The great Russian brain drain

Russians attempting to leave their country at the Georgian border in Stepantsminda, Georgia on September 27, 2022. (Photo by Mirian Meladze/Anadolu Agency via Getty Images)

In the coming decades, the proportion of elderly people in the world’s population will increase dramatically, driven by rising life expectancy and declining birth rates. According to the United Nations, last year, the proportion of people over the age of 50 worldwide surpassed that of children under the age of 10 for the first time and will continue to grow. By 2050, the proportion of people 65 and over is expected to hit 16%, up from about 10% in 2022. While aging populations are often associated with developed countries, this demographic shift is also occurring in many developing nations, which are key drivers of the global economy. 

Few countries will be hit as hard as Russia, which has the per-capita GDP of a developing economy but a demographic structure resembling that of much richer countries. Russia’s demographic problems are well known: high mortality rates, low birth rates, and high levels of out-migration. According to Rosstat, the state statistics agency, at the start of 2023, Russia’s population was 146.4 million. The population peaked at nearly 148.6 million in early 1993 before beginning to decline. After a minor increase in 1994, the decline persisted until 2009, when the population began to rise slightly. That growth was partly due to the inclusion of annexed Crimea in 2014 and changes to labor force age limits in 2017. But then the growth faltered, first due to the COVID-19 pandemic, and then because of Russia’s war against Ukraine.  

Since 2021, Russia has experienced an average natural population decline of half a million people a year. Rosstat’s demographic forecast for the country’s future is grim: By 2045, the population is expected to decrease by 5% to 138.8 million under the medium estimate, and by up to 11% (130.6 million) under the low estimate. Even the high estimate predicts a moderate decline until 2030 before a potential rebound.  

Even the more reasonable projections of Russian demographics are misaligned with reality. For one thing, they do not account for deaths related to the war in Ukraine, which exceed 60,000, according to even the most conservative estimates. Nor do these projections fully reflect the number of Russians who have fled their country since the invasion of Ukraine. In 2022, the out-migration spurred by the war and President Vladimir Putin’s partial military mobilization was the most significant exodus of Russians in the past 30 years. In total, the war in Ukraine has led over 800,000 Russians to leave the country in the last few years. That figure, too, is likely a conservative estimate. Most of these emigrants settled in neighboring countries that don’t require a visa, principally Armenia, Kazakhstan, and Georgia. In addition, some 80,000 Russians moved to Israel, 48,000 moved to the United States, 36,000 moved to Germany, and more than 30,000 moved to Serbia. 

A billboard promoting Russia's military invasion of Ukraine that reads "Pride of Russia" in Moscow, Russia on February 25, 2024. (Photo by Contributor/Getty Images)

This wave of emigration is highly political, as many that left the country opposed President Putin’s regime and the war against Ukraine. Not coincidentally, many of these emigrants had higher levels of education and more stable financial situations than the average Russian. They also tended to be young – between 20 and 40 years old. Approximately 80% have some sort of higher education and work in fields that require intellectual expertise like IT, data analysis, business, science, and culture.  

Many of these Russian emigrants are already thriving in their new homes. According to a study from OutRush titled The Great Exodus: A Portrait of New Migrants from Russia, about a quarter of new Russian migrants already speak the language of their new country or are making significant efforts to learn it. Two-thirds of those who left Russian companies joined international or local firms, according to OutRush surveys. These emigrants represent the most active segment of the population and possess high human capital. This large-scale brain drain will inevitably affect Russia’s labor market.  

Russian employers are already experiencing a shortage of qualified employees in important sectors like IT, finance, biotechnology, and medicine. In order to fill vacancies, Russian employers are being forced to lower their job requirements. Thanks to Western sanctions on Russian corporations, those companies are also having difficulty importing skilled workers to make up for the lost human capital. Even those Russian businesses not directly affected by sanctions are struggling to attract talent. For one thing, a skilled worker from Asia or the Gulf States with a foreign education would likely prefer other opportunities in more stable countries over an increased salary in Russia. Even if such a worker did choose Russia, they would then face difficulties getting the money they earned out of the country – and that’s not to mention the risks associated with being a foreigner in a hostile environment and with having a toxic line on one’s CV. 

Tourists outside a theater in Tbilisi, Georgia (a popular refuge for Russian exiles) on July 3, 2022. (Tako Robakidze/Bloomberg via Getty Images)

Lacking labor 

Though the 650,000 Russians who have fled since 2022 make up just 0.85% of the country’s workforce, they still represent a significant loss for Russia, which is now grappling with a limited supply of labor. Unemployment in Russia has hit a historic low of 2.4% and is still falling, forcing the military, the bloated military-industrial complex, and the broader economy to all compete for the same workers. About 700,000 Russians are currently stationed on the front lines, and the army depletes the labor market by 10,000 to 30,000 workers per month. That’s 0.5% of Russia’s labor supply each month. 

Russia’s private sector simply cannot keep up with military recruiting. Regions are competing to attract contractors for the military, offering recruits who sign up substantial one-off payments. St. Petersburg, for instance, has raised signing bonuses to 1.3 million rubles ($14,300). Krasnodar has raised them to 1.5 million rubles ($16,500), Bashkiria to 505,000 rubles ($5,500), and Moscow to almost 2 million rubles ($22,000). These payments are already a significant burden on regional budgets, and because of the difficulty finding recruits, the Kremlin recently had to add an additional 400,000 rubles ($4,400) to all new contract signings. That increase suggests that Russia has already recruited almost anyone who is willing to serve in the war. The civilian sector cannot compete financially with the government’s signing bonuses. The result will likely be more labor shortages, which will in turn lead to a decline in production across Russia’s private sector.  

Russia’s defense sector is also facing labor problems. Despite an influx of nearly half a million workers from the civilian sector in the past 18 months, the largely state-owned defense industry still faces a shortage of about 160,000 specialists, Deputy Prime Minister Denis Manturov said in June. To attract workers, defense companies are raising salaries – a trend that is spreading across the Russian economy. Indeed, wage increases are outpacing inflation: Between January and April, they rose by 19%. 

The fastest wage growth is in industrial areas, led by the Kurgan region – home to the country’s only armored personnel carrier plant – at 33%. The industrial regions of the Volga and the Urals, where most of Russia’s production of armaments and military equipment is concentrated, are close behind. The economy is operating at 84% capacity, which is substantial, but further growth in output will be limited by labor market constraints. The Russian economy is already overheating – supply is not keeping pace with demand – which is driving up inflation.

The most obvious solution to Russia’s manpower shortage is immigration – principally from Central Asia, Russia’s traditional source of new unskilled workers. In the last two years, migration (excluding population increases associated with the occupation of Ukrainian territory) helped compensate for Russia’s natural population decline. In 2023, 4.5 million foreigners entered Russia for work. That represented a 30% increase over the year before. The deadly March terrorist attack at Moscow’s Crocus City Hall concert venue, however – allegedly carried out by nationals from Tajikistan – fanned the flames of Russian xenophobia. Migration from Central Asia may therefore fall short of expectations in 2024, especially since Russia also faces competition from the Middle East and South Korea for Central Asian labor.  

All these forces are creating a dilemma for Moscow. Excluding the hypothetical import of North Korean workers, Russia has virtually nowhere else to turn for new labor. 

A Russian Army officer demonstrates an assault rifle to a boy during a pro-military event in Krasnogorsk, Russia on February 24, 2024. (Photo by Contributor/Getty Images)

Rocks and hard places 

Poor demographics and labor shortages are the primary challenges facing the Russian economy. The Kremlin lacks sufficient human resources to both sustain the war effort and ensure economic growth. For the reasons explained above, attracting more migrants won’t work. Given these constraints, wage increases have already led not to higher labor productivity and technological advancement but to increased inflation.  

Lowering wages is politically difficult for any government. The Kremlin is unlikely to do so, meaning increased wages will be eaten up by inflation. That will lead to even higher costs for the Kremlin year after year. Along with direct spending on the war, Russia faces serious budget problems. 

It is highly doubtful such problems – serious as they are – will create political risks for the Kremlin, however. Complete control over information and propaganda and continued sanctions will allow President Putin to attribute the slowing of the Russian economy and the deterioration in quality of life to the actions of the insidious West. 

At the same time, the outflow of Russia’s best and brightest will reduce the competitiveness of the Russian economy. The Kremlin knows this but has so far refrained from closing its borders completely or implementing Soviet-style restrictions on mobility like exit visas. NATO countries should let the Russian economy bleed and encourage the emigration of talented Russians by adjusting their own migration policies and lifting some sanctions. Lifting visa and banking restrictions for nonsanctioned Russians in addition to restoring scholarships for Russians who are not pro-Kremlin will make Russia feel the pain of lost capital and brain drain.