Russia’s economy is expected to stagnate for the next two decades with growth stuck at 1.5%, according to recent research. There are several factors slowing growth, but the most important is the population is shrinking, as the catastrophe of the 1990s hits the demographic curve, Iikka Korhonen, chief economist at Bank of Finland Institute for Economies in Transition (BOFIT), said in a paper this month.
The irony is that dealing with Russia’s demographic problems has probably been one of the Kremlin’s biggest successes, even if it hasn't fixed the problem. Today Russia’s population is just under 148mn (144mn if you discount the Crimea). That is actually a stunningly good result. When the “dying Russia” meme appeared in around 2000 even the optimistic scenarios were for Russia’s population to shrink to around 125mn today and many saying it would fall to 75mn-100mn from 144mn in 2000.
What the Kremlin managed to do was not only stave off disaster, but thanks to an extensive Mother and Child programme Russia’s population grew for a decade. Russian President Vladimir Putin can take the credit for 4mn additional babies being added to the population since 2006 and between 15mn and 70mn Russian who are alive today that would not have been without the state’s action.
The Mother and Child reforms instituted by the Kremlin in 2006 have been a stunning success and almost entirely unacknowledged. However, it did not solve the problem. The size of the population began to decline again in 2018 and the coronacrisis has also kept migrants at home, making the problem even worse. The demographic dent put in the population pyramid by the chaos of the 90s and the collapse of life expectancies was very deep indeed. The Mother and Child programme was only going to mitigate the problem, but it was never going to solve it.
Two decades on and once again the analysts and think-tanks are worried about demographic decline and the impact it will have on the economy. Again the predictions are gloomy. The UN, which was one of the most pessimistic in 2000, predicts that Russia’s population could halve by 2100. In its “pessimistic” scenario the UN thinks the population will fall to 125mn by 2050, but in its “optimistic” scenario will stay more or less stable to arrive at 144mn by 2050.
Putin has put dealing with Russia’s demographic problem at the core of his presidency from his first day on the job and he is still working on it 20 years later. Encouraging Russians to have more babies remains a core goal of the 12 national projects and retirement ages were hiked in 2019 to help mitigate the problem. The Kremlin would also like to attract more migrants as a stop-gap measure, but from this point on all the Kremlin can do is contain the problem. It will take 20 years for the demographic dent to work its way through the system.
It is hard to over-emphasise the catastrophe that the 1990s was. Russia’s demographics look like those of a country that was fighting a full-scale war. Male life expectancy fell to a low of 57.4 years in 1994, while female life expectancy that year was 71 years – the widest gap between the genders in the world.
Russia’s population had been growing strongly since the 1950s and boomed in the Soviet period, rising from under 100mn after WWII to peak at 148.5mn in 1992. However, problems were already apparent before the end of the Soviet Union, as the birth rates had already begun to decline in 1986 as economic stagnation that eventually brought the house of cards down set in.
The pyramid shows the birth rate falling from 1986 onwards and the base rapidly contracts in the 90s, introducing the demographic dent that then starts to work its way upwards. However, the dramatic effect of Putin’s reforms in 2008 is also visible as the base starts to expand rapid from that year. However, a decade later the demographic dent has arrived in the age band of the working population, which is why the economy is likely to stagnate from here. The dent will take more than a decade to work its way through and into retirement ages.
The fattest part of the pyramid is currently in the 35- to 39-year group who have 25 to 30 years of work left before retirement, but the cadres following them have been radically reduced.
These problems were already very visible in at the end of the 1990s, when demographers became increasingly alarmed at where Russia was heading.
The problems were spelled out in a seminal paper by Murray Feshbach, a Senior Scholar at the Woodrow Wilson Center, entitled "Russia's Health and Demographic Crises" that was widely cited and set the tone.
The crisis, he wrote, is a result of "a constellation of occurrences that include not only infectious disease, but alcoholism, drug abuse, suicide, trauma injuries, astounding levels of cardiovascular disease, male/female estrangement and loss of family cohesion, declining physiological fertility, ugly environmental pollution and micronutrient starvation."
To highlight just how bad things were in the late 90s a WHO health survey from earlier that decade found that smoking and Russians’ famously bad diet had no measurable impact on Russian life expectancy, simply because they didn't survive long enough for tobacco related cancer and heart disease to hurt them. The alcohol got them first. The study found that half of Russian men that died did so on a Monday as the alcoholic binging over the weekend caught up with them at the start of the week.
Feshbach, who had made his name studying infant mortality patterns in Soviet Russia, predicted in 2003 that Russia’s population could fall from 144mn in 2003 to 70mn-100mn by 2050. If his forecasts had been correct then Russia’s population should have passed through 115mn in 2020, whereas it was actually 146mn.
"I hope that my calculations are wrong," Feshbach said in a presentation in 2003 of the results of his research, “but I think that the decline in Russia’s population could be even worse.”
Feshbach believed the government was being overly optimistic, as officials failed to take into account an HIV epidemic and the spread of untreatable tuberculosis, as well rising infant mortality rates, all of which could have a major impact on the Russian population.
Feshbach said the halving in births from 2.5mn in 1987 to 1.2mn in 2002 had been a major factor in Russia's population decline. At the same time, there was major increase in mortality rates, resulting in a ratio of nearly 2.3mn deaths to 1.4mn births in 2002.
According to Feshbach, this trend was likely to continue and perhaps even worsen as the number of women 20-29 years old – that account for three-quarters of all births – declines.
Falling life expectancy was also worrying Feshbach and his colleagues. The average life expectancy of Russian males in 2003 was only 58 years, against 72 years in the US. Another way to view this, Feshbach said, is to consider that while 88-90% of all 16-year-old males in the US live to the age of 60, in Russia only 55-60% live that long. With over 40% of all males dying between ages 16-59, economic productivity and worker output was already severely limited. Taking all this into account he predicted that a more realistic figure for the Russian population would be around 77-102mn by 2050.
It didn't happen.
Since 2003 Russian life expectancy has rapidly recovered and instead of shrinking, the country’s population grew in size for a decade, defying all predictions.
Putin took over in 2000 and brought with him “stability.” Again it is hard to convey to those that did not live through Russia in the 90s just how “chaotic” the Yeltsin-era was, which sent tens of millions of Russians to an early grave, and how much a relief Putin’s “stability” was. Those two words don't come close to capturing the sea change there was in the quality of life following the hand-over.
Russians’ average life expectancy reached a historic record of 73.4 years in 2019, according to the country’s Health Ministry. The increase from 2018, when average life expectancy stood at a little over 73 years, is attributed to a 3.5% decrease in male mortality and a 2.1% decrease in female mortality among working-age Russians.
Feshbach was amongst the most pessimistic, but even the Russian state was anticipating a decline from 144mn to 123mn by 2050. At the time, Nikolay Gerashimenko, head of the Duma committee on health and physical fitness, was making an even more extreme prediction in 2003 that the population would fall to 50-75mn by 2075. And well-regarded Russian demographer Sergei Yermakov also predicted 70-90mn by 2050.
No one thought the population would actually grow in the following decade and remain more or less stable by the time the demographic dent hit the working aged population. But that is exactly what happened.
Putin takes action
The coverage surrounding Putin since he became president has mostly focused on corruption, his kleptocracy and an aggressive expansionist foreign policy. However, the issue that has preoccupied Putin most for all of his three terms in office is demography.
In his first State of the Nation speech in 2000 Putin listed 16 major problems facing Russia and remarkably he named demographics first. Putin emphasised that the country was losing around 750,000 or more people a year – wartime losses – and this was the biggest challenge to the country’s future.
Most of the first half of the noughties was taken up with fire-fighting as the economy was still reeling from its economic collapse in 1998. But by the middle of noughties oil prices took off and by 2007 inflation had fallen into single digits for the first time since 1991. That is the year the government launched a $1 trillion infrastructure investment programme that had to be abandoned a year later after the US subprime mortgage crisis hit the world.
But even before the massive economic revival plan was floated in 2007, a year earlier Putin launched his first big push to deal with the demographic crisis. The population at the time had fallen to 143mn. Putin held a press conference to introduce his counter punch in May 2006.
One-off maternity capital payments for mothers of a second child worth $7,600 were introduced as part of a 10-year programme that included a raft of support, tax breaks and other measures to encourage Russians to have more children.
The press conference was a piece of staged political theatre. Putin said: "Now, the main thing, what we see as the main thing–", but he was interrupted by a heckle from the floor.
"Love!" shouted Sergei Ivanov, the Russian Defence Minister at the time and one of Putin’s closest confidents.
"Right!" Putin answered. "The Defence Ministry knows what the main thing is. Really, I am going to speak about love, women, children" – there was applause from the assembled officials – "family, and Russia's most acute problem today: demography."
The Mother and Child programme proved to be successful beyond all expectations. Within a year the population decline was halted and reversed as bne IntelliNews reported at the time – a fact that continued to be widely ignored in their Russian coverage by the international media. By then the “dying Russia” meme was too well established to be so lightly abandoned.
Putin called for a wide range of subsidies and financial incentives, some to be paid by the government and others by employers. These include raising government subsidies for children up to 18 months to about $53 a month for a first child and about $107 for a second child. At the time mothers received about $25 a month for a child up to 18 months old.
Putin also proposed maternity leave as long as 18 months that would pay a mother at least 40% of her salary, and compensation for some of the cost of day care: 20% of the cost for a first child, 50% for a second child and 70% for a third.
For mothers who chose not to return to work, he proposed a one-time subsidy of about $8,900 upon the birth of a second child – a large sum at the time. He suggested subsidies for adoptive parents as well, and investments in prenatal care, maternity hospitals and kindergartens.
The government’s initiative also soon spilled over into the private sector as more families had babies and looked for better quality care as Russia’s economy blossomed in the noughties boom that saw it double in size.
“Sex was not sanctioned,” Mark Kurtser told bne IntelliNews wryly in 2015 at St Petersburg International Economic Forum (SPIEF) a year after Russia annexed the Crimea. Once Moscow's chief gynaecologist, Kurtser went on to found MD Medical Group (MDMG), Russia’s largest private provider of women and children’s healthcare, which has been growing in leaps and bounds since it was listed on London’s stock market in 2012. MDMG set up a chain of private hospitals in Moscow and the regions that provide gynaecology and obstetrics services, which make up just over half of its income, as well as polyclinics that mostly focus on medical services for women and children.
But Putin’s push to have more babies has had to contend with competing shocks and after rising for a decade, Russia’s life expectancy was knocked back for the first time since 2005 by the coronavirus (COVID-19) pandemic last year.
That was not the only shock to hurt Russia’s demographics since 2006. The 2014 oil price shock and collapse of the ruble unsettled families again and by 2017, in the midst of the subsequent recession, the birth rate started to decline again. Families stopped giving birth even to first children. They were afraid of financial uncertainty, only to be hit again in 2020.
Another factor pushing up the population is that the number of abortions has declined dramatically. For decades the preferred method of birth control was abortions, which were free and widely available. Russia had one of the highest abortion rates in the world. But as modern contraception methods became widely available the rate of abortions has plunged over the last decades, both in absolute terms and relative to the number of live births, experts at the HSE’s Institute of Demography said in a recent report.
Two decades on and Putin is still at it. Russia has earmarked RUB1.7 trillion ($2bn) to be spent on healthcare under the 12 national projects programme to meet his goal of raising life expectancy to 78 years by the time his current term ends in 2024. In January 2020 Putin announced new measures to stimulate birth rates from an average birth rate of 1.48 per woman to 1.7 within four years, up from a low of 1.16 set in 1999. For comparison the EU currently has a birth rate of 1.59.
When announcing the new perks last year, before the pandemic got going, Putin told the Duma: "The birth rate is falling again,” before expanding the maternity capital payments to include welfare payments to be paid for children aged three to seven in low-income families, and free school meals to be provided for the first four years of school, amongst other incentives.
Demographic 90s dent arrives, migrants to the rescue?
Ultimately Putin is fighting a losing battle. The size of the demographic dent from the 90s is just too deep for any of these programmes to repair it. And now it is here.
Russia’s population shrank in 2020 by about 500,000 for the first time in 15 years. The fact that Putin bought Russia a decade and a half of population growth is in itself an enormous achievement, but the cadre arriving in the work force now is the generation that were born in the bitterest years of the 90s. And the downturn was exacerbated by the coronacrisis, which has seen excess deaths run into the hundreds of thousands in the last year.
There were 229,700 more deaths between January and November 2020 than in the same period the previous year, an excess mortality rate of more than 13%, according to official figures.
The sanctions regime and Putin’s efforts to modernise the army since 2011 have also worked against population growth, as that led to almost a decade of declining real incomes that also hurt birth rates, which has now turned the natural population growth negative.
One solution is to attract more migrants, and indeed the number of immigrants in the last decade has also ensured that the overall population has continued to grow. Seasonal workers from other former Soviet republics have flocked to Russia for work, easily the most prosperous of the Former Soviet Union (FSU) countries.
But the 2020 coronacrisis has brought that to an end. The recession meant many jobs disappeared and at the same time the deep devaluation of the ruble against the dollar – migrants almost always send remittances home in dollars – meant that working in Russia became a lot less profitable.
With 11.6mn foreign-born migrants, as of 2019, mostly from Central Asia, Russia attracts the second-highest level of immigrants in the world after the United States. However, in 2018 the number of migrants didn't compensate for the fall in the natural population for the first time.
Since then it has got worse. The number of migrants into Russia in 2020 was down by 5mn to 6.3mn people, or half on the previous year, as iterant workers decided to stay at home, or simply couldn't get into the country. Russia’s statistics agency said the net inflow of arrivals fell from 167,000 to 69,000 over the first eight months of 2020 as the pandemic took hold.
And these workers do essential, if unskilled, work, keeping factories, construction sites and farms running among many other tasks that ordinary Russians don't want to do. Foreign workers in Russia were among those hit hardest by the pandemic. One survey showed three in four lost their job or wages during the spring lockdown, compared with 48% of Russians, the Moscow Times reported in December.
In the short to medium term Russia’s easiest solution to its demographic problem is to attract more migrants, but it is currently running a deficit. In 2021 the birth rate in Russia was an estimated 9.71 per 1,000 population according to the Migration Policy Institute, while the death rate was 13.4 deaths per 1,000. That leaves a gap of 3.7 people per 1,000 – more than the 1.7 additional migrants that arrive per 1,000 people a year. In other words, the population is shrinking by two people per 1,000 each year, even after counting the migrants into the equation.
Despite the undeclared war between Russia and Ukraine, the biggest national group is from the latter, which account for more than 60% of people applying for citizenship. There are some 3mn Ukrainians living and working in Russia today – more than the 2mn working in Poland – and as part of the Kremlin’s strategy to annex the Donbas by stealth the government has recently eased the citizenship requirements, making it easier to get a passport. According to reports earlier this year the authorities in Donbas have made it compulsory to hold a Russian passport to hold some publically funded jobs such as teacher or doctor. However, even migrants are not going to solve Russia’s falling population problem and what could be done has been done. At the end of the day Russia has little choice other than to wait 20 years for the demographic dent to work its way through.