ECONOMY
Russian Defense Sector Increasingly Having Trouble Attracting Workers
August 19, 2024
Maxim Starchak
Fellow at the Center for International and Defense Policy at Queen’s University, Russia correspondent for Defense News
Based on public statements by defense-sector officials and his own interviews, military expert Maxim Starchak concludes that the growing shortages of workers in the military-industrial complex are an insoluble problem.
Speaking in July at the second so-called Personnel National Congress of the Defense-Industrial Complex, Alexei Nechaev, a Duma deputy and rector of the Promsvyazbank Academy, called the shortage of workers in the defense sector “a significant problem.” Defense enterprises currently need about 160,000 specialists, he said. Promsvyazbank, a once-private bank that was nationalized after it failed, is the main financial institution supporting defense procurement, while its corporate academy provides specialized training for employees of the bank and the defense sector.
Persisting labor shortages
Soon after Russia’s large-scale invasion of Ukraine, Russian defense enterprises began to offer inflated salaries to attract workers. Over the past one and a half years, they have managed to bring in 520,000 new workers, but shortages persist.
Persisting labor shortages
Soon after Russia’s large-scale invasion of Ukraine, Russian defense enterprises began to offer inflated salaries to attract workers. Over the past one and a half years, they have managed to bring in 520,000 new workers, but shortages persist.
First Deputy Prime Minister Denis Manturov. Source: Wiki Commons
Whereas at the end of 2023 the Ministry of Industry and Trade reported that about 75,000 specialists were needed in the defense sector, six months later that figure more than doubled (growing 115%). Meanwhile, according to First Deputy Prime Minister Denis Manturov, whose portfolio includes industry, the needs of the defense sector for 2025 are even greater – namely 250,000 workers.
At a meeting with the heads of defense enterprises in May, President Putin noted that the production of weapons and equipment had increased significantly over the past 18-24 months while pointing out other tasks. Besides “accelerating the implementation of new technology,” he mentioned “accelerating the repair of weapons and equipment” and “using the resources of small and medium-sized private enterprises.” This underlines the shortage of available resources.
In Russia, the military-industrial complex comprises 6,000 enterprises employing about 4 million people. Yet many more people work for the defense sector in one way or another, with about 10,000 more enterprises being auxiliary companies and contractors.
Officials echo the president. At the abovementioned personnel congress, First Deputy Duma Chair Denis Kravchenko said that the labor deficit in the defense sector should be “urgently dealt with.” Andrei Peregudov, who heads the military-industrial complex department at the Ministry of Industry and Trade, noted that though the industry has managed to mobilize resources, “much remains to be done, especially since the defense sector competes for personnel with civilian sectors of the economy.”
At a meeting with the heads of defense enterprises in May, President Putin noted that the production of weapons and equipment had increased significantly over the past 18-24 months while pointing out other tasks. Besides “accelerating the implementation of new technology,” he mentioned “accelerating the repair of weapons and equipment” and “using the resources of small and medium-sized private enterprises.” This underlines the shortage of available resources.
In Russia, the military-industrial complex comprises 6,000 enterprises employing about 4 million people. Yet many more people work for the defense sector in one way or another, with about 10,000 more enterprises being auxiliary companies and contractors.
Officials echo the president. At the abovementioned personnel congress, First Deputy Duma Chair Denis Kravchenko said that the labor deficit in the defense sector should be “urgently dealt with.” Andrei Peregudov, who heads the military-industrial complex department at the Ministry of Industry and Trade, noted that though the industry has managed to mobilize resources, “much remains to be done, especially since the defense sector competes for personnel with civilian sectors of the economy.”
“Previously, defense-sector managers could turn down some state orders, picking the ones that they were best suited to do.Not anymore: criminal prosecution is the penalty for failing to fulfill an order.”
Competition for labor
The main competitor of the defense sector is IT. Boris Padalkin, vice rector for academic affairs at Bauman Moscow State Technical University, had this to say at the congress: "like a vacuum cleaner, IT sucks out everyone who knows how to hold a keyboard in their hands, and it is difficult for defense-sector enterprises to effectively compete for personnel with companies where the cost of fixed assets is practically zero."
The average salary in the defense sector has increased by 54% in two years, from RUB58,200 per month in 2022 to RUB 89,700 in 2024, on Ministry of Industry and Trade numbers, while SberAnalitika and Rabota.ru estimate the average salary in the IT sector at RUB 123,000 per month.
"For special professions in the defense sector or where they currently work overtime, the average salary is about RUB 150,000," noted Alexander Chizhov, the deputy director of the military-industrial complex department at the Ministry of Industry and Trade and another speaker at the congress. Meanwhile, HeadHunter, a leading online recruitment platform in Russia, the average salary of data scientists and DevOps engineers is over RUB 220,000 per month.
The main competitor of the defense sector is IT. Boris Padalkin, vice rector for academic affairs at Bauman Moscow State Technical University, had this to say at the congress: "like a vacuum cleaner, IT sucks out everyone who knows how to hold a keyboard in their hands, and it is difficult for defense-sector enterprises to effectively compete for personnel with companies where the cost of fixed assets is practically zero."
The average salary in the defense sector has increased by 54% in two years, from RUB58,200 per month in 2022 to RUB 89,700 in 2024, on Ministry of Industry and Trade numbers, while SberAnalitika and Rabota.ru estimate the average salary in the IT sector at RUB 123,000 per month.
"For special professions in the defense sector or where they currently work overtime, the average salary is about RUB 150,000," noted Alexander Chizhov, the deputy director of the military-industrial complex department at the Ministry of Industry and Trade and another speaker at the congress. Meanwhile, HeadHunter, a leading online recruitment platform in Russia, the average salary of data scientists and DevOps engineers is over RUB 220,000 per month.
PTPA designs and manufactures valves for the oil and gas, power generation, refining, chemical and other sectors. Source: Facebook
Firms often try to outbid each other, leading to a steady increase in labor costs, says Mikhail Pavlenko, formerly a WorldSkills welding representative in Russia and the current CEO of the Russian Welding Team association.
The “demographic hole” in Russia (by late 2022 the number of workers under 30 years old had dramatically decreased) only intensifies the competition for personnel. “There are now half as many young people on the labor market than required,” says Natalia Nikulinskaya, head of HR at Penza PTPA, a manufacturer of pipeline fittings.
Obviously, the war in Ukraine has significantly exacerbated the demographic issues. According to career consultant Galina Babkova, based on official data and calculations by independent media, 650,000 able-bodied men went to war in Ukraine.
As Oleg Kuzubov, HR chief at auto parts supplier Rossko Production told me, “amid the general personnel shortage and phenomenally low unemployment in Russia (2.4-2.8% in April-June), all professions are in demand, at any level, from workers to skilled specialists. One of the reasons is an increase in domestic consumption due to the exit of foreign suppliers and an increase in orders from the defense sector.”
Of the 160,000 workers needed in the defense sector, Nechaev says, about 50,000 are highly qualified designers and engineers. Vladimir Palmov, head of the Federal Personnel Center of the Defense Industry, explained: “we need people with working professions, middle-level specialists – and this, in my opinion, is the main trend in the development of the staffing situation today.”
Kuzubov, the HR head at Rossko, frets that the shortage of workers is made worse by the unpopularity of trade careers among young people. As a result, they are not replacing the workforce leaving the market. A trend of the last few years has been growing demand for operators of CNC (computer numerical control) machines of all stripes, Kuzubov added.
The state defense conglomerate Rostec has also noted a shortage of turners, millers, various locksmiths and adjusters. In the Urals, where there are many defense plants, including tank manufacturer Uralvagonzavod, the personnel deficit increased 60% in 2023 versus the previous year.
Wage increases fail to solve labor shortage
Even though workers without skills and experience are immediately offered a good salary, it is still hard to find people, says Larisa Smirnova, an HR expert from Kostroma.
The “demographic hole” in Russia (by late 2022 the number of workers under 30 years old had dramatically decreased) only intensifies the competition for personnel. “There are now half as many young people on the labor market than required,” says Natalia Nikulinskaya, head of HR at Penza PTPA, a manufacturer of pipeline fittings.
Obviously, the war in Ukraine has significantly exacerbated the demographic issues. According to career consultant Galina Babkova, based on official data and calculations by independent media, 650,000 able-bodied men went to war in Ukraine.
As Oleg Kuzubov, HR chief at auto parts supplier Rossko Production told me, “amid the general personnel shortage and phenomenally low unemployment in Russia (2.4-2.8% in April-June), all professions are in demand, at any level, from workers to skilled specialists. One of the reasons is an increase in domestic consumption due to the exit of foreign suppliers and an increase in orders from the defense sector.”
Of the 160,000 workers needed in the defense sector, Nechaev says, about 50,000 are highly qualified designers and engineers. Vladimir Palmov, head of the Federal Personnel Center of the Defense Industry, explained: “we need people with working professions, middle-level specialists – and this, in my opinion, is the main trend in the development of the staffing situation today.”
Kuzubov, the HR head at Rossko, frets that the shortage of workers is made worse by the unpopularity of trade careers among young people. As a result, they are not replacing the workforce leaving the market. A trend of the last few years has been growing demand for operators of CNC (computer numerical control) machines of all stripes, Kuzubov added.
The state defense conglomerate Rostec has also noted a shortage of turners, millers, various locksmiths and adjusters. In the Urals, where there are many defense plants, including tank manufacturer Uralvagonzavod, the personnel deficit increased 60% in 2023 versus the previous year.
Wage increases fail to solve labor shortage
Even though workers without skills and experience are immediately offered a good salary, it is still hard to find people, says Larisa Smirnova, an HR expert from Kostroma.
“At the end of 2022, the Sverdlovsk Region branch of the Federal Penitentiary Service announced that it would send 250 inmates to do forced labor at Uralvagonzavod.”
Uralvagonzavod, the largest main battle tank manufacturer in the world, located in the Urals. Source: Wiki Commons
This practice continued in 2023, but the numbers are too small to make a difference. The problem is only growing – for example, in Novosibirsk Region in 2024, the personnel shortage in the defense sector increased 30% versus last year, amounting to 2,000 people.
Local authorities are trying to attract workers to the defense sector from other regions by offering to fund their down payments on a mortgage and promising other money to buy real estate, besides free housing for the duration of their contracts and guaranteed jobs for family members. “But there are no people willing to move from central Russia to the Far East or the Urals. Now, in conditions of the personnel shortage, it is makes no sense for people to go anywhere: you can find a job at home,” says economist Alexander Safonov.
The Duma proposes addressing the labor problems in the defense sector with conscripts who want to do alternative, civilian service. However, this program will attract no more than 2,000 people, according to interviewed experts, who preferred to remain anonymous.
On top of this are problems with the quality of education. “The current education system requires modernization, as many educational institutions teach purely fundamental basics, using textbooks from the last century. In educational institutions, equipment for training is often unavailable, and if it is, it is commonly machines from the last century, which are very far from modern equipment,” says Rossko’s Kuzubov.
In addition, educational institutions often do not have instructors with knowledge of the latest practical skills, says Svetlana Dyukova, director of educational projects for Russian Welding Team. Vocational colleges hire retired instructors and cannot train students in modern technologies.
Vasily Brevnov, a defense sector expert, told me that defense enterprises are trying to solve the problem by establishing close cooperation with educational institutions. In particular, they finance the training of the required number of students in the needed programs and participate in the educational process.
For example, Rostec’s program for the aircraft engine industry includes financing training, plus employment at its best enterprises from the first year. However, such programs take time. For instance, training a machine operator takes at least two years, while the time frame for producing highly skilled engineers is much longer.
The labor shortage is dragging on defense procurement, President Putin acknowledged last year. Experts agree that the shortage will continue, and the issue insoluble. The consultancy Yakov and Partners predicts that by 2030 the deficit will reach 2-4 million people.
In June, industrial output in Russia slowed sharply, with the subsegments of military equipment and optics/electronics production falling for two straight months. This suggests that industry is plateauing amid the labor problems and tight monetary policy. Salary increases and other measures have ceased to push workers into industry, which is starting to slip.
Local authorities are trying to attract workers to the defense sector from other regions by offering to fund their down payments on a mortgage and promising other money to buy real estate, besides free housing for the duration of their contracts and guaranteed jobs for family members. “But there are no people willing to move from central Russia to the Far East or the Urals. Now, in conditions of the personnel shortage, it is makes no sense for people to go anywhere: you can find a job at home,” says economist Alexander Safonov.
The Duma proposes addressing the labor problems in the defense sector with conscripts who want to do alternative, civilian service. However, this program will attract no more than 2,000 people, according to interviewed experts, who preferred to remain anonymous.
On top of this are problems with the quality of education. “The current education system requires modernization, as many educational institutions teach purely fundamental basics, using textbooks from the last century. In educational institutions, equipment for training is often unavailable, and if it is, it is commonly machines from the last century, which are very far from modern equipment,” says Rossko’s Kuzubov.
In addition, educational institutions often do not have instructors with knowledge of the latest practical skills, says Svetlana Dyukova, director of educational projects for Russian Welding Team. Vocational colleges hire retired instructors and cannot train students in modern technologies.
Vasily Brevnov, a defense sector expert, told me that defense enterprises are trying to solve the problem by establishing close cooperation with educational institutions. In particular, they finance the training of the required number of students in the needed programs and participate in the educational process.
For example, Rostec’s program for the aircraft engine industry includes financing training, plus employment at its best enterprises from the first year. However, such programs take time. For instance, training a machine operator takes at least two years, while the time frame for producing highly skilled engineers is much longer.
The labor shortage is dragging on defense procurement, President Putin acknowledged last year. Experts agree that the shortage will continue, and the issue insoluble. The consultancy Yakov and Partners predicts that by 2030 the deficit will reach 2-4 million people.
In June, industrial output in Russia slowed sharply, with the subsegments of military equipment and optics/electronics production falling for two straight months. This suggests that industry is plateauing amid the labor problems and tight monetary policy. Salary increases and other measures have ceased to push workers into industry, which is starting to slip.
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