ECONOMY
How Government Intrusion Into The Private Lives Of Russians Is Affecting The Economy
December 18, 2023
Tatiana Rybakova
Journalist and writer
Journalist Tatiana Rybakova writes that ever increasing restrictions on the rights of Russians are forcing some to leave the country and others to give up on plans to expand their businesses, though overall the country remains stable.
A friend of mine is the owner of a small marketing agency, and recently he lost two major clients.
One of them is a regional retail chain. Its owners changed their mind about expansion. In fact, now they are considering reducing their store network. The reason: recently there were police raids on their stores – they were looking for men to mobilize. They found several and handed them draft notices. The remaining men of military service age, who mostly work as loaders, are now thinking about quitting. Such raids are currently taking place not only in the warehouses of large marketplaces, but also at more modest retail chains, which do not make the news.
Now, the owners of the chain, the clients of my friend, are considering what to do. Should they replace the workers with migrants? Migrants are also being picked up, taken to military enlistment offices and compelled to sign a contract with the army. Should they replace them with pensioners and women? This is a cash-strapped regional chain; not only does it not have robots like at Amazon, it lacks loading machines. Older people or women simply could not do the job. Therefore, they decided to forgo marketing services for now – there is no point in looking for new clients if they have to downsize their business.
The second client who rethought marketing services is the owner of a business where the employees are mostly women. They are not threatened by mobilization, but there is another problem: the owner is afraid that following a ban on abortion, his young employees will start to go on maternity leave en masse. In his region, private clinics have already been banned from performing abortions (see Russia.Post for more on the new restrictions on abortion in Russia). And the ban could be extended to the rest of Russia.
On top of that, there is the bill being considered by the Duma in the first reading that would prohibit the firing of mothers with children under 16 years of age – the bottom line is that the owner of a business with predominantly female staff has something to worry about. So, for now he is also taking a break from marketing services – he will think about what to do next. Completely shutting down the business cannot be ruled out.
One of them is a regional retail chain. Its owners changed their mind about expansion. In fact, now they are considering reducing their store network. The reason: recently there were police raids on their stores – they were looking for men to mobilize. They found several and handed them draft notices. The remaining men of military service age, who mostly work as loaders, are now thinking about quitting. Such raids are currently taking place not only in the warehouses of large marketplaces, but also at more modest retail chains, which do not make the news.
Now, the owners of the chain, the clients of my friend, are considering what to do. Should they replace the workers with migrants? Migrants are also being picked up, taken to military enlistment offices and compelled to sign a contract with the army. Should they replace them with pensioners and women? This is a cash-strapped regional chain; not only does it not have robots like at Amazon, it lacks loading machines. Older people or women simply could not do the job. Therefore, they decided to forgo marketing services for now – there is no point in looking for new clients if they have to downsize their business.
The second client who rethought marketing services is the owner of a business where the employees are mostly women. They are not threatened by mobilization, but there is another problem: the owner is afraid that following a ban on abortion, his young employees will start to go on maternity leave en masse. In his region, private clinics have already been banned from performing abortions (see Russia.Post for more on the new restrictions on abortion in Russia). And the ban could be extended to the rest of Russia.
On top of that, there is the bill being considered by the Duma in the first reading that would prohibit the firing of mothers with children under 16 years of age – the bottom line is that the owner of a business with predominantly female staff has something to worry about. So, for now he is also taking a break from marketing services – he will think about what to do next. Completely shutting down the business cannot be ruled out.
A barbershop in Batumi, Georgia. Source: Yandex
A friend of mine who stayed in Moscow is lamenting the loss of her hairdresser. Of course, compared to the problems of the businesses described above, hers is not a serious problem. But she had been getting her hair cut by the same man for years; plus, we are talking about a particularly sought-after hairdresser – becoming one of his clients was a big deal.
Now, it’s over. When the Supreme Court declared the mythical “international LGBT+ organization” extremist (see Russia.Post), followed by raids on gay clubs literally the next day by the police and volunteers, her talented hairdresser Dima packed up and left in a day for Berlin. He has already found a job – he had long collaborated with many European fashion magazines.
The salon where he worked is also closing soon. The gay owner decided to relocate his business to another country. He is taking all the equipment and all the staff – though not only gay people worked at the salon, most of the other employees decided to follow him.
Now, it’s over. When the Supreme Court declared the mythical “international LGBT+ organization” extremist (see Russia.Post), followed by raids on gay clubs literally the next day by the police and volunteers, her talented hairdresser Dima packed up and left in a day for Berlin. He has already found a job – he had long collaborated with many European fashion magazines.
The salon where he worked is also closing soon. The gay owner decided to relocate his business to another country. He is taking all the equipment and all the staff – though not only gay people worked at the salon, most of the other employees decided to follow him.
“The atmosphere in Russia is becoming too toxic, the future is too uncertain, and hairdressers and other beauty workers are needed everywhere.”
The Bay of Kotor, Montenegro. Source: Wiki Commons
This is a trend
Recently, the ideological gimmicks of Russian legislators and politicians are increasingly intruding into the private lives of citizens. The latter have responded with actions that have a direct effect on the economy. This is a trend that will only continue, says economist Yakov Mirkin, a professor and doctor of economics who authored the book A Brief History of Russian Stresses. Models of Collective and Individual Behavior in Russia over 300 Years.
Living in Russia, you are influenced by three trends, he explains. The first is the growing role of the state (ogosudarstvlenie), especially in economic affairs, an increasing concentration of power, and more restrictions in all areas of personal life. “This applies first and foremost to freedom of movement (Western sanctions also limit this), freedom of speech, freedom of conscience, economic and financial freedom (in this way, Western sanctions also erect their own ‘high walls’). In light of the large-scale military conflict and the so-called ‘mobilization economy,’ the role of mono/ideology is inevitably intensifying.”
“Decisions expressing this trend are likely to be spontaneous, unsystematic and ultimately irrational. Simply put, ‘whatever comes into someone’s head.’ This is why they can unexpectedly and negatively influence collective behavior, as the consequences were not calculated. The flow of such decisions is set to be extremely strong, since they express the interests and ideas of a large group of people who (1) are at different levels of the government hierarchy and (2) ‘follow the trend,’ seeking to create for themselves better conditions for survival and competition within the state apparatus,” says Mirkin.
The second trend is the creation of an image of “normal life” in which the military conflict with Ukraine is somewhere “on the margins,” on the periphery of mass consciousness and does not affect the ordinary, daily existence of the absolute majority. And if it does, it does so in a positive sense – revitalizing the economy (the impact of defense spending), creating new jobs. As part of this trend, the government will offer a raft of stimulus to support big business, develop small and medium-sized enterprises, and improve demographics.
“The second trend, to a certain extent, cancels out the effect of the first, creating the illusion that ‘everything is as usual.’ Moreover, Russia, in many respects and where Western sanctions allow it, continues to be an open economy,” says Mirkin.
Recently, the ideological gimmicks of Russian legislators and politicians are increasingly intruding into the private lives of citizens. The latter have responded with actions that have a direct effect on the economy. This is a trend that will only continue, says economist Yakov Mirkin, a professor and doctor of economics who authored the book A Brief History of Russian Stresses. Models of Collective and Individual Behavior in Russia over 300 Years.
Living in Russia, you are influenced by three trends, he explains. The first is the growing role of the state (ogosudarstvlenie), especially in economic affairs, an increasing concentration of power, and more restrictions in all areas of personal life. “This applies first and foremost to freedom of movement (Western sanctions also limit this), freedom of speech, freedom of conscience, economic and financial freedom (in this way, Western sanctions also erect their own ‘high walls’). In light of the large-scale military conflict and the so-called ‘mobilization economy,’ the role of mono/ideology is inevitably intensifying.”
“Decisions expressing this trend are likely to be spontaneous, unsystematic and ultimately irrational. Simply put, ‘whatever comes into someone’s head.’ This is why they can unexpectedly and negatively influence collective behavior, as the consequences were not calculated. The flow of such decisions is set to be extremely strong, since they express the interests and ideas of a large group of people who (1) are at different levels of the government hierarchy and (2) ‘follow the trend,’ seeking to create for themselves better conditions for survival and competition within the state apparatus,” says Mirkin.
The second trend is the creation of an image of “normal life” in which the military conflict with Ukraine is somewhere “on the margins,” on the periphery of mass consciousness and does not affect the ordinary, daily existence of the absolute majority. And if it does, it does so in a positive sense – revitalizing the economy (the impact of defense spending), creating new jobs. As part of this trend, the government will offer a raft of stimulus to support big business, develop small and medium-sized enterprises, and improve demographics.
“The second trend, to a certain extent, cancels out the effect of the first, creating the illusion that ‘everything is as usual.’ Moreover, Russia, in many respects and where Western sanctions allow it, continues to be an open economy,” says Mirkin.
“The third trend, the most important for the matter at hand, is high volatility in the social and economic life of society, which is inevitable amid the intensive military conflict, strain on everything and the shortage of labor.”
“For an ordinary person, ‘black swans’ will appear, unexpected events that will jolt him out of ‘normality,’ increasing personal and family costs. Nobody knows what costs exactly, but they will definitely come,” explains Mirkin.
Not everyone will leave
The state’s attempts to regulate what its citizens do in bed will trigger a tangible flow of people leaving the country,says economist Nikolai Kulbaka, though it should not be such a huge wave of emigration like after mobilization was announced in autumn 2022.
“The issue of relocation is a very serious economic issue. Even within Russia the mobility of the population is low, to say nothing of moving abroad, when the issues of getting a foreign passport, having money, speaking the language and gaining employment immediately arise. These issues create a serious barrier even for people who are aware of the level of personal risk,” he explains.
Therefore, Kulbaka believes, the next outflow will be spearheaded by the most qualified specialists, “those who have a profession that is in demand abroad, such as hairdressers, cosmetologists and manicurists – they are already leaving without any problems – and highly educated specialists, such as IT workers,” says Kulbaka.
The majority, in his opinion, “will rather freeze up, like a bug being poked by a stick.” “Even in freer times in Russia, there were practically no coming-outs of LGBT+ people, excluding certain worldly or creative people. The rest lived and continue to live very closed lives,” says Kulbaka. A separate issue, he says, is that now, against the backdrop of very low unemployment, each departure can become a headwind for an employer – especially if it is some kind of niche role or a critical employee.
The current “creeping mobilization,” with raids not only on warehouse and store workers but also students, does not yet pose a massive threat, and the risks for each individual citizen are relatively low, Kulbaka believes.
“There is not widespread discussion of such cases, so a student at some university may not know that students from a neighboring university are being grabbed and taken to an assembly point. Such information is seriously suppressed,” he adds.
But people will continue to leave, parents will try to send their children somewhere. “Some will return, although overall few come back. Those leaving now are doing so in a more calculated way than last September, when tens of thousands fled the mobilization – perhaps now they will get ready [to leave] more quickly. So, this process might just stretch out over time,” summarizes Kulbaka.
At-risk groups
While the authorities are in an ideologically inspired legislative frenzy – trying to create either an Orthodox caliphate or a mythical USSR, where every woman has many children, love exists only for heterosexual people and the economy somehow grows by itself – both individuals and businesses are beginning to weigh the risks.
The biggest problems, Kulbaka believes, are in store for small business. “Let’s not talk about the shadow economy… which is about 20% [of the whole economy] in Russia. Medium-sized business, which generally is not very competitive relative to firms that rely on government money, is at risk.”
“People will be lured from there to firms where there is state support or protection from being mobilized. The service sector will suffer first of all. This will most likely affect Moscow less but will be very noticeable in small cities, where the loss of even one or two employees can sharply reduce a company’s profitability,” says Kulbaka.
In general, in his view, businesses need to take a closer look at online work opportunities wherever possible. Moscow and St Petersburg, Kulbaka believes, will try to plug the gaps with specialists working remotely, including from abroad.
“Employers will be chasing blue-collar workers – there are already not enough of them. The service sector will be slowly disrupted, and a shortage of both migrants and local workers will remain. Most likely, we will see older and older cashiers, salespeople, security guards and so on,” sums up Kulbaka.
Not everyone will leave
The state’s attempts to regulate what its citizens do in bed will trigger a tangible flow of people leaving the country,says economist Nikolai Kulbaka, though it should not be such a huge wave of emigration like after mobilization was announced in autumn 2022.
“The issue of relocation is a very serious economic issue. Even within Russia the mobility of the population is low, to say nothing of moving abroad, when the issues of getting a foreign passport, having money, speaking the language and gaining employment immediately arise. These issues create a serious barrier even for people who are aware of the level of personal risk,” he explains.
Therefore, Kulbaka believes, the next outflow will be spearheaded by the most qualified specialists, “those who have a profession that is in demand abroad, such as hairdressers, cosmetologists and manicurists – they are already leaving without any problems – and highly educated specialists, such as IT workers,” says Kulbaka.
The majority, in his opinion, “will rather freeze up, like a bug being poked by a stick.” “Even in freer times in Russia, there were practically no coming-outs of LGBT+ people, excluding certain worldly or creative people. The rest lived and continue to live very closed lives,” says Kulbaka. A separate issue, he says, is that now, against the backdrop of very low unemployment, each departure can become a headwind for an employer – especially if it is some kind of niche role or a critical employee.
The current “creeping mobilization,” with raids not only on warehouse and store workers but also students, does not yet pose a massive threat, and the risks for each individual citizen are relatively low, Kulbaka believes.
“There is not widespread discussion of such cases, so a student at some university may not know that students from a neighboring university are being grabbed and taken to an assembly point. Such information is seriously suppressed,” he adds.
But people will continue to leave, parents will try to send their children somewhere. “Some will return, although overall few come back. Those leaving now are doing so in a more calculated way than last September, when tens of thousands fled the mobilization – perhaps now they will get ready [to leave] more quickly. So, this process might just stretch out over time,” summarizes Kulbaka.
At-risk groups
While the authorities are in an ideologically inspired legislative frenzy – trying to create either an Orthodox caliphate or a mythical USSR, where every woman has many children, love exists only for heterosexual people and the economy somehow grows by itself – both individuals and businesses are beginning to weigh the risks.
The biggest problems, Kulbaka believes, are in store for small business. “Let’s not talk about the shadow economy… which is about 20% [of the whole economy] in Russia. Medium-sized business, which generally is not very competitive relative to firms that rely on government money, is at risk.”
“People will be lured from there to firms where there is state support or protection from being mobilized. The service sector will suffer first of all. This will most likely affect Moscow less but will be very noticeable in small cities, where the loss of even one or two employees can sharply reduce a company’s profitability,” says Kulbaka.
In general, in his view, businesses need to take a closer look at online work opportunities wherever possible. Moscow and St Petersburg, Kulbaka believes, will try to plug the gaps with specialists working remotely, including from abroad.
“Employers will be chasing blue-collar workers – there are already not enough of them. The service sector will be slowly disrupted, and a shortage of both migrants and local workers will remain. Most likely, we will see older and older cashiers, salespeople, security guards and so on,” sums up Kulbaka.
“As for the risks for individuals, families with young children are the most vulnerable.”
HR officers used to be afraid of single mothers: they will constantly be at home with their sick children, you cannot send them on business trips, you cannot make them work overtime.
And now, what if it is forbidden to fire mothers with children under 16? “Women of childbearing age will have problems, as there is the risk that they will go after maternity [family] capital, having one, two, three children, and as workers they will just disappear,” Kulbaka predicts.
From the standpoint of Russian politicians fighting for “traditional values,” this seems like a good outcome: let women sit at home, give birth to children, the more the better. The trouble is, Kulbaka notes, that should the dreams of such politicians come true (hopefully, this seems unlikely), Russia could lose 11% of its entire available workforce. And this amid the current labor shortage!
The current labor shortage may be good news for people approaching retirement age. A couple of years ago, employers tried not to hire them, as it is already forbidden to fire such workers, Kulbaka recalls, but now they are likely welcome – they will not go anywhere, will not go on maternity leave, will not be sent to the front.
Still, working pensioners are ineligible for increases to their pensions or allowances, so they might be disinclined to work. Thus, it is not obvious that they can be recruited.
Meanwhile, we can expect that overall, over a long time horizon, Russia as a society will remain stable and adapt thanks to the growth of defense spending, the “pivot to the East,” the “ogosudarstvleniye” of the economy, and the strong financial incentives and measures to support medium-sized and small business put in place by the state.
“Growth through loss, development at extremely high costs – this is common practice for Russia, as evidenced by its history,” states Mirkin.
And now, what if it is forbidden to fire mothers with children under 16? “Women of childbearing age will have problems, as there is the risk that they will go after maternity [family] capital, having one, two, three children, and as workers they will just disappear,” Kulbaka predicts.
From the standpoint of Russian politicians fighting for “traditional values,” this seems like a good outcome: let women sit at home, give birth to children, the more the better. The trouble is, Kulbaka notes, that should the dreams of such politicians come true (hopefully, this seems unlikely), Russia could lose 11% of its entire available workforce. And this amid the current labor shortage!
The current labor shortage may be good news for people approaching retirement age. A couple of years ago, employers tried not to hire them, as it is already forbidden to fire such workers, Kulbaka recalls, but now they are likely welcome – they will not go anywhere, will not go on maternity leave, will not be sent to the front.
Still, working pensioners are ineligible for increases to their pensions or allowances, so they might be disinclined to work. Thus, it is not obvious that they can be recruited.
Meanwhile, we can expect that overall, over a long time horizon, Russia as a society will remain stable and adapt thanks to the growth of defense spending, the “pivot to the East,” the “ogosudarstvleniye” of the economy, and the strong financial incentives and measures to support medium-sized and small business put in place by the state.
“Growth through loss, development at extremely high costs – this is common practice for Russia, as evidenced by its history,” states Mirkin.
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