This is a very nice interview. Note the huge regional differences, which I have pointed out before. No one in their right mind would call Moscow poor. I am surprised to hear about Tyumen, but only slightly, since it's a big oil-producing area (as in Tyumen Oil Co.). I had also thought Dagestan was the poorest Russian region (outside Chechnya), not Ingushetia, but the situations in both places are probably pretty similar. Caucasians tend to have huge extended families, so that helps people somewhat.
These is my third of three longish Russocentric posts, so I am outta here. www.gateway2russia.com 27 April 2004 Who`s Poor in Russia? "One of the specific features of Russian poverty is that half of the Russian poor work", - says Lilia Ovcharova, Director of Academic Programs at the Independent Institute for Social Policy and of the Laboratory for Standards of Living at the Russian Academy of Sciences Natalya Arkhangelskaya Poverty in Russia is a popular topic. It turned from a local issue in the early 1990s into a global problem and an obstacle to economic development. We should not drag our feet in addressing the problem of poverty. But who should be considered poor? The government has developed new criteria, a minimum basket of consumer goods, but on the day-to-day level other guidelines often work better. According to experts, we can get more or less accurate information about someone s income, including when that person is poor, by looking at their spending. Logically, spending has to equal income. This equation can be calculated on the macro level, or in other words for the entire country. As a result, we see that Russians spending exceeds their declared official income by a third, and this figure fluctuates insignificantly from year to year. In principle, people in all countries are inclined to underreport their income, but not to such a dramatic extent. The official government poverty criteria, on the other hand, are severely behind the times. The infamous basket of consumer goods is calculated according to completely anachronistic Soviet patterns. You have to agree: one coat and two dresses every five years and 450 grams of bratwurst per capita per year are absurd. The authorities have announced that they admit their mistakes and are ready to roll up their []sleeves and battle poverty. They have promised to raise wages, pensions, and welfare payments. But it will not be possible to change the standard of living without a developed civil society and without reforming education and health care and increasing low-income Russians access to these services. To understand more about the problem of poverty in Russia, Expert spoke with Lilia Ovcharova, Director of Academic Programs at the Independent Institute for Social Policy and of the Laboratory for Standards of Living at the Russian Academy of Sciences Institute for Socioeconomic Issues. Poverty is relative - It s impossible to give a simple answer to the question, Who is poor in Russia? Depending on how the answer will be used, researchers apply different criteria and methods and accordingly get different results. International comparisons provoke the most discussion. There is no single way to determine poverty in the US, Russia, Nigeria, and Sweden: poverty is a relative concept. But there is a single tool to define extreme impoverishment. You determine the portion of the population living on a dollar a day, then for various countries like Russia, which has a cold climate, various coefficients are applied. As a result according to these methods, a poor person in Russia is someone living on 25 rubles a day. These people make up about 7% of the population. There are no people this poor in America and Western Europe, if we are talking about legal citizens. But in Eastern Europe they make up 3-4%, and in China 18%. - But seven percent is really low. You often hear estimates that more than twenty percent of Russians live below the poverty line. - That is the result of other methods. When the president, for example, talks about poverty, he usually uses the figure 22%, or thirty million people. Other methods give other results. But let s deal first with the official poverty line. It is based on a minimum basket of consumer goods that cost 2143 rubles late last year. - How do those who end up with figures of 7-10% calculate the number of poor Russians? - Again, by different methods. We face something similar, for instance, when we estimate the size of the middle class. We use three criteria: income and property, education, and self-perception. It turned out that those people who have practically none of the above are in fact the extremely destitute. They make up about 10% of the population. These are the people who need targeted assistance, or to put it more simply, food subsidies. In America, the government simply gives people $100 in food stamps. We need something similar, as the main priority is to improve their nutrition. In the West, however, officials hand out assistance very carefully, so that people do not fall into the so-called poverty trap, when they can make more from welfare transfers than from working. A group portrait of poverty - One of the specific features of Russian poverty is that half of the Russian poor work. In Europe, where those earning half of the average income are considered low-income, the poor (12-13%) are unemployed. - What about pensioners? - Around the world, there are traditionally poor groups: large families with many children, single-parent households, and the unemployed. Russia s main risk groups are approximately the same, though families with children face the biggest risk of falling in to poverty. Especially if a family has two or three children. Regarding pensioners, they are not included in the category of the poor, and the poverty of Russian pensioners, especially those with jobs, is to a significant extent a myth. They do have one serious problem: they frequently cannot get necessary medical treatment. Another specific feature of the Russian situation is that in the West, the majority of the poor are concentrated in large cities, while in Russia they live mostly in villages and small towns. This is where the well-off live in Europe. - What would a collective portrait of the thirty million poor Russians look like? - The poorest group is children ages seven to fourteen. Next come people living in villages and towns in depressed regions, regardless of profession. The poor are often government employees, like teachers, doctors, and low-level clerks. The poorest people by profession are the service staff at hospitals and clinics. The situation in education is a little more equal. The average age of a poor Russian is impossible to determine, but in general, the poor are older than those who are better off. Gender is also a factor, but its significance is gradually disappearing. Also, importantly, the most serious factor determining poverty is education level. Rich man, poor man - The rich in Russia have fourteen times the income of the poor. This figure is based on data from the State Statistics Committee, and it is fairly stable. But I think that we actually have greater inequality, as the SSC s sample does not include major purchases made by the wealthy. There are also other reasons to doubt this figure. The Gini coefficient, the coefficient of inequality, is calculated by taking the poorest 10% and putting them in one general group. The same thing is done with the richest 10%. But in reality the rich in Tuva, for example, are not that different from the poor in Moscow. The average income in Moscow is seven times higher than in the poorest Russian region, Ingushetia. In other words, poor Muscovites raise the average level for the poor and the rich in Ingushetia lower the average level for the rich. If Russia did not have this great interregional inequality, the Gini coefficient would not be fourteen, but eighteen. - What region has the fewest poor? - Tyumen is the leader, followed by Karelia, and in third place comes Moscow. The capital has the highest per capita income and at the same time has the highest level of inequality, 53 times. - So all of Russia s oligarchs and all its homeless live in the capital? - The homeless are not included in these statistics. Moscow is a good example of how even wealthy areas can have great inequality. If we had resettlement patterns like they do in developed countries, there would be no pensioners living in Moscow. It would be too expensive. The fact that young people all want to go to Moscow is normal. Around the world, financial resources and the labor market are concentrated in capital cities. - What is the Gini coefficient for developed countries? - Russia cannot be compared to every country in this way. In Europe, for instance, incomes vary by about ten times. But European countries are small, with only one kind of climate and evenly developed economies. Russia has eleven time zones, and Moscow has the same level of development as Europe, while the South and Eastern Siberia are more like Africa. That is where the huge difference in standards of living comes from. America and Brazil are similar. Canada is also a large, northern country, but there is nothing of the sort. If we were to move people out of inefficient regions where there are no jobs, roads, or other infrastructure, we could reduce this inequality. But migrants will go where the work is. Meaning, to Moscow, which we don t want. Rescuing the drowning - If we were to rank problems, then the first thing we need to do is increase the wages of those workers who make up half of Russia s poor. The second thing to do is get the officially unemployed, able-bodied workers without jobs back on the labor market. And only then should we provide assistance to the remaining 8-10%. These are households where earning potential is either nonexistent or so low that it would cost more to integrate them into the workforce than to give them welfare. This is only if we are calculating wages and welfare. But we also need to take into account the costs of law enforcement and medical treatment, as the unemployed sometimes turn to crime and vagrancy and often end up in hospitals. Their children have a hard time integrating into society and this is a problem for the future. In short, the total cost of a low-paying job and welfare payments is sometimes the same. In these nuances lies the heart of right- and left-wing ideologies. It s not for nothing that society swings between the two and maintains its balance that way. Nonetheless, we have to understand that targeted assistance will not reduce the number of poor people. It s more important to help those on the edge of poverty to move up. - This is sometimes called the tidal wave model in the West. John F. Kennedy applied it, and his tactics are often juxtaposed to those of Johnson, who focused government efforts on welfare. Putin, to all appearances, has just that in mind: reducing poverty by developing the economy. But is it possible to do this in just three years? - In principle, it s possible but it s a very ambitious goal because in my opinion it contradicts plans to double the GDP. That amount of GDP growth is extreme and will only be made possible by the most promising points of growth. But war on poverty requires the government focus on the least promising groups in society, namely unqualified, surplus workers who need higher wages but won t necessarily give much in return. If the state doesn t work with the labor market and doesn t even out the differences between cities, villages, and rural areas, but only focuses on wages while maintaining currently levels of public assistance, employment, and spending (i.e. free health care and education, no increase in utilities or housing prices), then by 2015 we could turn the minimum wage to a living wage and reduce the number of poor by 13%. In practice, in order to make the minimum wage a living wage, it needs to triple. This would only be possible on one condition: we substantially cut the number of state employees. We are not in the position to triple the amount of money in the state budget. In addition, it will be necessary to increase payments for children to at least 50% of the minimum standard of living from the current level of 3%. Today, this program costs 18 billion rubles, but we need 16 times more. Poor but proud - Has the problem of persistent poverty in Russia been severely neglected? - I have always gotten into arguments with the people who say that we need to quickly set up a banking systems, stabilize the ruble, pay off our foreign debts, and so on. Everything else will follow. If we were talking about a year or two, then perhaps that would be possible. But we have been living under this system for more than ten years, and in that time huge number of people has become accustomed to poverty. We have gathered a large body of empirical evidence. If a person is only poor for a year, he most of all would like to find a job. Any job. After three years in poverty, his priorities change. The most important goal is to economize, while the search for income moves into second place. The next turning point comes at seven years. The person is so bogged down by trying to save money that he barely reacts to job offers. This means social degradation, a serious threat second only to social aggression in terms of dangerousness posed by poverty. And this is exactly what we refuse to see.
