Why is Russia so weak

Russia

Martin Brand

To person

Martin Brand is a research fellow at the Collaborative Research Center 1342 "Global Dynamics of Social Policy", subproject B06 "External reform models and internal debates in the redesign of social policy in the post-Soviet region" at the University of Bremen. This project is funded by the German Research Foundation (DFG) - project number 374666841 - SFB 1342. At the Research Center for Eastern Europe he works on poverty policy in the post-Soviet area, the subject of his dissertation is welfare development in Russia.

There are different views and opinions about the criteria by which poverty is determined in Russian society. Above all, the unemployed and low-skilled workers as well as people in rural areas and small towns belong to the risk group. Strong economic growth should act as a countermeasure.

In a supermarket in Saint Petersburg, customers stand in front of refrigerated shelves. For many people in Russia, the money to live is only enough for food and clothing, (& copy picture alliance / Peter Kovalev / TASS / dpa)

Summary

This article analyzes the extent of poverty in Russia and the government's anti-poverty policies. It is argued that Russia's poverty reduction targets only forms of extreme poverty, not that third of society that sociologists classify as poor. Nonetheless, extreme forms of poverty, which affect around one in eight in Russia, seem to have moved into the focus of politics. This can be, inter alia. Recognize in President Putin's promise to halve poverty in Russia by 2024. The prerequisite for this, however, is sustained high economic growth.

introduction

"Poverty in Russia is a shame," said Russian finance minister of many years and acting head of the Federal Audit Office, Alexej Kudrin, in the summer of 2019 and warned that if it continued to increase, this could lead to a "social explosion". This diagnosis raises the question of how serious the problem of poverty really is in Russia and what measures are being taken to combat poverty.

Putin's decree: cut poverty in half

In May 2018, Russian President Vladimir Putin signed a decree obliging the government to halve poverty by 2024. He also ordered a steady increase in real wages and pensions and decreed that the housing conditions for at least five million households must be improved annually. But that is easier said than done. How realistic is it to cut the poverty rate in half within six years? How serious is the problem of poverty in Russia really? And what measures has Russia taken to fight poverty so far? These are the key questions for the following text. I will show that Russia's social policy to alleviate poverty is based on two pillars: firstly, on redistribution in favor of certain social groups (older people and families with young children) and, secondly, increasingly on targeted social support for the needy.

The most important pillar, however, is the hope of high economic growth. "This is the only way to overcome poverty and ensure a noticeable increase in income for citizens," Putin said in his speech to the Federal Assembly in 2019. "The Russian economy must grow by more than three percent in 2019, and in future it must outperform the global economy "said Putin. Russia's fight against poverty therefore faces two challenges. On the one hand, Russia's poverty reduction policy is subject to considerable uncertainty as it is dependent on exceptional economic growth. On the other hand, by focusing on certain social groups and extreme forms of poverty, it hardly does justice to the existing challenges posed by poverty, which affects an estimated one third of the population of Russia.

Measuring poverty in Russia

How poor is the Russian population? The answer to this question is not easy, as there are quite different views in the social sciences about what poverty is and how it can be measured. One approach is to measure poverty on the basis of income or material standard of living, with a distinction usually made between absolute and relative poverty. While absolute poverty refers to the physical subsistence level, relative poverty emphasizes deficiencies in terms of a generally accepted standard of living. Other approaches, on the other hand, focus on people's chances for a self-determined life or the question of social exclusion.

The Russian poverty debate is dominated by a perspective that primarily focuses on the physical subsistence level and the material standard of living. The legally stipulated subsistence level is the official poverty line. In addition, there are surveys on the material situation and on self-assessment of one's own life situation. All of these data paint a very different picture of poverty in Russia, but clearly show the same trend.

This trend says that the poverty rate in Russia fell sharply between 2000 and 2013, especially in the economic boom years up to 2007. However, during the economic crisis of 2014, the poverty rate rose again for the first time under Putin. After the poverty rate had stabilized in the following years, there are now signs that poverty is rising again in Russia (see chart 1 on p. 6).

Despite this undeniable long-term trend, there are significant differences in the perceived level of poverty within Russian society. In the first half of 2019, according to official information from the Russian State Statistical Office (Rosstat), 19.8 million people (13.5 percent of the population) had an income below the subsistence level. However, it is often criticized that the official subsistence level is too low and does not reflect the actual costs of everyday life.

This criticism is supported by a recent survey by the independent opinion research institute Levada Center. According to this survey, the respondents put the perceived subsistence level at almost double the official poverty line of 11,185 rubles (approx. 162 euros) per month. Taking this subjective subsistence level as a basis, almost 40 percent of all people in Russia lived in poverty in 2018.

According to surveys on the standard of living, the extent of perceived poverty is much higher than the official poverty line suggests. When asked by Rosstat about their material situation, 26.5 percent of those questioned answered "bad" or "very bad". According to a Lewada survey, 71 percent of those questioned estimated that they had less than the subsistence level to live on (see Figure 1 on p. 6). Such a lack of income leads to various forms of deprivation (deficiencies). For example, every sixth household in Russia states that their income is only sufficient for food, and more than a third of households state that they cannot afford to buy each family member two comfortable pairs of shoes that are appropriate for the season (see graphs 2 and 3 on p. 7).

In a study on poverty in today's Russian society, the sociologists Natalia Tikhonova and Svetlana Mareeva attempt to quantify the problem of poverty. On the basis of official statistics and the results of two nationwide surveys of material deprivation, they conclude that by 2013 almost a third of the Russian population was affected by poverty. According to Tikhonova and Mareeva, this third forms the so-called "new periphery", a closed social group that is clearly different from the rest of the population.

Who are the poor?

The identification of this "new periphery" leads to the question of who exactly these poor are in Russia today. Regardless of the method used to measure poverty, families with children - especially large families and single parents - are considered to be particularly at risk of poverty. The risk of poverty is also high for pensioners and people with disabilities, at least when it comes to subjectively perceived poverty and deprivation.

Tikhonova and Mareeva argue that poverty in Russia today is primarily determined by a person's position in the labor market. According to their study, the unemployed and unskilled or poorly qualified workers are particularly at risk of poverty. A large proportion of the poor are employed in the informal economy and therefore have no access to social support. Thus the situation of the poor today is fundamentally different from the situation in the 1990s and early 2000s, when the professional background of poor and non-poor differed little.

Another factor that significantly determines the risk of poverty is geography. The poor live more often in rural areas than in cities (see Figures 2 and 3 on p. 7). Even the middle and high skilled have twice as high a risk of poverty in small towns and villages as in the regional capitals. In general it can be said: the smaller the city, the more difficult the material situation of the people.

There are also considerable regional differences. Measured against the official regional subsistence level, the poverty rate in the economic centers of Moscow and St. Petersburg and in the oil-rich Republic of Tatarstan is only half the national average of 13.5 percent. In the North Caucasus and along the Mongolian border, however, one in five people in some regions has to get by on less than the subsistence level (see Map 1 on p. 9).

Redistribution in favor of certain social groups

So if every eighth (official poverty line) to every third (sociological assessment) in Russia is affected by poverty, how is social security organized? It takes place primarily through three major mechanisms of monetary redistribution: through pensions, monthly cash benefits for certain groups of people, and maternity allowances. These social support programs are aimed at specific social groups within Russian society, namely the elderly and families with young children. There is also unemployment insurance, but the maximum amount is generally still below the subsistence level.

The most important instrument of monetary income redistribution in Russia is the pension system. To give a rough idea of ​​the scope of the pension benefits, just a few statistical key points are mentioned here: Almost a third of all people in Russia (30 percent) receive an old-age pension, although the pension level is very low. In 2018 it was only 30.8 percent of previous wages, which is well below the International Labor Organization (ILO) minimum standard of 40 percent. When the Russian government decided in 2018 to gradually raise the retirement age from 55/60 to 60/65 years (women / men), it also promised to significantly increase the pension level. Despite this, there were nationwide protests against the reform. After all, the average old-age pension is well above the official subsistence level for pensioners. Overall, Russia spends almost seven percent of its GDP on pension payments, which is slightly below the average for the OECD countries but well below the level of most EU countries.

Another central system for monetary redistribution of income are monthly cash benefits for numerous categories of citizens. In 2018, 15.2 million people benefited from this at the federal level; in the regions, their number is likely to be even higher; at least the federal subjects bear by far the largest part of the monthly cash benefits. These monthly cash benefits make up around one and a half percent of GDP, but they are often criticized in the scientific debate because they are not targeted to the needy, but to "deserving" social groups such as social workers. B. War Veterans, People with Disabilities, or Veterans of Work. Nevertheless, the monthly cash payments largely correspond to the sense of justice in Russian society. In practice, they mostly benefit older people.

Women with young children are another social group that benefits particularly from income redistribution. In addition to continued payment of wages during maternity leave, the so-called maternity or family capital is of particular interest. This is a one-time benefit for mothers who have had a second child. It was introduced in 2007 after President Putin declared demographics to be the most pressing problem facing Russia today. Even if the maternity or family capital can only be used for certain purposes, in particular to improve living conditions, its amount is considerable and currently corresponds approximately to an average annual salary. The program, which has been used by more than five million families so far, is very popular among the Russian population. In his message to the Federal Assembly in January 2020, Putin therefore promised to continue maternity and family capital until the end of 2026 and to extend it to the birth of the first child.

Russia's income redistribution policy is aimed at specific social groups, but not at greater social equality across society. For example, the uniform income tax has remained unchanged at 13 percent for years, while VAT, which affects poorer households in particular, was raised from 18 to 20 percent in 2019. It is therefore not surprising that the distribution of income - not to mention wealth - has been extremely unevenly distributed for years (see chart 4 on p. 8). So far, there have been no visible efforts to seriously reduce the extent of social inequality. Instead, Russia has taken a number of measures in recent years to provide targeted support to those in need and thus to solve the country's poverty problem.

Targeted poverty reduction

As a result of the global financial and economic crisis of 2008, pensions that are lower than the official subsistence level for pensioners have been topped up since 2010, from which more than 6.4 million people benefited at the beginning of 2019. In this way, almost all pensioners in Russia are protected from existential poverty.

Another focus of targeted state aid in recent years has been the financial support of needy families with children. Since 2018, low-income families have received federal subsidies equal to the regional subsistence level for small children up to the age of one and a half years. From 2020, the circle of eligible families is to be expanded further, according to Putin's promise in his messages to the Federal Assembly in 2019 and 2020. As early as 2012, he asked the regions to introduce appropriate financial support for large families, which many of them implemented immediately.

A milestone in targeted social assistance are the so-called social contracts, anchored in law at the federal level in 2012, with which all needy people and not just certain social groups are to be reached. In the sense of an activating social policy, these social programs aim to enable individual offers for applicants, e.g. B. Vocational training or financial support to set up a small business or run family farms. Although only about 115,000 social contracts were signed in 2018, which include around 320,000 people, Putin has announced a massive expansion of the program. More than nine million people, according to Putin's announcement before the Federal Assembly in 2019, will benefit from the social program in the next five years. He also promised the regions financial support from the federal center.

According to estimates by Lilia Ovcharova and Elena Gorina, targeted social assistance still plays a subordinate role in Russia. At the federal level it has so far only made up three percent of all social benefits, at the regional level it still accounts for a quarter. Little is likely to change in this regard in the years to come.

Another targeted social policy measure was the increase in the minimum wage in 2019 and its coupling to the subsistence level, which has been required in the Labor Code since 2001, but has not yet been implemented. Before the increase, around one in ten workers in Russia earned less than the subsistence level. Such extremely low wages should be prevented by the new minimum wage, but the widespread phenomenon of in-work poverty will hardly be resolved in this way. In his message to the 2020 Federal Assembly, Putin proposed that the link between the minimum wage and subsistence level should also be enshrined in the constitution.

Conclusion

So how likely is it that Putin's May 2018 decree will translate into reality and that poverty will be halved in the coming years? As the Russian President himself emphasizes, the prerequisite for this is strong economic growth of over three percent a year. However, Russia's central bank predicts otherwise. She expects Russia's GDP to gradually increase from 0.8 to 1.3 percent in 2019 to 2 to 3 percent in 2022.The International Monetary Fund also expects no more than two percent growth per year until 2024. In addition, a look back shows that economic growth of more than three percent in Russia was last achieved in 2012.

Assuming that Russia's economy will develop somewhat better than forecast and that the government will succeed in raising the necessary financial resources to expand targeted social support for those in need, the chances are good that the proportion of the poor will be significantly reduced. However, this only applies to absolute poverty, i.e. H. to those people or families who live beyond the subsistence level. In view of the rise in poverty in recent years, this would nevertheless be an enormous success.

At the same time, it is unlikely that the material situation of the lower third of society as a whole will improve significantly. This would require a greater redistribution of social resources: from the affluent to the less affluent, from the metropolises to the smaller cities and rural areas. Such a redistribution policy, based on general considerations of social justice, has little support in Russian political discourse. So far, redistribution has largely taken place in favor of groups in society that are considered "deserved" or that are considered to be of great importance with regard to national development, namely older people and families with children.


Reading tips

  • Natalia E. Tikhonova, Svetlana V. Mareeva: Poverty in Contemporary Russian Society: Formation of a New Periphery, in: Russian Politics. 2016. Vol. 1. No. 2, pp. 159-183.
  • Ann-Mari Sätre: The Politics of Poverty in Contemporary Russia, Routledge, 2019.
  • Lilia Ovcharova, Elena Gorina: Developing Targeted Social Assistance in Russia, in: Problems of Economic Transition, 2017. Vol. 59. No. 11-12, pp. 843-864.
  • Petra Böhnke, Jörg Dittmann, and Jan Goebel: Handbuch Armut. Causes, trends, measures, UTB, 2018.

The Russia analyzes are jointly published by the Research Center for Eastern Europe at the University of Bremen, the German Society for Eastern European Studies, the German Poland Institute, the Leibniz Institute for Agricultural Development in Transition Economies, the Leibniz Institute for East and Southeast European Research and the Center for Eastern European and International Studies (ZOiS) gGmbH. The bpb publishes them as a licensed edition.