The Russian economy continues to limp along, propped up by a variety of mechanisms to artificially keep things humming. The problem is, Russia doesn’t have many arrows left in that quiver.
For one, Russia is suffering from a severe labor shortage. Unemployment in September was a record low of 3%, and while low unemployment sounds good in theory, economists get skittish when unemployment rates drop below 4%. That 4% represents the normal “churn” of businesses going under, people getting laid off, etc. Go much below that, and businesses are faced with having to leave positions unfilled, or filling them with underqualified workers.
How bad is the Russian labor shortage? Bad enough that they are resorting to the old Soviet practice of using widespread prison labor.
"The Russian economy is facing harsh structural challenges, including the lack of a qualified work force," Jamestown senior fellow Sergey Sukhankin said in a note on Monday. "The Kremlin has sought to integrate prison labor with certain sectors of the domestic economy to solve this issue."
The use convict labor isn't new to Russia. The practice dates back to the Soviet era's "Gulag" system, where convicts were assigned to work in the riskiest and most "lucrative" sectors of the Soviet Union's economy, Sukhankin said.
Given that the Russian military is also using convicts as cannon fodder, the question is, will there be sufficient prisoners to supply the demands of both?
Meanwhile, Russia’s lack of scientists has accelerated since the war started.
The number of scientists in Russia has decreased by around 25 percent over the past two decades, and this is hindering the country's ability to achieve "technological independence," a top Russian security official, Nikolai Patrushev, said this week [...]
A large number of scientists and academic staff are believed to have fled the country after Russian President Vladimir Putin launched a full-scale invasion of Ukraine in February 2022, and again after he announced a partial mobilization of the population last fall.
Those losses are going to hurt Russia’s long-term ability to innovate or even remain on par with other countries in scientific fields.