Russian Economy Set to Take Another Hit – A Much Smaller Labor Force in the Future

Paul Goble

            Staunton, November 8 – To the extent that falling prices for natural resources will force Moscow to rely on the development of other sectors, the Russian economy faces another and perhaps even more serious hit in the near term – a dramatically smaller workforce, each of whose members will have to support significantly larger pensioner and youth populations.

            That in turn means that the government will have to go into debt to support these non-working groups because it will not be able to rely either on earnings from the export of raw materials or from the production of its own workers in other sectors, thus imposing further downward pressure on economic growth.

            These are just some of the issues Russian experts and officials are grappling with following the release of a World Bank report showing that in the 2020s, the number of working-age Russians will fall by more than seven million, “twice more than in this decade” (finanz.ru/novosti/aktsii/vsemirny-bank-podskazal-rossii-lekarstva-ot-starosti-v-nishchete-1000899328).

            And the Bank’s experts say that Russia’s available workforce will continue to decline by “approximately a quarter” by 2050 compared to 2010, which will mean that each worker will have to “carry” 50 percent more people who will be either underage or pensioners, with the latter group especially likely to increase along with the average age of the population as well.

            The aging of the Russian population, the Bank’s experts say, will by itself reduce Russian economic growth by 1.3 percent each year over the next 25.  And that will require more government spending on pensions and health care, something Moscow should deal with in part by raising the retirement age, an extremely controversial step in the population.

            If the elderly can be kept on the job, the Bank report continues, that would boost Russia’s labor force by two to three million and keep the lower birthrates of the 1990s and subsequently from limiting economic growth in the non-raw materials sectors.

            The World Bank expects birthrates in Russia to continue to fall and suggests that Moscow should devote “more attention” to supporting those families “who want to have more children,” a pro-natalist policy to which the Russian government has given lip service but not provided the enormous amount of resources that would be required for it to be successful.

            The report also calls for boosting training and pay for women so that more of them will want to remain in the workforce even if incomes rise – and to assist that by providing support for fathers whose wives have recently given birth. Doing any of these things will be controversial; doing none of them will make Russian economic growth in the future far more problematic.