The nominal incomes of Russians have increased by 17 percent in the first nine months of 2024 compared to the same period in 2023, according to official statistics. They are even growing in real terms - by 8.6 percent.
Since the beginning of the war against Ukraine, the growth of real incomes in Russia is likely to exceed 18 percent - such economic rates have not been seen in Russia since the beginning of the century. The Russian authorities, led by Putin, present the current growth in incomes as their great achievement. But what is the reason for this dynamics and can this really be called an achievement?
Russians' incomes: salaries grow, pensions fall
The main reason for the growth in incomes is the level of wages. From January to September, the average wage increased by 9% compared to the previous year, and the nominal one - by 18%. A survey shows that practically all companies have increased the salaries of their employees - a fifth increased them by over 20%, and 43 percent of enterprises - by 10-20 percent. The expectations are that the annual inflation in Russia will reach 9.6 - 9.8 percent.
However, not only have pensions not increased, but they have even fallen - by 0.7 percent. Other social payments are increasing - along with the generous bonuses that hired soldiers receive, as well as the compensation given to the families of the military and those who died at the front.
In addition, income has recently increased due to high interest rates on bank deposits. However, the share of these incomes in the total volume is not large - only 8%. The share of social payments is 18%, and of wages - 59%.
In addition, incomes from deposits have been increasing recently - thanks to high interest rates on bank deposits. But the share of these incomes in the total volume is not large - eight percent. The share of social payments is 18 percent, of wages - 59%. 59 percent.
The war created a shortage of personnel in Russia
At the end of 2024, unemployment in Russia was at a record low - 2.3 percent, and in a third of the regions it was even below 2%. Wage growth is directly related to this phenomenon: the shortage of personnel forces employers to increase wages.
But this is not an indicator of a healthy economy. The labor force began to be scarce not because new jobs were being created, but because the war emptied the labor market, depriving it of hundreds of thousands of workers. The Bell newspaper writes that about 650,000 people have left Russia since the beginning of 2022 and have not returned. Another 300,000 were forcibly mobilized, and over 400,000 went to fight voluntarily, attracted by the high salaries in the contracts.
Another reason for the personnel shortage is the reduction in the influx of migrants. Along with the general instability of life in modern Russia, the influx of foreign workers was limited by the campaign against migrants launched by the authorities after the terrorist attack on the Crocus City Hall concert hall, in which at least 140 people died, and a unit of the so-called "Islamic State" claimed responsibility. One of the latest examples is the law prohibiting the admission to school of children of migrants who do not know Russian.
The military-industrial complex also plays an important role in the emerging shortage of personnel. In order to increase weapons production, defense enterprises began to attract workers from other sectors of the economy, offering them higher wages. The affected enterprises also had to increase wages to retain their employees.
Unemployment will remain low, but wage growth will slow down
Attracting migrants is actually the only reserve of the Russian labor market, says Rostislav Kapelyushnikov, deputy director of the Center for Labor Research. He is convinced that the employment of young people should not increase further so that they can concentrate on their studies. The employment of women with children is already high, and the employment of older people has already increased after the retirement age was raised.
Since the Russian authorities clearly do not intend to attract more migrants, the shortage of personnel will persist. But wages will grow more slowly because the Russian economy has begun to slow down, explains financial analyst Olga Belenkaya. Official statistics show that in the first nine months of this year, Russian business profitability has fallen by 18 percent, which means that companies have less free cash. And next year, corporate tax will also increase - by 20 to 25 percent. At the same time, expensive loans are becoming an increasingly serious problem for the financial situation of enterprises.
The Russian government's forecast is that in 2025, wage growth will be 7%, and in 2026 - no less than six percent. Independent experts are more skeptical - according to Professor Natalia Zubarevich of Moscow State University, wages will be able to rise more than inflation only in defense enterprises and in the largest companies. “In trade, wages have already reached the ceiling, and so has construction.“
Wages are growing after decades of stagnation
Thanks to the growth in wages, working Russians will have more money - but only compared to the last years before the war. In 2014, as a result of the sharp devaluation of the ruble, Russians' incomes collapsed and have stagnated since then. The main reason for this was the decline in world oil prices. Sanctions imposed on Russia in response to the annexation of Crimea also played a role.
In the period up to 2020, incomes in Russia did not change at all, remaining 7-8 percent lower than in 2013. In the current 2024, the level of the distant 2013 will be exceeded by about 12 percent.
If the incomes of Russians are converted from rubles to dollars, the picture will turn out to be even less rosy. The difference with 2013 will be only a few percent. Both then and now, the average nominal salary of Russian workers is just over $800.
Author: Oleg Khokhlov