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The Paradox of a Labour-Deficit Economy: Why Russia's Manpower Shortage Became a Ceiling on Growth and Worker Well-Being

The Russian labour market reached the autumn of 2025 carrying two records at once, and they point in opposite directions. The first is a record of scarcity: the share of enterprises complaining that they cannot find workers has grown several times over in five years, while unemployment sits at historic minima. The second is a record of strain: the average actual working week has reached the highest level ever observed in the country's statistics. Set side by side, the two records describe the central paradox of the current economy — a labour shortage that behaves like a constraint on growth and well-being rather than a transfer of power to workers. As Evgeny Vidov (Евгений Видов) wrote in Kommersant (Коммерсантъ) on November 27, 2025, the picture is "more employment, but fewer opportunities": the deficit of labour has become a stable feature of the economy, yet it has not converted into well-being for those who work.

The empirical core of that verdict is a study by the Institute of Economics of the Russian Academy of Sciences (ИЭ РАН), "Worker Well-being in a Labour-Deficit Economy", prepared by Irina Soboleva (Ирина Соболева) and Eduard Sobolev (Эдуард Соболев). As reported in Kommersant, the study asks why a shortage of workers — the condition that in textbook economics should hand bargaining power to employees — instead hardened into a ceiling on their welfare. This analysis follows the study's data through the channels that decide the answer: the quantity of work, the structure and quality of jobs, the price of labour and its share of output, and finally the household balance sheet on which all of it lands. The labour market of Russia is the case; the mechanism is more general.

A deficit that became the climate

The starting point is the scale of the shortage. According to the Institute of Economics study, the share of enterprises reporting a lack of workers rose from 6% in 2019 to 37% in 2024 — a sixfold increase in five years. Over the same period the reserve from which the economy could draw additional workers shrank dramatically: the potential labour force fell from 1.6 million people to 772 thousand. Crucially, the authors attribute the deficit not to demographics but to an imbalance of demand and supply: the economy's appetite for labour outran the pool of people available to fill it, and the gap persisted long enough to change the regime of the entire market.

The vocabulary of the experts tracks the hardening. In December 2023 Igor Polyakov of TsMAKP (ЦМАКП) described the deficit as acquiring the features of a "personnel hunger"; in April 2024 Rostislav Kapelyushnikov of the Higher School of Economics argued that the market had switched into a mode of limited labour supply, and for a long time; TsMAKP's November monitoring put unemployment at minimum levels while naming the labour factor a constraint on the growth of output. A shortage that many expected to be cyclical thus became, in the researchers' own words, the climate in which every other decision — hiring, pay, hours, investment — is made. That is the first half of the paradox: the deficit is real, deep and durable.

Skilled technician inspecting industrial equipment
Skilled technician inspecting industrial equipment

Formalisation at the maximum, quality in the shadow

The second channel is the structure of employment. On paper the labour market has never looked more civilised: in 2024 the share of workers holding a written employment contract reached 96.2%, the maximum over the entire observation period, while oral agreements fell to 1.8%, their minimum. Formalisation of this depth is normally read as a gain in worker protection — a contract means enforceable rights, recorded hours and documented pay.

But the same years show a quieter movement underneath the paperwork. Employment shifted towards mass segments of the labour market, and the share of people working outside their trained specialisation grew. A written contract says nothing about whether the job uses the worker's skills, whether it offers a career line, or whether it matches the education the worker spent years acquiring. The combination — record formalisation together with a drift into mass segments and work outside one's specialisation — means the deficit was absorbed by moving people into whatever vacancy existed, not into the vacancy that matched them. The quantity of employment rose; the quality of the match did not.

There is also a defensive logic to the paper trail. In a market where every employee is scarce, a written contract is an employer's instrument of retention as much as a worker's instrument of protection: it fixes the hours, the pay and the obligations that an oral agreement leaves contestable. The record 96.2% therefore measures the intensity of the struggle to hold on to people, not the depth of the jobs themselves. When the same dataset shows employment drifting into mass segments and work outside one's specialisation, the conclusion is uncomfortable but direct: the market formalised the jobs it could fill, not the jobs the economy needed.

An open book with text lines on one page and a light bulb on the other: skills and specialisation mismatch as employment shifts into mass segments
Record formalisation coexists with a drift away from trained specialisations: 96.2% of workers held written contracts in 2024, the maximum on record, while employment shifted into mass segments and jobs outside one's specialisation.

38.2 hours: the record week as the market's adjustment valve

The third channel is time. Vladimir Gimpelson (Владимир Гимпельсон) of the Higher School of Economics summarised the mechanism plainly: enterprises compensate the lack of workers by increasing hours and intensifying labour. The statistics confirm that this is not a metaphor. The average actual working week in 2023–2024 reached 38.2 hours, a record for the observation series. The comparison set makes the record starker: in developed economies the actual week typically runs between 34 and 36 hours, with Germany at 34 hours and the Netherlands at around 30.

A gap of two to eight hours a week is the physical form of the deficit. Every hour above the developed-economy band is an hour the economy extracted from people already employed because it could not find additional people. Intensification of this kind raises output today without raising productivity tomorrow: it spends the worker's reserve of time and health instead of building capacity. It also explains why record employment and record strain appear in the same dataset — they are two views of one and the same adjustment.

What the record week replaces

In a market with a usable labour reserve, a demand shock is met by hiring. In a market where the reserve has shrunk from 1.6 million to 772 thousand people, the same shock is met by hours. The record week is therefore not a sign of prosperity but a substitute for the hiring the reserve no longer allows — and a substitute with diminishing returns, because intensification eventually collides with the physical limits of the working day and with the well-being of the people whose hours it consumes.

Wages that chase scarcity, not productivity

The fourth channel is pay, and here the numbers look like a success story until their cause is examined. Between 2018 and 2024 the average nominal wage rose from 43.7 thousand to 89.1 thousand rubles — roughly a doubling in nominal terms. Dmitry Belousov (Дмитрий Белоусов) of TsMAKP reads this growth as a reaction to the deficit rather than a reward for productivity: employers bid up the price of labour because labour is scarce, not because each worker produces more. The distinction matters. A scarcity premium is paid for the absence of alternatives; a productivity gain is paid for the presence of value created. Only the second is durable, and only the second enlarges the pie rather than redistributing a fixed one under pressure.

The employer side of the same mechanism is a bidding contest concentrated where the shortage bites hardest — the mass segments that absorbed the drift of employment. When pay rises as a reaction to scarcity, the increase attaches to the vacancy rather than to the person: it follows the job's shortage, not the worker's contribution. That is why the wage ladder of 2018–2024 could double the average without rebuilding the link between pay and productivity, and why the study finds employment income so often insufficient to end financial vulnerability even at record nominal levels.

The household side shows the limits of the premium. Employment income, the study's evidence indicates, frequently does not lift households out of financial vulnerability: more than a third of households cannot cover sudden and basic expenses from their resources. And the expectations gap quantifies the sentiment: in SuperJob's (SuperJob) 2025 survey the desired "comfortable" income exceeded 250 thousand rubles a month against an average nominal wage of about 90 thousand. When the comfort line sits at nearly three times the average wage, wage growth — however fast — is experienced as falling short, because households measure it against the cost of security, not against last year's payslip.

The comfort gap

The 250-thousand comfort line against a 90-thousand average is not a statement about greed; it is a measure of how far current pay sits below the income at which households feel safe. Combined with the finding that more than a third of households lack a reserve for sudden expenses, it shows that the scarcity premium bought employment growth without buying financial security.

The distributional ceiling: Gini, the 3.67 gap and labour's 44–45% of GDP

The fifth channel is distribution. The wage Gini coefficient fell from 0.456 in 2005 to 0.404 in 2023, and the gap between high- and low-paid positions stands at about 3.67 times. Compression of wage inequality is usually welcome; in a labour-deficit economy, however, part of that compression is mechanical — scarcity bids up the bottom of the distribution faster than the top — and it does not by itself enlarge labour's overall claim on output. That claim is the number that sets the ceiling: the share of labour in GDP stands at 44–45%, against about 55% in OECD countries and 57–60% in Scandinavia.

Ten to fifteen percentage points of GDP is the distance between an economy where growth automatically feeds wages and an economy where it does not. Within a 44–45% labour share, even a generous scarcity premium redistributes a smaller slice than workers in developed economies receive as their normal share. This is why the deficit could double nominal wages and still leave more than a third of households without a reserve: the flow grew, the share did not.

The Scandinavian reference point sharpens the comparison. At 57–60% of GDP, labour's share in those economies leaves room for wages to rise with growth even without a labour shortage; at 44–45%, the Russian economy needs either a shortage strong enough to force premiums or a productivity jump strong enough to enlarge the slice — and the first of these two engines, as the household data show, runs out of road long before it delivers security.

hh.index 7.3: the market's own balancing signal

The sixth channel is the market's self-correction, and it is already visible. HeadHunter's (HeadHunter) October 2025 data show fewer active vacancies and more resumes than before; the hh.index — the platform's ratio of resumes to vacancies — reached 7.3, the maximum since the beginning of 2023, a level the platform classifies as moderate competition for jobs. In plain terms, the queue per vacancy is lengthening again.

Read against the previous sections, the index is a signal of balancing rather than of health. If the scarcity premium was the main channel through which the deficit transferred anything to workers, then an easing of scarcity removes that channel before the structural ones — productivity, labour's share, the skill match — have been repaired. The market may return to a buyer's balance while the qualitative constraints described above remain fully in place.

Two signals of different frequency

The October 2025 turn does not contradict TsMAKP's monitoring of unemployment at minimum levels; it complements it. The unemployment rate measures the stock of people without work, and that stock remains tiny. The hh.index measures the flow of competition at the vacancy gate, and that flow is thickening as resumes accumulate faster than vacancies. A market can therefore stay at full employment in the stock sense while loosening at the margin in the flow sense — precisely the configuration in which the scarcity premium weakens first, before any structural channel has changed.

Why a quantitative deficit became a qualitative constraint

The paradox resolves once the channels are lined up. The deficit was met extensively rather than intensively: hours and headcount absorbed it (38.2 hours a week, a drift into mass segments), paperwork formalised it (96.2% written contracts) without fixing the skill match, and price paid for it (43.7 to 89.1 thousand rubles) as a scarcity premium rather than a productivity gain. What the deficit did not change is the qualitative base of well-being: labour's share of output stayed at 44–45% against developed-economy norms of about 55%, and more than a third of households remained one unexpected expense away from strain. A shortage that raises the price of labour without raising the value labour creates converts, over time, from leverage into limitation — for growth, because the labour factor caps output as TsMAKP's monitoring observes, and for well-being, because the gains arrive as premiums that inflation and vulnerability eat.

Each channel, taken alone, looks like an adaptation; taken together, they describe an economy that paid for its labour shortage with the worker's time, health and security instead of with capital, technology and skills. The Institute of Economics study's framing makes the stakes explicit: well-being in a labour-deficit economy depends on whether the deficit raises the value created per hour, or merely the number of hours sold. The Russian data answer that question in the second sense, and the consequence is the paradox of the two records — employment at a maximum, opportunity at a minimum.

  1. Quantity over quality: the shortage was covered by hours and by moving people into mass segments and jobs outside their specialisation, not by productivity;
  2. Paper over match: formalisation peaked at 96.2% written contracts while the skill-to-job match deteriorated;
  3. Price over value: nominal wages doubled from 43.7 to 89.1 thousand rubles as a reaction to scarcity, in Dmitry Belousov's reading, not to productivity;
  4. Share unchanged: labour's slice of GDP remained at 44–45% against about 55% in OECD countries and 57–60% in Scandinavia;
  5. Security last: more than a third of households lack a reserve for sudden expenses, and SuperJob's 2025 comfort line of over 250 thousand rubles stands against an average wage of about 90 thousand.

The forward view follows from the same logic. Kapelyushnikov's "long mode of limited supply" means the constraint does not expire by itself; HeadHunter's 7.3 means the scarcity premium may fade before the structural channels are rebuilt. For the deficit to stop being a ceiling, the adjustment has to move from hours and premiums to productivity and to labour's share of output — the two variables that, in the Institute of Economics study's framing, decide whether employment growth becomes well-being or merely occupies it. Until then, the labour market will keep producing its two records together: more employment, and fewer opportunities.

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