Angle: “Unemployment due to Western sanctions”, a new reality for Russian workers | Reuters

[London, 13th Reuters]–The call to Alexander Kiririuk to dismiss was received hours after the Russian troops invaded Ukraine. The British beer company Samuel Smith, where he works, has decided to withdraw from the Russian market.

“On February 24, we all woke up to a new reality.” Kiririuk, 33, who has been working for the company since 2018, says. The company’s beer was growing in sales in Russia, Ukraine and other neighboring countries.

Ironically, Mr. Kiririuk is Ukrainian. He moved from the former Soviet Union to Moscow in search of a job, but became one of the millions who were surprised by Putin’s invasion.

Western sanctions on Russia have caused the country’s economy to plummet, with inflation expected to fall into the double-digit range and growth in the negative double-digit range.

The Strategic Research Center (Moscow) expects Russia’s unemployment to increase by up to 2 million by the end of the year. In the worst case, the unemployment rate could approach 8%, double the February level.

“Russia has been forced out of the international financial system, so the overall structure of the economy will change,” said Tatiana Orlova of Oxford Economics.

“With the withdrawal of foreign companies and banks, white-collar unemployment will increase, but companies are also withdrawing from sectors such as retail, which hired low-wage workers.”

According to a survey by the Yale University Graduate School of Business, more than 600 companies have announced their withdrawal from Russia since the invasion. Most companies plan to continue paying their salaries for several months.

The number of employees in Russia by Western companies was more than 60,000 in the US McDonald’s, 45,000 in the French automobile giant Renault, and 15,000 in the Swedish furniture giant IKEA. Orlova estimates that the withdrawal of Western companies will directly result in the loss of nearly one million jobs.

Mining and oil companies may be forced to dismiss personnel if the West steps into a ban on imports from Russia, Orlova said.

Looking at the online recruitment platform, Headhunter, the number of job seekers in the week up to 10th has increased by about 10% compared to the week up to February 24th. On the other hand, the number of job offers decreased by more than 25%.

The ripples are widespread. Moscow’s Sheremetyevo Airport suspended 20% of its staff last month as travel was disrupted due to western sanctions.

Russia’s service sector showed a sharp contraction in March for the first time in about two years, with the number of workers declining the most since June 2020.

The World Bank estimates that a total of 2.6 million people could fall below Russia’s official poverty line this year.

Aleftina, 25, a beautician near Moscow, says that more than 10% of regular customers did not make reservations in March. As a result, the average monthly income of 100,000 rubles has been reduced by 15,000 rubles ($ 185, about 23,000 yen).

“My customers are going down every month. I hear complaints that I’m saving on beauty bills because I’m out of work.”

According to a Reuters survey, Russia’s external balance surplus is expected to double this year to $ 233 billion, supported by energy revenues. This may allow authorities to maintain payments for unemployment benefits.

But Oxford Economics Orlova predicts that Russia’s economy will be in a more serious recession than in 1998 or 2008. Moreover, sanctions are likely to have long-term implications, such as the inability of Russian companies to access foreign technologies and equipment needed for investment.

According to Orlova’s model, Russia is also expected to be less productive than its trading partners.

One reason is that Russia’s promising IT sector is likely to be hit. According to the Higher School of Economics, Russia’s IT sector doubled in economic value in the six years to 2019, accounting for 1.2% of gross domestic product (GDP) at the end of the year.

However, the Russian Electronic Communications Association estimates that more than 100,000 IT experts have escaped Russia since the invasion of Ukraine.

While the unemployment rate in Western countries rose to the double-digit range during the Corona disaster, Russia’s unemployment rate did not exceed 6.5%, partly because of the country’s unique factors. One of them is that state-owned enterprises often choose to cut wages over dismissal.

Another factor is that as the population ages, there is an increasing tendency to rely on migrant workers from neighboring countries to fill the labor shortage, especially unskilled labor. According to the World Bank, Russia’s population aged 65 and over is about twice as high as the world average of 9%.

In other words, the loss of employment in Russia will begin to affect the former Soviet Union countries.

“Everywhere there are headcount cuts, the ruble has fallen and some people have not been paid,” said Kubanichibek Osmanariev, head of the Kyrgyz National Conference (Moscow).

“The (Russian) Kyrgyz people are at a loss. Should I return home and wait for the situation to improve? It is a well-known fact that there is no job in my home country,” he said.