Future Tense

What the Exodus of Western Brands Means for Russian Workers

Rows of empty tables and chairs in a food court
A closed McDonald’s restaurant in the Aviapark shopping center in Moscow on March 19. Reuters/DPA Pictures

MOSCOW—The list of Western companies cutting ties with Russia in response to the “special military operation in Ukraine” continues to expand: According to the Yale School of Management, more than 600 brands have paused their operations in Russia. According to state-sponsored pollsters VCIOM and FOM, however, half of Russians aren’t worried about the foreign firms’ exodus and don’t think it will negatively affect their lives. In response to a survey by the recruiting company Superjob, 25 percent of responders stressed that they won’t buy items from companies that abandoned Russia even if they come back. The media captured how Russians put stickers saying “Goodbye” on the windows of McDonald’s and Starbucks restaurants, as well as Cartier shops. However, the departure of the Western firms is not only about the limited choice for consumers; it’s also about the potential job losses for hundreds of thousands of Russians.

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Galina Karelova, deputy speaker of the Federation Council (the upper chamber of the Russian parliament), reported on March 23 that since the “special military operation” began, about 40,000 companies employing 8.4 million Russians had announced job status changes for some of their staff, adding up to almost 100,000 workers listed as idle—an official designation in Russia. That number has likely increased in the past month. Under Russian law, employees should be paid two-thirds of their salary for idle time caused by a company’s actions. A few Western corporations have declared that they will continue to pay Russian workers after shutting down their operations, including McDonald’s, which employs 62,000 Russians, and Ikea, with 15,000 workers. In response to questions from Slate this week, Ikea said that it would keep on paying employees till June. (McDonald’s did not respond to a request for comment.) While many companies announced that they have halted their operations in Russia in solidarity with Ukraine and disagreement with the “special military operation,” others have said it has become impossible to operate due to logistics problems. It is hard to ascertain if the latter is an excuse.

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A woman who works for Renault, a French car brand that employs about 5,000 Russians, told Slate that her salary decreased after the company suspended its manufacturing plant in Moscow: “At the beginning of March, my colleagues and I were forced to use paid vacation days, though I planned my vacation in June. I took one week off. Then I worked for two weeks, and then I was categorized as idle. Now I receive two-thirds of the salary.” She added that the company told workers it had halted production because of supply chain problems, but management hasn’t provided any information on what happens next. “I don’t think that the company will continue to pay two-thirds for a long time. The situation has persuaded me that living and working in a country with a more stable economy is better. I am looking for job openings abroad.” Renault did not respond to a request for comment.

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Along with Renault, German carmakers Mercedes-Benz, BMW, and Volkswagen, South Korean Hyundai, Japanese Toyota, and Swedish Volvo have stopped local production. A Volvo employee told Slate that some of her colleagues had been idle and have been receiving two-thirds of their salary: “It mostly affected blue-collar workers because our plant in Kaluga has been temporarily closed. Some white-collar workers are idle as well. I am ready for the same to happen to me. If this helps my company keep jobs, I will understand that,” she said. She added that she sees how hard the top managers work to develop a solution. “The company is in a very difficult position: It needs to satisfy Europeans and the Russian government. Many factors affect our work: sanctions, the risk that our products might be used as dual-use goods, and logistics issues,” she said. (“Dual-use goods” are those that have both consumer and military applications.) “We plan only one month ahead right now. I believe that the solution will be found,” she said. Volvo didn’t immediately respond to a request for comment.

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Partners of foreign auto companies in Russia also suffered. A plant director who supplies plastic parts to Volkswagen and the Renault–Nissan–Mitsubishi Alliance said he had to shut down production: “Complete plant head count—260 employees—have started to receive two-thirds of salary since April,” he told me. He sees the current situation as an opportunity. “I like challenges and risk management. The future will be very challenging, but I believe the local market will grow stronger and more independent than it was.”

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The exodus of Western brands has particularly affected industries that had just started to recover after the pandemic lockdowns. The manager of one of the Adidas stores in Russia said that this is the third time his shop has faced closure in the past few years: The first two, in 2020 and in 2021, were due to the coronavirus. Then the shop shuttered again March 14 and remains closed. “The company management has been keeping silent for quite a long time [after the start of the ‘special military operation’], so we didn’t understand what would happen to us,” he said. But there’s been good news: “Then Adidas announced that it would continue to pay salaries in full. It is different from the coronavirus lockdown because employees were paid two-thirds of their wages back then,” he said.

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According to the manager, supply chain disruption was the main reason the German sportswear brand suspended operations. Now, he says, the sportswear maker has closed some Russian shops permanently. “My boss persuaded me that this happens every year and that my shop is productive, so I should not worry,” he said. “But for my colleagues who worked in those stores, the news came as a shock.” For now, his salary hasn’t changed, which he is grateful for. “I was worried initially because of the uncertainty. However, I realized that I can’t change anything, so I am just waiting.” Adidas declined to comment.

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The Spanish fashion retailer Inditex, which owns more than 500 Zara, Zara Home, Oysho, Bershka, Massimo Dutti, Pull&Bear, and Stradivarius shops in Russia, said on March 5 that it would continue to pay its 9,000 employees after it halted sales. Not all the retail workers have been so lucky, though. One Moscow resident lost her side job as a retail storage worker; she didn’t work officially for Inditex. Instead, as she shared with Slate, she worked two days per week as a temp at Inditex locations, as well as at Calvin Klein, Mothercare, Uniqlo, and Victoria’s Secret before they all closed stores. “I used to find jobs at an application called Ventra Go, which specializes in outsourcing. But starting in March, offers have disappeared,” she said. “Every time I update my profile, it says: ‘There are no vacancies for you.’ Stores of Russian brands also don’t look for temps. My income fell by 20 percent. This is very bad. I am short of money, and I don’t know how else to get a side job.”

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Western firms have been large advertisers in Russia, so their exit has also hit the marketing industry hard. More than one-third of the top 30 advertisers announced that they have stopped ad investments; PepsiCo, Nestlé, Mars Russia, McDonald’s, Procter & Gamble, L’Oréal, Ferrero, and Coca-Cola are among them. Russian producer Ksenia Golovchenko said she was laid off from the advertising agency she worked for. “Half of our clients reported that they have suspended work in Russia, so they didn’t need promotion anymore,” she said. “The company decided to move out of the office to reduce expenses, and we switched to working remotely. Then management called me and said that I was laid off. I was told that there were no complaints about my job, but the company was running out of money, and it couldn’t pay anymore. At least 20 percent of the staff was terminated.” Since she was laid off, she has relocated to the country of Georgia. “I’ve been looking for a new job for a month and haven’t found anything yet. There is no work on the Russian advertising market right now,” she said.

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In April, foreign companies started to announce mass layoffs. On April 9, the British cosmetics retailer Lush said it would close 17 of 48 locations in Russia and lay off 200 employees. On April 12, SAS Institute, a U.S. developer of analytics software, reported that it dismissed 300 workers and planned to start bankruptcy procedures.

Viktor Lyashok, an expert in labor economics, says that the unemployment rate has been stable in Russia since the beginning of the year, but he expects the situation to worsen. “According to the recruitment company HeadHunter, job openings in Russia reduced by 17 percent in March. And this is only the beginning,” he said. However, Lyashok thinks the unemployment rate will not grow dramatically: “In crises, Russian employers try to keep their workforce by cutting their pay [instead of layoffs]. So I assume that many employees will see their income decline this year.”

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Other experts are less optimistic and predict the unemployment rate might rise from the current 4 percent to 7.5 percent—the level observed during the 2009 financial crisis—by the end of the year.

The Russian government hopes to stave that off. “Let’s hope that not millions of people will be left jobless, but fewer,” said Kremlin spokesperson Dmitry Peskov in March. The government announced allocating around $500 million for unemployment programs. The Ministry of Labor and Social Protection has even started to call employees losing their jobs “a liberation” instead of a layoff.

If the situation gets too bad, authorities can always blame the West for attempts “to suffocate the Russian population” with sanctions. However, it might not be easy; none of the Russians I spoke to think the West is responsible for putting their jobs at risk. One woman who lost her job said, “I blame the Russian government, which let it happen.”

Future Tense is a partnership of Slate, New America, and Arizona State University that examines emerging technologies, public policy, and society.

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