For the last 20 years, we have constantly heard about a huge demographic crisis that would hit Russia by the 2010s. But as we now approach the year 2014, Russia seems to have made a surprising turnaround stabilizing the population with rising birth rates and decreasing deaths.
However, the positive trends in the summary figure are overshadowing a particular crisis Russia is facing right now. This is the gaping hole in Russia’s demographics: the impending near halving of the population aged 18 – 24, compared with the situation of just a few years ago. The low birth rates of the years of economic and social hardship in the 1990s are now materializing in a dramatic drop in the number of young people reaching adulthood
In such challenging situation companies are obliged to muster a serious effort when developing corporate cultures which attract the best employees and foster a dynamic, modern and effective way of working. This is also about improving labor productivity by tearing down the hierarchy and bureaucratic rules and practices which hinder efficiency and innovation
Technical Leaders - Working with the Management Team
A Gaping Hole in Russia's Demographics - The Challenge to the Economy
1. AWARA GROUP MARKET RESEARCH, DEMOGRAPHICS
A GAPING HOLE IN RUSSIA’S DEMOGRAPHICS –
THE CHALLENGE TO THE ECONOMY
Russia’s population is not shrinking but the number of
young adults has nearly halved in the five years, from
2006 to 2013, and the working-age population will see
a 10 million reduction by the year 2020.
For the last 20 years, we have constantly heard about a huge demographic
crisis that would hit Russia by the 2010s. But as we now approach
the year 2014, Russia seems to have made a surprising turnaround
stabilizing the population with rising birth rates and decreasing deaths.
The population actually grew, albeit modestly, during 2010, 2011 and
2012. Unfortunately, some biased and unprofessional observers are
still drawing their figures from years in the early 2000s, such as this
Washington Times article. A more accurate picture of the demographic
situation is provided by Mark Adomanis in his contribution to the
Forbes 11 Things Everyone Should Know About Russian Demography
The writer, Jon Hellevig, is managing partner of Awara Group, a
management consulting and corporate services firm offering advice
and outsourced services in accounting, pay-roll, recruitment, IT and
law. http://www.awaragroup.com/
However, the positive trends in the summary figure are overshadowing
a particular crisis Russia is facing right now. This is the gaping hole in
Russia’s demographics: the impending near halving of the population
aged 18 – 24, compared with the situation of just a few years ago.
The low birth rates of the years of economic and social hardship in
the 1990s are now materializing in a dramatic drop in the number of
young people reaching adulthood; that is to say, those replacing the
previous generations of the relative baby boom in universities and in
the job market. In the years between 1983 and 1988 about 2.4 million
babies were born each year, but in 1989 births dropped to below 2
million. This was followed by a further steady decline to reach a low of
1.2 million in 1999. Since then births have followed an upward trend
reaching 1.9 million in 2012. (Figure 1). This means that whereas in the
year 2005 roughly 2.5 million people reached adulthood (age 18) the
figure was halved by 2013, with only 1.2 million reaching this age. The
figure will see only slight increases until at least 2020, after which it may
approach 1.5 million, still much lower than the number of young adults
of the mid 2000s.
2. AWARA GROUP MARKET RESEARCH, DEMOGRAPHICS
RUSSIA’S GENERATION GAP – THE CHALLENGE TO THE ECONOMY
Figure 1 – Generation Gap – Young Adults Reaching Adulthood 2001 to 2030
2.6
2.4
2.2
2
1.8
1.6
1.4
1.2
2030
2029
2027
2028
2026
2025
2024
2023
2021
2022
2019
2020
2017
2018
2015
2016
2014
2013
2011
2012
2010
2009
2007
2008
2006
2005
2004
2003
2001
2002
1
Source: Russian Federal State Statistics Service
How dramatic the situation is can be seen from looking at the
number of students in colleges and universities. In 2009 there
were some 7.4 million students but for the 2013/2014 school
year less than 6 million were enrolled, and this figure is expected
to drop further to 4.2 million in the near future1. This means
that during the next 10 years less than one million students will
graduate each year and enter the job market whereas only a few
years ago the number was the double. Considering the virtual full
employment (unemployment rate at 5.2% in August 2013, source:
Rosstat) and the fact that the Russian job market has been able
to absorb double the amount of students during the past years, it
will mean that there will be a huge deficit of young people entering
the job market.
Following this demographic gap, the overall working-age population
is also expected to shrink substantially. According to predictions,
the Russian working-age population will decline from the present
level of about 87 million by some 10 million, or about 10%, by the
years 2020 to 20252.
this is the total number of students in all grades
Source: Interfax February 28, 2013
1
2
This will pose a dire threat to the economy as a whole and will challenge
all business leaders to steer a course in the new realities. The halving of the
pool of entry-level job candidates will force companies to rethink totally
their human resources strategies and indeed their whole business strategy.
It is a question of absolute numbers: from where do you get the
people to do the auxiliary work which traditionally has been assigned
to young and energetic newcomers? But it is also a question of
nurturing talent. Now companies must gear up for the fight for
talent. They will be forced to rethink seriously their employer brands,
the attractiveness of the company in the eyes of potential employees,
and recruitment strategies in order to attract talent. And the young
people of the diminishing generations will have the benefit of choice.
They are a pampered generation who will put employers on the
catwalk to assess what they have to offer. It is already a generation
born and raised in the digital era, the PlayStation generation as Pekka
Viljakainen calls people born after 1985 in his No Fear: Business
Leadership for the Digital Age. These people cannot be pushed
around according to old management models. They want to work
3. AWARA GROUP MARKET RESEARCH, DEMOGRAPHICS
with companies running modern corporate cultures with mentally
and technologically inspiring leaders that offer them challenges but
also life-work balance. Therefore, companies are obliged to muster a
serious effort when developing corporate cultures which attract the
best employees and foster a dynamic, modern and effective way of
working. This is also about improving labor productivity by tearing
down the hierarchy and bureaucratic rules and practices which
hinder efficiency and innovation.
They must improve the way staff is managed. Away with the
command-and-control mentality which prevails in most Russian
companies and even in Western companies in Russia, which have for
too long been ignoring the question of developing their corporate
cultures. What are needed now are cultures that are low on hierarchy
and strongly guided by the principles of employee engagement. This
is about how to achieve a company’s strategic goals by creating
conditions for each staff member, manager and executive to be fully
switched on in their jobs; this will enable them to deliver their best
efforts in the best interests of the business.
Only companies guided by the principles of engagement can possibly
win in the race for shrinking talent and retain the best employees.
Truly great and inspired leaders can turn this challenge into an
opportunity because, frankly, the general level of management
practices in Russia today is so poor that those who choose to invest
in developing their corporate cultures and implement a strategy of
employee engagement will be able to make a significant impact and a
real difference, and do it quickly.
Developing corporate cultures is the most important element of
modernizing business and increasing labor productivity which
www.awaragroup.com
Global call center:
+ 7 (495) 225 30 38
Follow us on social networks:
RUSSIA’S GENERATION GAP – THE CHALLENGE TO THE ECONOMY
Russia so sorely needs. Developing cultures is not only about
behavior and interpersonal relations, it is also about modernizing
business processes; all processes and rules that govern them must
be streamlined. The company has to be purged from all bureaucratic
procedures, and all bureaucratic minded managers who uphold
them. There has to be a common awareness throughout the
organization that each and every employee is there solely for the
purpose of successfully selling the company’s products and services
to its customers, while at the same time maintaining excellent quality
and a total service concept. A company with a proper culture realizes
that all the rest is merely auxiliary to sales.
One implication of this is that companies must seek to outsource a
greater part of their functions. Particularly well suited for outsourcing
are, for example, the following functions: accounting, payroll, HR
administration, recruitment IT, and legal services.
Another imperative, which follows from the reduced number of young
adults and the shrinking working-age population, is to move away
from a business model heavily biased towards a presence in Moscow
and St. Petersburg. There will be a need to disperse business functions
all over Russia and even abroad. Of particular interest in this respect is
giving consideration to what the Customs Union countries of Belarus
and Kazakhstan have to offer, as well as aspiring Armenia.
In this context, it would be highly desirable that the Russian
Government waived the work permit and visa requirements for
foreign interns so as to compensate for the drop in the number of
Russia’s young people. Having received a chance to work in Russia,
there is every likelihood that such a young adult would then opt for
furthering his or her career in this rewarding market.