Militarization of the Economy Is Pushing russia Towards a Socio-Economic Abyss

russia’s labor market is on the verge of exhaustion: in the first quarter of 2025, the growth rate of wages for new employees slowed down to 2.2 %, which is half the rate of the previous year.

Only a narrow segment of the economy maintains positive income dynamics, namely – the spheres related to defense orders and import substitution. For the rest of the economy, especially the public sector and pensioners, income growth is limited to inflation-adjusted indexation. Under such circumstances, the real incomes of most citizens remain frozen, and consumer demand is depressed.

Structural labor shortages remain a deterrent to a sharp decline in wages, but are not a guarantee of sustainable growth. The current model of the russian economy, built on centralized state funding,  in the face of international sanctions is showing the exhaustion of resources.

Against this background, russian companies are forced to revise their human resources policies, including salary cuts, forced vacations and transfer of employees to lower-paid positions. In particular, russia’s largest agricultural machinery manufacturer, “rostselmash”, which is included in the list of strategic enterprises of the rf, has sent 15,000 of its employees on unscheduled leave.

In case of a decline in energy export revenues or a significant reduction in reserves, the kremlin will face the impossibility of maintaining the illusion of stability. Superficial stability in the labor market masks systemic degradation. moscow temporarily maintains control through the war, but russia is steadily moving toward a socio-economic crisis.