Russian Salaries Increase At The Fastest Rate In Ten Years
Russian businesses are investing in higher wages, retraining, and more productive equipment to keep place with a productivity boom and increased competition
The Gaidar Institute’s November 2023 Industrial Survey Bulletin (IEP) documents the results of a study of how companies in Russia’s industrial sectors are coping with skills shortages. The most widespread tools used to combat this are firstly increasing wages (79% of respondents) and secondly the retraining of employees (75%) to retain workers in the context of rising wages in other sectors of the Russian economy, including the military and related security sectors.
In November, the balance of expected changes in wages, according to the institute’s respondents, reached the highest levels over the past ten years of monitoring this indicator. The most intensive wage growth in 2023 was in light industry enterprises. These businesses are experiencing the maximum personnel shortage and are also facing the liberation of the domestic market from competing imports as a result of sanctions restrictions, the withdrawal of subsidiaries of foreign manufacturers from the market and the weakening of the Ruble exchange rate.
The third most common tool was establishing close contacts with secondary specialized educational institutions (71%). In fourth place (60%) were businesses investments in more productive equipment, while another 42% switched to labour-saving technologies in existing production processes.
“When hiring new workers for blue-collar vacancies, more than half of enterprises retrained new employees, without relying only on the skills acquired during their studies or at a previous place of work” the IEP analysts record. Only 43% of employers reported an increase in the salaries they were offered. Searching for qualified workers in labour-abundant regions and bearing the costs of relocating them closer to the enterprise was practiced by 31% of employers.
“Russia’s industrial personnel policy, in the context of a personnel shortage in 2023, is beginning to develop regional territorial mobility of labour, the lack of which labour market experts complained about in previous years” the IEP states, although this was partially to do with border lockdowns due to covid. But things are changing from historical norms – the classic shift (temporary hire) method was used by only 14% of enterprises. Using migrants (both from the Central Asian republics and Southeast Asian countries) to fill vacancies for skilled workers has proven to be the most unpopular way to solve personnel problems.
Russia’s experience in increasing labor costs is in contrast to the European Union, where high inflation rates have eaten into all salary payments across the EU with the sole exception of Belgium and the Netherlands. Germany saw real wages decline by 3.3%, Italy by -7.3% and Hungary by a whopping -15.6%.
In terms of where vacancies are in Russia, the most sought after positions in the labour market are skilled workers, truck drivers, special transport drivers, general workers, and engineers, within the industrial, construction and transport and logistics sectors.
The Russian manufacturing industry also demonstrates the fastest growth rate in the number of vacancies: their number increased by 2.2 times over the year. Delivery service vacancies have doubled, while demand for personnel in the domestic hotel and restaurant business increased by 36% – a result of more Russians taking domestic breaks rather than travel to Europe.
The top five Russian industrial segments, with the highest demand for personnel are in:
Production of industrial equipment;
Production of metal products and blanks;
Mechanical engineering, machine tool manufacturing;
Metallurgy;
Food industry.
The increase in Russian median salaries was +7.5% over 2023, while workers’ wages are growing at a record pace and crucially, outstripping inflation.
In other sectors, wages in Russia increased on average by the following amounts during 2023:
IT: +8.1%;
Construction: +6.9%;
Marketing, advertising, PR *due to a domestic consumer boom in the wake of foreign exits and sanctions): +6.6%;
Banking & Finance: +6.2%.
Source: Russia Briefing