- Russia's war on Ukraine has fueled a massive brain drain that will hobble Putin's economy.
- By some estimates, 80% of those who have left Russia are college educated, and 86% are under the age of 45.
Russia's war on Ukraine triggered a massive brain drain, and the toll it will take on the economy is coming into clearer focus.
Since Vladimir Putin launched the invasion in February 2022, emigration out of Russia has exploded, with some estimates putting the exodus at 1 million people. A recent analysis from the policy platform Re: Russia narrowed the number to 817,000-922,000.
That's contributed to a record labor shortage, with 42% of industrial firms unable to find enough workers in July, up from 35% in April.
The composition of Russia's exodus also points to the best and brightest fleeing the country. While a barrage of Western sanctions incentivized many to leave for economic reasons, others fled to avoid military service, skewing the numbers toward younger Russians.
Workers under the age of 35 now account for less than 30% of the labor force, the lowest on record going back 20 years.
And according to a report from the French Institute of International Relations, 86% of those who have left Russia are under the age of 45, and 80% have a college education. At least 100,000 IT professionals moved out of Russia in 2022, a Kremlin official estimated last year.
In addition, data also suggest the Russians who fled were significantly wealthier, as nearly 11.5% of personal savings that were in Russian banks at the end of 2021 were were transferred abroad in 2022, amounting to about 4 trillion rubles ($41.5 billion).
A shrinking population of skilled professionals bodes ill for the Russian economy. When highly skilled workers leave, economic opportunities depart with them, which will bring Russia's living standards to the level of other former Soviet states, the Atlantic Council said in a report.
Without migration to fill the labor gap, and paired with declining birth rates, the Russian economy is expected to shrink.
In fact, the Atlantic Council estimated that Russia's GDP, as measured by purchasing power parity (PPP), will fall behind Indonesia's in 2026, nearly two years earlier than would've been the case had Putin not launched his war on Ukraine. By then, they will switch places as the world's sixth and seventh largest economies by PPP.
To be sure, Western sanctions limiting Russia's access to advanced technologies will also weigh on GDP. But in drawing the comparison with Indonesia, the report pointed to a common decisive factor.
"But Russia's slide and Indonesia's ascent are both driven in large part by the same thing: people. Russia is suffering from acute brain drain while Indonesia's labor force is growing," the Council wrote.
"In particular, Indonesia's educated professional class is growing while Russia's is shrinking. That contrast is what makes their soon-to-be swap on the list of the world's largest economies notable. The world's center of economic gravity is shifting."
Not only is Indonesia's labor force increasing, but the influx of highly skilled workers has helped boost private consumption standards in the country, it added.
As a result, China is taking notice of Indonesia's expanding ability to spend, and trade ties between the two countries are likely to tighten, the Council said. This may further dim growth prospects for Russia, which has grown increasingly dependent on trade with Beijing since the war's start.
"Although Russia may be an important export market for Chinese producers for the moment, as it rushes to fill the gaps left as western companies pull out, its long-term growth prospects are stagnant at best and more likely negative," the report said.