Why Moscow Has Rock-Bottom Unemployment

Despite sluggishness in Russia's overall labor market, Moscow's labor market is hot—boasting a 0.9 percent unemployment rate, writes Peter Cappelli at Human Resource Executive. There are lessons here for the United States. He explains why:

The intensity of Moscow's economy and the stagnation in the rest of the [Russian] economy are related. Despite having a population that is, by world standards, highly educated, the Russian economy is being held back by an apparent skill shortage....

The reason unemployment and underemployment is so high in the rest of Russia, even among those who appear to have skills, is that most workers have no way to indicate whether they can work effectively in modern businesses.

And precious few employers are willing to train and develop employees. We see this in most countries as well now, but it is much worse in Moscow because most of the companies are small, and there is no history of employee development. They rely on outside hiring, which is why wages are spiraling up.

Another factor is that the standards around education have eroded, so it is no longer clear what a degree from a particular university conveys in terms of abilities and competencies.

The problems with tunnel-vision recruiting—Cappelli says that Russian employers hardly acknowledge the concept of finding "diamonds in the rough among applicants"—are here in the United States as well, where most companies stick to a selective pool of candidates, Cappelli says. Neither are Moscow companies developing talent, he says, and U.S. employers are doing so "less and less."