In order to be competitive, firms have to maintain levels and composition of the workforce that are «optimal» given the current production program. The paper explores what types of firms in Russian industry cannot optimize their employment, and why. Do they suffer from labour shortage or still experience labour surpluses? What is the skill dimension of reported shortage or excess? What factors increase the likelihood of persistently non-optimal employment? In other words, where is the excess/shortage concentrated and what affects its persistence? Finally, what are the costs and ways of dealing with these problems for the firms? The analysis is based on microdata from a survey of large and medium industrial firms conducted by the HSE and the World Bank in 2005.