russia’s Economy Has Hit a Wall Due to a Shortage of People and Technology

russian officials have finally addressed a problem they’ve been trying to ignore for years. The ministry of industry and trade and the ministry of economic development of the rf are investigating the causes of low labor productivity. Official unemployment stands at 2.2%, so there’s almost nowhere left to recruit the necessary number of new workers.

The official 2.2% unemployment rate also bears little resemblance to the real picture. The statistics does not account for a significant portion of hidden unemployment – workers on forced leave, those working part-time, the self-employed without income, and other forms of non-employment. Expert estimates of the actual rate reach 20–30%.

Technologically, russia does not have the means to compensate for the labor shortage. In terms of labor productivity, it ranks only 37th in the world. There are about 40 robots per 10,000 workers, compared to a global average of 177. In terms of artificial intelligence adoption, russia ranks 119th.

Consequently, years of talk about import substitution, domestic technologies, and production modernization have ended in officials’ being forced to find ways to make the old economy operate more efficiently.

A telling example is the attempts to fill labor shortages with workers from north korea. The first attempt to recruit north koreans as janitors for 55,000 rubles a month failed. Now moscow is trying to bring women from north korea to work at russian enterprises, offering salaries starting at 80,000 rubles.

This clearly illustrates the limitations of the russian economic model. When there is a shortage of workers, the authorities look for new people. When there is a shortage of technology, they talk about productivity. When import substitution fails, they try to bring in even cheaper labor.