Streetwise Professor

October 21, 2008

Russian Poverty

Filed under: Economics,Politics,Russia — The Professor @ 7:49 pm

This article from Novye Izestia (with a translation obtained from Johnson’s Russia List) pertains to the debate that has been going on in the comments section for the past week or so:

Novye Izvestia
No. 192
October 20, 2008

Russia’s poverty levels are far higher than official statistics indicate Federation Council discusses poverty levels and the economic crisis Author: Andrei Dolgikh [Federation Council Speaker Sergei Mironov: “Official statistics underreport the scale of poverty in Russia to a substantial degree. In reality, at least a third of Russian citizens are
living in poverty.”]

On October 17, International Day for Eliminating Poverty, Federation Council Speaker Sergei Mironov admitted: “Official statistics underreport the scale of poverty in Russia to a substantial degree. In reality, at least a third of Russian citizens are living in poverty.” But according to the Federal State Statistics Agency (Rosstat), 18.9 million citizens were below the poverty line in 2007 – 13.4% of the population. To use Rosstat’s terminology, they had incomes below the subsistence minimum. This minimum is set separately for each region. In the city of Moscow, it is 6,659 rubles per person per month; in the Tambov region, it is 3,347 rubles; in Chukotka it is 9,965 rubles. The average nationwide subsistence minimum is between 4,000 and 6,000 rubles a month. According to Mironov, 42-45 million Russian citizens have incomes lower than this level.

The specialists we approached for comments explained the “trick” in official calculations. Oksana Dmitrieva, member of the Duma’s Budget and Taxes Committee, said: “Russia uses a lower subsistence minimum figure for old-age pensioners (20-30% below the minimum for working-age citizens – editor’s note). Due to this, pensioners are artificially excluded from the category of the poor. The actual incomes of most pensioners are extremely low, and the number of people living below the poverty line exceeds Rosstat’s figures by 20 million.”

Several years ago, the authorities announced their goal of reducing poverty nationwide. They started forgetting this goal long before the global financial crisis reached Russia. It was far more pleasant to talk of rising real incomes. Indeed, real incomes have been rising – but these figures are rather like the average temperature of patients in a hospital. This is indicated by the
growth of the decile coefficient, which indicates the gap between the richest 10% and the poorest 10%. According to Rosstat, this coefficient was 13.9 in 2000 and 16.8 in 2007. Independent analysts speak of a 25-fold difference.

According to the Federation Council, almost half of Russian citizens are seeing their incomes grow more slowly than prices. Mironov offered a grim forecast: “Given the growth of food prices, utilities rates, transport and communications costs since the start of this year, real incomes next year will be lower than this year.” According to Dmitrieva, state-sector employees and pensioners are already worse off: “Indexation of pensions and other payments from the state has been based on an inflation figure of 10.5%, but inflation will reach 15% by the end of the year.”

And now there is the financial crisis to contend with, on top of inflation. Yevgeny Gontmakher, head of the Social Policy Center (Economics Institute, Russian Academy of Sciences), told us that Russia could be facing a lengthy period when the number of people living in poverty will increase. Gontmakher said: “Some citizens may lose their jobs and their incomes. The state has enough money to cover state-sector employees for a year or two, but this money could run out in five years or so.”

This seems like perfect material for another set of tennis between Michel and DR in particular. The article seems to support quite strongly several points that Michel has made. Over to you, guys.

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  1. What? There are poor Russian? That can’t be right. Don’t 95% of all Russians own their homes/apartments outright? Doesn’t this leave them with pools of disposable income that they spend on cars, consumer goods, and vacations? I can’t believe it! Timothy told me that Russia is now Rich. I am shocked and aghast that there are Russian who dare to claim to be poor. [Sorry, I couldn’t resist the sarcasm.]

    Comment by Michel — October 22, 2008 @ 12:46 am

  2. 1. T. Post certainly never claimed there doesn’t exist a substantial segment of poor Russians and your attempts to imply otherwise are risible and underhanded, Michel.

    2. Of course poverty levels will depend on how one measures the poverty level. Isn’t this obvious?

    3. Two quick comments, since I think that both I and Michel have already shown off all our serves and volleys anyway (besides, the game is being rigged against me from the start by the organizer :)). a) Lower minimums for seniors are semi-justifiable since they do indeed typically need less money than families and in practice most receive some support from their children, b) Rising inequalities have been a worldwide phenomenon, and Russia’s as measured by the Gini coefficient is still significantly lower than most countries out the European Union and Japan. Actually, ironically one of the positive effects of the current economic crisis is that inequality is likely to lessen, since the wealthy are losing proportionately much more.

    4. SWP, do you mind replying to $67.88? ( I would genuinely appreciate it if you could try to clear up my economic confusion. 🙂

    Comment by Da Russophile — October 22, 2008 @ 1:05 am

  3. Da Russophile, you forget one thing. As you age, your health tends to decline. This means that you are more likely to need to spend more on medication and health care (no longer free). Consequently, the elderly are more likely to need more money for health care than the young. As for receiving support from their children, in many poor regions of Russia, it is very often the children that depend on pensioners. Quite often pensions were the only source of revenue that was actually received by the family.

    Comment by Michel — October 22, 2008 @ 1:28 am

  4. 1. Game rigged? How? ‘Splain, please. I am hurt to the quick.
    2. Re $67.88, I’ll try to reply this evening, but my life has this nasty habit of getting in the way. Not blowing you off, just that I can push multi-tasking only so far.
    3. Given that front monthh NYMEX WTI crude is selling at $68.07, and Brent futures at $66.05, I think I’ll have to do a new post, with a title that will be something like “$64.00”, or “The $64 dollar question” maybe.

    The ProfessorComment by The Professor — October 22, 2008 @ 11:37 am

  5. “1. Game rigged? How? ‘Splain, please. I am hurt to the quick.”

    Typically when moderating a debate the moderator is neutral and refrains from kicking it off with an article that “seems to support quite strongly several points that Michel has made”.

    In any case the long prior discussions without resolution make me think it will be better for the sake of all our lives to let this rest. 🙂

    Comment by Da Russophile — October 26, 2008 @ 5:05 pm

  6. […] generally civil and very interesting. The Great Debate Check out Michel’s Comments (and Russian Poverty, later offshoot) – not […]

    Pingback by The Great Debate | Sublime Oblivion — November 26, 2008 @ 3:51 am

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