The rapid growth of real incomes, unseen since the mid-2000s, has made a surprising comeback in Russia amidst war and international sanctions. From January to September 2024, real disposable incomes rose by 8.6% compared to the same period the previous year. Over nearly three years of war, their cumulative growth reached 18.6% according to revised Rosstat data – or 12.3% according to unadjusted figures – after eight years of virtual stagnation.
However, these figures point less to a sustainable trend in income growth, driven by positive economic dynamics and fundamental factors, and more to a one-time leap. This leap was fueled by the wage boom of 2023-2024, itself a result of an acute labour shortage tied to increased government demand and the simultaneous exit of at least 2.5% of workers from the labour market.
This largely artificial situation, unrelated to genuine market demand, caused a redistribution of resources from enterprises to workers against the backdrop of a relatively low labour share in the economy. Yet, declining profitability in many sectors, which were already operating at modest profit levels, is expected to slow wage growth and hiring. Additionally, higher-than-anticipated inflation levels and a prolonged period of elevated inflationary pressure will adjust the trajectory of income growth downward.
In January-September 2024, nominal cash incomes of Russians, according to Rosstat, increased by 17% compared to the same period the previous year, while real disposable incomes (adjusted for mandatory payments and inflation) grew by 8.6%. In 2023, real disposable incomes rose by 5.4%. Initially, Rosstat reported that incomes declined by 1% in 2022, but in spring 2023, it revised the figures, showing a 4.5% increase instead. Consequently, over the course of the war, the growth of real disposable incomes by the end of 2024 will reach either 12.3% or a striking 18.6% – assuming this year’s increase reaches 7.2% (as projected in a consensus survey conducted by the HSE Centre for Development). However, with inflation accelerating sharply at the end of the year, the actual figure may be lower.
In the longer term, the situation is less optimistic. Incomes dropped sharply following the ruble devaluation and inflation surge of 2014-2015, driven by plummeting oil prices. Between 2016 and 2020, incomes stagnated at 7–8% below 2013 levels, with growth only resuming in 2021. Overall, accounting for Rosstat's revised 2022 data, real disposable incomes will exceed 2013 levels by 12.1% in 2024. Without the revision, the increase amounts to just 6.2%.
By the end of 2024, Russian incomes converted to US dollars will only slightly surpass 2013 levels. In 2013, the average nominal wage was 29,800 rubles, equivalent to $806 at the exchange rate of the time. In the third quarter of 2024, the average nominal wage reached nearly 84,000 rubles – almost triple the 2013 amount. However, with the exchange rate exceeding 100 rubles per dollar, this translates to purchasing power of around $820. This is significant, as imported goods still constitute a substantial portion of household consumption, particularly in the non-food segment.
Due to the prominence of imports in consumption, the real disposable income growth over the past three years of war, especially in 2024, may be somewhat overstated. Experts debate whether Rosstat’s inflation basket accurately reflects consumption patterns and, consequently, whether its official consumer price indices are reliable (→ Re:Russia: Prices in the Fog of War). In major cities, where imports have a greater share in consumption, inflation has likely outpaced the national average, leading to more modest real income growth in urban areas.
Despite these nuances, 2023–2024 marked a departure from nearly a decade of stagnation in real incomes, with growth rates reminiscent of the 2000s. However, this surge is less of a sustained trend and more of a one-time leap. Unlike the 2000s, this leap is not tied to an increase in national wealth but rather to its redistribution, driven by non-economic factors.
The primary contributor to the rapid income rise has been wage growth. Unlike real incomes, wages have been climbing since 2018, likely reflecting a contraction of the informal sector. By 2021, the average real wage was 18% higher than in 2013; by the end of 2024, it will be 38% higher. From January to September 2024, real wages increased by 9% year-over-year (nominal wages grew by 18%), according to Rosstat. However, rising inflation toward the year’s end will temper this figure, and estimates suggest annual real wage growth of 8.2%, based on the Central Bank’s December consensus forecast.
The past two years have been a period of wage boom. As it has been repeatedly noted, it was caused by the expanded demand for labour in military production and infrastructure which coincided with a war-driven wave of emigration which reduced the labour force by approximately 1%. Losses from deaths, injuries, and active military service accounted for over 1.5% of the labour force. Finally, the labour market tensions were further exacerbated by the reduction in the inflow of labour migrants as a result of social instability and the authorities' anti-migrant campaign (→ Re:Russia: Authoritarian Dysfunction). Thus, This wage boom has been fueled by an acute, largely artificial labour shortage, spurred by increased state-driven demand and the significant workforce exodus.
A November survey of enterprises conducted by the Central Bank revealed that nearly all companies (93%) adjusted wages in 2024. Among these, 19% raised wages by more than 20%, 43% by 10-20%, and 38% by up to 10%. Looking ahead, 75% of respondents plan to increase wages in 2025.
Rosstat reports that over the three years of conflict (September 2024 vs. September 2021), nominal wages rose by 1.66-1.76 times across a wide range of manufacturing sectors, particularly those supporting military production. These include metal products, vehicles, transportation equipment, electrical and optical equipment, and textiles. Additionally, military contractors in conflict zones receive monthly payments exceeding 200,000 rubles, reflecting robust state labour demand that overrides typical profitability constraints.
Social benefits, the second-largest source of income, have increased significantly due to one-time military contract bonuses and expanded material support for contractors’ families, according to the authors of the Central Bank's ‘Regional Economy’ report. Conversely, real pensions have seen minimal growth. From January to October 2024, real pensions declined by 0.7% compared to the same period in 2023 according to Rosstat. This contrasts with modest growth of 3.3% in 2023 and a 0.9% decline in 2022 (excluding a one-time payment of 10,000 rubles in September 2021). Including that payment, pensions grew by a modest 1.7% during the period.
Income from property has grown recently, driven by increased bank deposits and higher interest rates following key rate hikes. In the third quarter of 2024, property income accounted for 8.4% of total cash income, compared to 6.8% in the third quarter of 2023 and an average of 5% from 2014-2021.
Wage and income growth are expected to slow. The Ministry of Economic Development forecasts a gradual deceleration: +7% in 2025, +5.7% in 2026, and +4.1% in 2027. The Center for Macroeconomic Analysis and Short-Term Forecasting (CMASTF) anticipates even lower growth in their November forecast: 3.3-3.6% in 2025, 2.2-2.5% in 2026, and 2.3-2.6% in 2027. Actual figures may underperform these projections. While the labour shortage persists, slower economic growth, reduced profitability, and high interest rates are expected to temper labour demand, according to Olga Belenkaya, head of macroeconomic analysis at Finam.
In the Central Bank’s December ‘Regional Economy’ report, analysts of the Central Bank note that labour costs as a share of business expenses remained stable in 2024, aligning with the five-year average. This indicates proportional increases in other costs. Meanwhile, the net financial result (profits minus pre-tax losses) of Russian businesses fell by 19.1% in the first nine months of 2024 compared to the same period in 2023.
Wages account for a relatively low share of Russia’s GDP, typical of resource-dependent economies. A weaker ruble reduces labour costs in dollar terms, while export revenues constitute a significant income source. In 2023, the ruble depreciated by approximately 25% against the dollar, with a further 10% depreciation expected in 2024. Rosstat data indicates that labour compensation has hovered around 40% of GDP over the past three years, while gross profits exceeded 50%. This may suggest significant profit redistribution toward workers. However, these averages obscure disparities, particularly in labour-intensive sectors where profitability remains low, underscoring uneven economic realities.
In this situation, 'a benefit for the economy' will be 'a certain redistribution [of labour resources] toward more efficient companies' from less efficient ones due to a reduction in their activity or even bankruptcy, Elizaveta Danilova, director of the Central Bank's Financial Stability Department, said recently. The process of streamlining staffing lists by eliminating unnecessary employees has already begun, according to The Bell and the Telegram channel ‘Non-Digital Economy’, citing examples from the IT sector, where employers previously tried to retain staff by any means. Market sources explain that even industry leaders can no longer afford 'expensive employees in times of costly money'. According to The Bell, layoffs are happening not only at companies like VK (which operates the social network VKontakte), MTS, but also at Sberbank. Sources for 'Non-Digital Economy' report that companies are shutting down three types of projects: unprofitable ones, those with long payback periods, and those with unclear results, firing entire teams. One of them is certain that there will be no salary increases 'even at the level of inflation, let alone more'.
Statistics from the recruitment service hh.ru show that the labour shortage is already unevenly distributed across various sectors of the economy. A severe labour shortage is observed only in retail. A less acute but still notable shortage is recorded in some categories: manual labour, healthcare and pharmaceuticals, automotive industry, manufacturing and service, sales and customer service, transportation, and logistics.
Thus, the salary boom is likely a thing of the past. Growth will increasingly concentrate in sectors that are less sensitive to the key interest rate level and can access credit under special conditions, allowing them to maintain growth even amid economic instability. Along with defense enterprises and their contractors, major corporations will continue to participate in the wage race for some time, warns regional economics expert Natalia Zubarevich, in an interview with the YouTube channel Private Talks. But eventually, they too will hit a ceiling.
Meanwhile, inflation is accelerating and, by the end of this year, will result in lower income and salary growth than expected at the start of autumn. The Central Bank predicts an increasingly prolonged period of high inflation, which will redistribute resources in the opposite direction – from workers to businesses. The rapid income growth in the past two years, as we have previously noted (→ Re:Russia: Who will break the camel's back?), has not elicited an adequate response from industries focused on consumer demand. This means that prolonged inflationary pressure will correct the trajectory of income growth downward.
Such a correction will mean that, in the long term, the dynamics of real income in Russia are on a trajectory of prolonged stagnation. Even accounting for the jump in 2023-2024, the average annual growth rate of real incomes over the past 12 years has been between 0.5% and 1%.