Russia’s recent unemployment numbers are something politicians in the West can only envy. In the wake of the global financial crisis between 2008-2009, EU unemployment hovered near 12 percent, and in the United States near 10 percent. But in Russia, the numbers were, and are, as much as two times lower. This despite the onset in Russia of its own economic crisis caused by plummeting global prices for oil, Russia’s main export, and sanctions slapped on the country by the West for the Kremlin’s aggressive actions in Ukraine.
Despite the hardships, Russia’s rate of unemployment (now calculated by metrics used by the International Labor Organization) has remained at levels deemed “natural”, i.e. around 5.5 percent. (see graph) Unemployment in Russia today remains 1.7 times lower than in 19 EU countries, but just a bit higher than in the United States. And while the U.S. economy has recovered (3.5 percent annual growth in the third quarter of 2016 and 1.9 percent in the fourth), the Russian economy is struggling and stagnant.
So what gives? How is it that Russia, despite the economic crisis, still has such low unemployment?
The first factor is demographic, and has nothing to do with government policy. A dramatic drop in the Russian birthrate in the 1990s, means fewer potential workers today, and a tighter labor market. There are half as many young Russians (aged between 20-25) in the work force today than those in their forties, to Aleksei Deyatov, chief economist at Russia’s Uralsib bank.
The total number of people employed in the economy reached a high of 75.5 million in 2008, but since then has been in decline. Even now during peak “summer season” months, the number is just 73.5 million (out of a population of 146.8 million), compared to 71.5 million in the traditionally low “winter season.” (graph)
If Russia’s demographics dynamics had remained at levels from the early 2000s, then, for this reason alone, unemployment would be 1.5 percentage points higher than its current rate, explained Vladimir Gimpelson, director of the Center for Labor Studies at Moscow’s School of Economics in an interview with RFE/RL. In other words, if there were more people in Russia’s labor market today, competition for jobs would be fiercer said Elena Kiseleva of the Institute for Advanced Strategic Studies in Moscow.
Experts generally agree government policy does impact Russia’s low unemployment rate whether by accident or intent.
First, the country’s stingy have a lot to do with why the official number of registered unemployed is estimated to be 4.5 times lower than the actual number. (graph) For the eighth year in row, the minimum monthly unemployment benefit remains at 850 rubles ($15 at current exchange rates), while the maximum monthly payout to the unemployed is 4,900 rubles ($85). Even that more generous handout is two times lower than the official minimal monthly living wage, which, as calculated for the fourth quarter of 2016 by the Ministry of Labor and Social Affairs, was 9691 rubles ($168). And that is still a far cry from the nominal monthly wage in Russia in 2016, which was 36,703 rubles ($636). That means the top payout for the newly registered unemployed in Russia was only 13 percent the nominal pay, as compared to 70-80 percent in Western Europe, noted Gimpelson.
“As a result, a Russian, losing work today, simply can’t afford to take off for an extended period of time. He needs to find something to do very quickly to ensure some type of income. And frequently he finds that work in the “informal” economy,” Gimpelson added.
And that leads to the next reason Russian official unemployment is so low: Russia’s huge “informal”, or grey economy. According to by the Institute for Labor Studies, between 25 and 30 percent of Russia’s labor force is working in the country’s informal economy, a barometer of a country's economic maturity.
Official figures for those laboring in Russia’s informal economy are lower, but not much. In early 2015, Russian Minister for Labor and Social Affairs Maksim Topilin that about 20 percent of the Russia’s working-age population is not registered in the country’s retirement system. Not having registered wages, they (or their employers) make no contributions to the country’s pension fund.But the ministry is convinced most of these people are working somewhere. At the start of 2016, according to from the state statistical agency, Rosstat, the percent of people employed in the grey economy hit an 11-year high, 19.8 percent of those engaged in the economy, or nearly 15 million people.