Russia’s Demographic Problems Begin to Bite -- and Bite Hard

Paul Goble

 

            Staunton, January 18 – Demography is destiny, many analysts say, but their opponents insist that that is true only in the very long term. But occasionally, as in Russia today, demography is destiny in the most immediate and direct sense, a reality that many refuse to acknowledge and that limits Moscow’s ability to deal with the current crisis.

 

            As Yekaterina Mereminskaya points out in an article in “Gazeta,” “Russia came to the crisis with unresolved demographic problems which now can turn into catastrophic ones.” The low birthrates of the 1990s and the collapse of immigration mean that it will not have enough workers to ensure import substitution (gazeta.ru/business/2015/01/15/6376785.shtml).

 

            Meriminskaya cites the words of Tatyana Maleva, the head of the Institute of Social Analysis and Prognostication of the Russian Academy of Economics and State Service, to the effect that “Russia is in the first stage of a demographic catastrophe,” one that is not only unprecedented but that is not reflected in official government statistics.

 

            The Russian authorities are proud of the low level of unemployment in the country, but they fail to see that this means there are no reserves to deal with two huge problems: the size of the cohort entering the workforce is far smaller than that leaving it and immigrants are no longer going to make up the difference, Maleva says.

 

            That will have systemic consequences, she continues, but today, “the problem of the labor market is not in the level of employment but in the combination of the growth of unemployment in some oblasts and a shortage of labor in others,” the result of shorter work weeks in the latter.

 

            This contraction has already begun in the financial sector and the media and is spreading to retail trade and housing as well. What it should mean, of course, is that mangers should become workers, but that isn’t happening, or that more rather than fewer immigrant workers should be allowed in.

 

            But just the reverse is happening, Maleva points out. “According to the Federal Migration Service, 70 percent fewer migrants arrived in Russia during the first nine days of 2015 compared to the number for the same period in 2014.”  And their failure to come is already hitting communal services in cities “from St. Petersburg to Vladivostok.”

 

            Moreover, this is occurring on the backdrop of the problem of the aging of the population of Russia. In place of the retiring generation is arriving, in Malev’s words, “the tragically small” generation of the 1990s, who not only are few in number but do not want to become workers at the bench.

 

            “Independently of the crisis, the price of oil, and the ruble exchange rate, the labor market in Russia is entering a very complicated phase, one that is deep, lengthy, and involves a long-term decline in the size of the economically active population,” Maleva says.  This is something, she adds, that “no one in the world has ever passed through.”

 

            Vladimir Mau, the head of Maleva’s academy, adds that “now is departing the last generation capable of working in producing and is arriving a generation which in principle does not want to work in production. And the government must be ready for this shift – possibly by increasing programs for adults.”

 

            But that is far from the only demographically driven problem Russia faces, both say. Although it is not fully reflected in the statistics because Rosstat does not count medicines in its price index, the rising cost of imported medicines is pushing down the standard of living in Russia and will continue to do so as the population ages and needs more of them.

 

            That in turn will contribute to the explosive growth in the share of the population in poverty.  According to Maleva, 12 percent of Russians can be counted as poor now, but that figure is likely to rise to 23 percent by the end of this year – and “for certain social groups, to as much as 30 percent.”  Those increases will eliminate all the progress of the last 20 years.

 

            Inevitably, she continues, prices increases and pay backlogs will spark social tensions even more than was the case in 2009, and this time around, the Russian population has many fewer resources to cope, something which means that the problems it faces will be translated into tensions far more quickly than in the past.

 

            Russians are financing consumption now with savings, but 42 percent of Russians do not have any savings – and that number will continue to grow as prices rise and people try to compensate by drawing down what they have put aside in the past. That means that ever more Russians will feel the bite of the country’s demographic and economic problems.

 

            Because the government and the media are not reporting accurately about this, many Russians do not recognize how serious the current situation is and think that “everything will be fine.” But “if people understood what this year is going to be like,” regardless of whether sanctions are lifted, Maleva says, “they would not be doing so.”