18.07.08

The number of people employed in the Russian economy has increased by only 300,000 (0.4%) over the last year, according to data released yesterday by the Federal State Statistics Service (Rosstat). Economists are concerned that unused labor resources may be reaching their limit. In other words, the extensive model of economic growth is running out of steam; Russia needs investment and higher labor productivity.

Rosstat released its latest labor market survey yesterday. As at February 2008, the number of economically active people aged 15-72 was 74.8 million, or 66.8% of the population in that age range. The breakdown: 69.5 million people employed in the economy, 5.3 million recognized as unemployed. The number of economically active people increased by only 219,000 (0.3%) over the past year, and the number of employed people increased by 300,000 (0.4%); the number of unemployed dropped by 1.5%.

Employment growth in previous years was substantially greater. Last year, Rosstat concluded that more and more citizens who weren't working at all or didn't need to work – primarily young people, pensioners, and women with children - were being drawn into the economy. That conclusion is harder to draw now; the supply of "spare" labor resources, not involved in the economy, seems to be running out.

"The number of employed people has hovered around 70 million since 2006, following a steady rise in earlier years," says Sergei Zaversky from the Complex Strategic Studies Institute.

"The supply of working-age individuals will shrink, and aside from particular groups - the poor, disabled, marginal strata - there is no one else to draw on," says Irina Denisova from the Economic and Financial Studies Center. "The employment of working-age able-bodied individuals has reached its limits."

Igor Polyakov from the Marcoeconomic Analysis and Short-Term Forecasting Center agrees: "The domestic supply of labor resources is approaching its limit." Labor migration might help, but despite extremely diverse estimates of its volume - up to 15 million people - Rosstat consistently indicates the same number of working-age people in Russia: around 112 million.

Another resource for increasing employment involves drawing more women into the workforce; but this option is almost impossible for Russia. Goldman Sachs analyst Rory MacFarquhar notes that in India, for example, only 36% of women are employed outside the home (according to the World Bank); but Russia's female employment level is around the same as that of developed nations.

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Source: Kommersant.ru, translated by InterContact