission to travel [see Vol. 75, No. 15, pp. 3‑5] – and, furthermore, if you refuse to work for a company you have been assigned to, the authorities may punish you by sending you to war – this system of assigned labor may actually work. Of course, this means that the quality of labor will be extremely low, but when did government officials concern themselves with such nonsense?

Actually, developed countries are also having issues with labor shortages. In the US, for example, despite all the efforts by the Federal Reserve Bank, the labor market looks solid and unemployment remains at a record low. But developed countries have long come up with a solution to this problem. It’s automation and robotics. . . .

In Russia, let’s face it, automation and robotics are not popular at all. And it’s not because Russian engineers are not smart enough. It’s just that business owners don’t see why they should buy a robot or even a sweeping machine to sweep the floor if they can get 10 migrants to keep the floor clean. After all, with a machine, there is always the risk of a breakdown. In the current situation, some business owners may in fact be interested in buying such a machine, but it’s too late now because of sanctions.

Designing such a machine on our own is also not an option. First, this would require a lot of infrastructure and highly skilled personnel, from designers to workers. It took China several decades to build this infrastructure by copying Western models and technologies, and training a huge number of specialists. However, to this day, there are certain things that China can’t produce on its own. Second, it may not be so obvious yet, but scientists, too, are in short supply in Russia these days. For example, Valentin Parmon, the head of the Russian Academy of Sciences’ Siberian division, complained recently that Russia has lost 50,000 researchers over the last five years, which is another record number. I would think that this outflow only worsened this year. Despite tougher visa practices, European Union countries and the US are happy to receive Russian scientists.

In fact, it’s not just scientists they’re after. Google “talent visa” and you will see a huge number of offers, from France to Australia. All sorts of people – writers and artists, inventors and athletes – are using this visa to leave Russia, and their number has only swelled since the war started.

The developed world is engaged in a war of its own: a brain war. Brains will be key in the next 10 years, which will be the era of total robotics and artificial intelligence applications. There is always strong demand for smart people, even if this means spending money to find and educate them. Also, it will be necessary to find and educate those who will save humanity from turning into dumb animals once everything is digitized and people no longer have to fight for survival – I am referring, again, to athletes, artists and the like.

More and more countries will join this fight, and it’s the kind of fight where the winner takes all. Russia chose to stay out of this fight, and it was a mistake. This is the only war worth fighting.