Russia's wage growth stalls as war costs hit struggling citizens
The wage growth of newly hired Russian workers is slowing down. In recent months, the economy under Vladimir Putin has lost momentum, with the war-related expenses being particularly burdensome for those living on the brink of poverty, as assessed by the "Financial Times".
According to an analysis of Russian job offers conducted by the "FT", the rapid improvement in the standard of living for Russians, which had contributed to support for the war against Ukraine, is coming to an end. This change is indicated by the slowdown in wage growth for newly hired workers starting at the beginning of 2025.
The conclusions drawn by the "FT" are backed by data from the Federal State Statistics Service of Russia (Rosstat), which reported that the growth of real incomes, including income from property rental and interest from savings, dropped in the first quarter of 2025 to 7.1%, down from an average growth rate of 8.3% last year.
The newspaper noted that after launching a full-scale invasion of Ukraine, the Kremlin "opened the taps and money flowed into the economy as it shifted to a war footing — through army conscripts’ pay, defence salaries, cheap loans to war-linked businesses and generous mortgage subsidies for households."
According to Rosstat data, real incomes fell after the war began but rebounded at the end of 2022 and started growing at a pace not seen in over a decade. Remarkably, "even cumulative inflation of about 30 per cent over three years failed to erode the gains."
In the opinion of the British journal, Putin's war-related expenses have severely impacted those living on the brink of poverty.
"For example, some families living in poverty now get money from conscripted husbands at the front. The state has been using money to pour cold water on the simmering pot of public sentimen," said Alexandra Prokopenko, a collaborator at the Carnegie Russia Eurasia Center in Berlin.
The financial situation of Russians is worsening
The British journal cited research conducted by a group of independent Russian researchers called Chronicles. According to their findings, 40% of Russians confirmed a deterioration in their financial situation. However, the same percentage reported no change in their finances (40%), and 20% observed an improvement.
According to the co-founder of Chronicles and oppositionist Aleksei Minyalo, there is a connection between Russians' sense of well-being and their support for the war in Ukraine. In his opinion, the more challenging the financial situation, "the less likely someone is to back it."
As a signal of the weakening war economy of Russia, the "FT" cited official estimates of Russian GDP growth, which is expected to fall to about 2% in 2025, representing a significant slowdown compared to the average of 4% over the past two years. The latest forecasts from the International Monetary Fund also point to a slowdown in Russian GDP growth to 1.5% this year and 0.9% in 2026.
