If the old phrase “demography is destiny” holds true, Russia’s future looks particularly dire. The Russian population has declined for the first time in a decade, as a result of what has been labelled the second demographic crisis. Such negative demographic trends – caused by structural factors, as well as the Kremlin’s unsuitable or insufficient policies – are bound to have very serious consequences for Russia’s labour market and, more in general, its economy in the years to come.
Granted, the challenges springing from falling birth-rates and ageing populations do not concern Russia only: many other states in North America, Western Europe and most of the BRICS suffer from the very same problems, which add further loads on already stressed government budgets and healthcare programmes. Yet high levels of mortality (especially among men) make the situation in Russia particularly worrying. In 2018, deaths continued to exceed births: according to data from the state agency Rosstat, in 2018 there was a decline in newborns of 90,600 compared to 2017. The decline was not matched by the influx of immigrants as had been the case in the past. As a result, the population declined by 93,500 (out of 146.8 million people). Furthermore, more and more Russians are leaving their country. Rosstat estimates that 377,000 Russians left the country in 2017, the latest period for which figures are available and a six-year record. Yet it is not straightforward to ascertain the number of Russians migrating, especially to specific countries like the US and Germany. In fact, there is a certain discrepancy between the numbers given by Rosstat, on the one hand, and the UN and especially the OECD due to methodological differences, something that suggests that the real number of Russians emigrating from their country is much higher than the numbers Russia has officially reported, as shown by a study published by the independent media outlet Proekt. A report by the Atlantic Council claims that since president Vladimir Putin’s ascent to the presidency, and especially since 2012, between 1.6 and 2 million Russians have left for Western countries, substantiating fears of a dangerous brain drain. And a 2019 Gallup poll showed that 20 percent of working-age Russians said they would leave Russia if they could – a threefold increase from five years ago.
Certainly, this is a bleak picture for Russia’s labour market. According to a World Bank report published in 2016, factors such as the decline in fertility and the retirement of large numbers of people born in the 50s could reduce the working-age population in Russia by around 14% over the next 35 years. If there is no change in labour force participation rates, Russia could face a shortage of over 20 million workers and the dependency ratio could increase by over 50%, causing a drop in productivity and other serious problems to the welfare system. Already in 2017, thinking about closer time horizons, the then Minister of Economy Maxim Oreshkin warned about the big risks related to the shortage of young workers for potential economic growth in the following five to six years. Oreshkin blamed factors on which the Russian government had little leeway. In fact, this emergency would be materializing in a particularly acute form now because people born in 1999 – when the birth rate in Russia reached an all-time low – have reached working age.
In light of these dynamics, it appears evident that the launch of the recent reform of the pension system, finally approved by the Duma last October, was an urgent need for the government. The new legislation raises the retirement age for men from 60 to 65 years and for women from 55 to 60 years. The government had initially planned to raise the retirement age for women to age 63, but Putin then announced that he would limit the increase in an attempt to appease the criticism raised by the reform. The anger at the reform seems justified, considering that average life expectancy in Russia is 65.9 years for men and 76.5 for women. These numbers vary greatly from region to region; in Moscow, both men and women live much longer, almost like in more developed Western countries, but in the economically depressed regions of the far north life expectancy is much lower. In light of that, with this reform, many men simply will not live long enough to receive a pension.
If the causes of this demographic crisis are due mainly to demographic factors (increasing mortality rates, changes in the age structure of the population, ageing, decrease in women of fertile age), unsuitable policies – such as the reduction in the number of hospital beds, Moscow’s countersanctions against medicines previously imported from abroad and inadequate immigration policies – certainly did not help. The Kremlin will have to act precisely on policies to limit the effects of this crisis, such as the improvement of available hospital facilities and the promotion of public-private partnerships. Russians’ spending on private health care has already increased tenfold in the last 15 years to almost a third of the total market, while over 500,000 Russians travel abroad each year for medical or surgical treatment. But measures promoting more virtuous habits among the population, such as a healthier diet, are also crucial. For example, Alexander Tkachyov, head of the Ministry of Agriculture, recently promoted wine as a substitute for stronger alcoholic beverages such as vodka. According to Tkachyov, interest in quality wine is growing and, by drinking more wine, the Russians could see the country's health and demographic problems change for the better – to the delight of Italian producers, currently the top wine exporters to Russia.