Demographic crisis in Russia: what consequences does it bring to human resources ?

29 March 2017

Demographic crisis in Russia: what consequences does it bring to human resources ?

People often talk about demographic crisis in Russia underestimating its consequences and dynamics that was a result of the collapse of births following the collapse of the Soviet Union.

1980 – 1990

In the decade before the fall of the Soviet Union from 1980 to 1990, Russia had 600,000 new inhabitants as an annual average growth in 2.2 million births and 1.6 million deaths (more births than deaths).

In 1990, the population of the Soviet Union was 292 million inhabitants, whereas 147,969,000 inhabitants of the whole amount lived inside the Russia’s nowadays borders.

1990 – 2000

At the fall of the Soviet Union, the economic and political collapse led to a demographic catastrophe.

Starting from 1991 the number of births began to decrease, going from 1,794,626 annually to 1,214,689 in 1999, while the fertility rate crashed from 1.89 to 1.17 children per woman. At the same time, the collapse of the health system that resulted from the economic crisis caused the return of diseases that could be found only in the poorest countries of the planet. As a direct consequence, the number of deaths increased dramatically from 1,690,657 in 1991 to 2,144,316 in 1999.

This situation marked the beginning of the new demographic terminology specific up to the country: the term “Russian cross” defining a low birth rate and high mortality. During the first post-Soviet decade, Russia naturally lost between 750 and 900,000 inhabitants per year, a demographic collapse that has never been seen in a country not being at war.

Logically, numbers of pessimistic demographic predictions appeared at that time. The CIA said that the population of Russia would reach only 130 million inhabitants in 2015 (when it established itself in 2016 up to 146.8 million inhabitants). In 2002, the Robert Schuman Institute imagined that by 2050, the population of the country would reach “between 77.2 million and 101.9 million inhabitants” under more or less optimistic scenarios. For most observers, Russia was doomed to die.

2000-2017

However the economic stabilization from 2000 and the launch of a huge demographic plan starting in 2005 to support the birth rate crashed all the predictions and turned the demographic situation drastically. The number of births continued to increase from 1,266,800 in 2000 to 1,893,256 in 2016, while the number of deaths decreased from 2,365,826 in 2003 to 1,887,913 in 2016. The fertility rate rose from 1.17 to 1.8 children per woman between 1999 and 2016, more than in the European Union.

As a result of this new dynamics, Russian population is increasing naturally again since 2012 of 25,000 inhabitants in 2013, 30,000 in 2014, 32,000 in 2015 and 5,000 in 2016. Russian population, which had been decreasing in numbers during terrible 15 years (1990-2005) managed to reach 142,742,368 inhabitants in 2008 and now reaches (01/01/2017) 144,498,215 inhabitants without the Crimea and 146.8 million including the Crimea.

2017 – 2030 ?

The Russian State Institute Rosstat is now setting up updated demographic prognoses taking into account the annual demographic trends. Three scenarios exist:

– «The pessimistic» scenario states that the Russian population will reach 143,2 million in 2030.

– «The average » scenario being most plausible claims that the Russian population will reach 147,1 million in 2030.

– «The optimistic » scenario says that the Russian population will reach 152 million in 2030.

Yes, but what about Russian demography?

In spite of this incredible demographic thaw, the population of Russia will face an extremely complicated situation over the next fifteen years, due to appalling lack of births during the period 1990-2000, that is obvious according to the age-gender pyramid.

As an example, the nowadays population of 30-year-old Russians (people born in 1987) represents 2.58 million people in 2016, with 1.3 million men and 1.28 million women. At heart of the Russian demographic crisis in 2030, same 30-year population (people born in 2000) will be only 1.4 million with 685,000 women and 720,000 men, 50% less than today (!).

From the point of view of the labor market, this means that the number of the newcomers to the labor market will start a serious decrease from 2017, even though the unemployment rate is already very low. This trend will be indicated until 2030, at which time the increase in births started from the 2000s will be noticeable.

Therefore we are only on the edge of the demographic crysis on Russian labor market.

How and where will we be able to find qualified, Russian-speaking and Russian labor market oriented human capital to work in Russia if it is not just “in” Russia? The lack of internal demographic resources would lead to an increased flows of immigration.
The lack of available internal demographic resources could lead to an increased import of human power from abroad.

What is a part of immigration in all that?

During the 1990s, millions of ex-citizens (from the former USSR) suddenly found themselves separated into foreign countries at the fall of the Soviet Union. These “red feet” returned to Russian Federation, creating a mainly Slavic migratory flow that largely compensated the demographic collapse that the country experienced at the same time due to decrease of births, rising mortality and mass-emigration to Western countries.

During the 15 years period 1999-2014, immigration trend changed and turned mainly to the CIS and particularly to Central Asia. During the period 2000 – 2014 several “millions” of foreign workers appeared, mainly from Central Asia, working mainly for the unpleasant tasks of construction and urban maintenance.

Nevertheless, due to the war in Ukraine and the fall of ruble’s currency large part of this work force left Russia by the end of 2014. There has been a new wave of Slavic migration hitting Russia during the last two years: hundreds of thousands Ukrainians have emigrated to Russia to flee the war and the crisis that their country has been going through. Large parts of those migrants are probably not going to leave Russia anymore.

Unfortunately for the Russian labour market, these migratory flows are not going to be a sufficient support for Russian economy, because at least part of migrant workforce is not trained and competent enough to meet the future needs of the local economy.

So what are the solutions?

The absence of an internal demographic resource could encourage a shift towards a selective form of immigration and not the massive one, but this strategic decision might need special measures to attract the best human capital from the neighborhood and distant countries.

The launch of visas such as the VKS visa (for highly qualified specialists) shows that Russian authorities have already understood these necessities, but the tool, although an advantage for employers with the current ruble’s price, is far, far from sufficient.

The complexities surrounding the settlement in Russia could justify the establishment of centers to prepare people for specific sides of language, culture, life and work in Russia. These centers could be launched in and outside the country. Such programs could serve as a springboard for tens of thousands of young potential workers to attract, welcome, select, prepare and accompany them logistically during their professional installation in Russia.

It is an increasing necessity, if we consider that the popularity of Russian language is vanishing in certain countries, such as France, where even the descendants of old Russian emigrants (who immigrated to Europe during XXth century) do not know how to come back to Russia.

The low currency of rubles is undoubtedly favorable to Russian economy, but at the same time creates a quiet complex situation to attract migrants. Even if they work in Russia, their reflexes and financial obligations are deeply related with the value of the currency of their country of origin. This has been the case since 2014 with the low-skilled workforce from Central Asia as well as with highly skilled workforce of western expatriates, two types of workforce that left Russia in numbers because of the weak ruble.

This overall demographic situation should increase the very particular characteristic of Russian labor market that faces a real shortage in available and qualified work force. This shortage dynamics are perplexing while in large Russian cities companies are already struggling to find, keep and train competent human capital. This lead to the situation that companies are bound to develop like they can but not like they want.

The first consequence for the candidates will probably be the possibility to bargain for their wages upwards while being permanently pursued by competitors of their employers, new market players or agencies constantly looking for the new talents on the job market.

Will the future of recruiters in tomorrow’s Russia consist of headhunting for middle management positions, or even lower management positions? Will the work of recruiters evolve more and more towards marketing and sales to promote their customers and their open positions?

Will the future for companies be to nurturing talent pools and ensure their integration and loyalty through amazing integration / retention plans?

Will the hyper-concentration of talents in the few large urban centers, and of course Moscow at the top, leave Russian regions with no future?

The battle for talents in Russia has just began.