Social Contracts: No Single Solution to Poverty
Encouraging entrepreneurship, providing social support services and
helping people find jobs are all part of a new ‘social contract’ programme
introduced across Russia to assist poor families in becoming financially
self-sufficient. Using formal contracts to encourage low-income people to
engage in economic activity is proving to be more effective than welfare
handouts, according to researchers of the HSE Centre for Studies of Income and
In this context, a social contract is a formal
agreement between a low-income individual and a social protection authority
whereby the individual and their family are offered cash, services or essential
goods, such as fuel, food, clothing, footwear or medicines, so that eventually
they can become self-sufficient by tapping into their own resources, i.e.
finding a job, starting a business or maximising the output of their smallholding.
This new type of social policy was approved by the central government in late 2012, but has actually been implemented by
local authorities in some Russian regions since the early 2000s.
Regardless of whether a beneficiary fully succeeds in
breaking free from poverty with the help of a single social contract, they see
their living standards improve due to various types of assistance and tend to feel
more empowered, with a better outlook on the future, according to Lydia Prokofieva and Irina Korchagina,
senior research fellows at the HSE Centre for Studies of Income and Living
Standards, and Anna Mironova and Ekaterina Tarnovskaya, junior researchers at the same Centre, who examined some
of the outcomes and future potential for social contracts in Russia and
presented their findings in the paper The
Social contract as a mechanism enabling households to overcome poverty in
Russia, published in the Journal
of Social Policy Studies,
issue 1, 2015.
The paper is based on the 2013 social contract
programme performance data collected for the Russian Ministry of Labour as part
of the regional statistics programme; the target audience has been analysed
using data from the RLMS-HSE 2013 survey.
Jobs instead of Handouts
To be eligible for a social contract, a family has to
qualify for low-income status. In most of the 36 Russian regions which were
running the programme even before its federal endorsement in 2012, all types of
low-income families were eligible, yet 10 regions selectively targeted families
with children, and five regions focused particularly on families with three and
more children (officially recognized as ‘large families’ in Russia).
Generally in Russia, families with children are more
likely to live on incomes below the subsistence level, while their rate of
poverty is twice that of households without children – 23% vs. 9.2%, based on the
RLMS-HSE 2013 survey data. Assistance for low-income families with children can
include arranging for day care and helping mothers find part-time or full-time
jobs; in addition, young adults who are unemployed and living with their parents
can benefit from assistance with employment. In fact, most social contract
programmes mainly target families with active members who are unemployed.
Certain regions target rural households in particular;
57.5% of all social contract beneficiaries in these regions live in villages.
One-off Payments Most Common
Only 36 Russian regions collected data on the social
contract programme performance in 2013. "The new programme has covered
less than 2% of all recipients of social assistance and just 3% of those with
officially low incomes," note the study's authors. Only in four Russian
regions were social contracts offered to more than half of social assistance
recipients with incomes below the subsistence minimum, while in nearly one
third of all regions, less than one percent of this group were offered social
More than 60% of all social contracts in Russia in
2013 were implemented in the Tyumen region (28.1%), Khanty-Mansi Autonomous
Area (19.7%) and the Nizhny Novgorod region (12.7%); these three regions have
the longest history with social contracts since mid-2000s, evidencing the fact that
coverage depends largely on how long the programme has been in place. Of all
recipients of this type of social support, 85% are families with children aged
16 or younger and 43% are families with three or more children.
Social contracts can offer families monthly or
lump-sum cash payments to be invested in a household farm or small enterprise,
some also provide in-kind assistance and certain services. In 2013, six regions
offered all three types of assistance, including Arkhangelsk, Astrakhan,
Belgorod, Rostov and Nizhny Novgorod regions, and Tatarstan, while Buryatia
only offered in-kind assistance.
According to the researchers, some 40% of the regions
running social contract programmes offer both cash and in-kind assistance,
while 58% of the regions only offer cash, usually as a lump sum averaging
30,000 rubles across regions and ranging from more than 100,000 rubles in Tver
region, Yakutia and Yamal-Nenets Autonomous Area to less than 10,000 rubles in 13
regions; many regions only provide
assistance for a limited period.
Business and Employment Support Not Common
Just three regions – Tula and Murmansk districts and
Yamal-Nenets Autonomous Area – offer eligible beneficiaries assistance with
employment and job retraining in more than half of all social contracts. In
other regions, the share of such assistance is much smaller, while Bryansk and
Tver regions and Altai Territory do not offer this option and focus instead on
Even less common is using social contracts to
encourage self-employment (a.k.a. 'individual entrepreneurship') – only the Komi
Republic and Yamal-Nenets Area offer such assistance to 25% and 35.6% of
While the programme’s stated goal is to help people
become financially independent, Prokofieva et al. note that most measures under
social contracts do not support this goal directly, as more than half of all
assistance reported by regions include relief for families in crisis or
struggling with social adaptation – such as household aid, food distribution,
leisure activities and healthcare; in addition, 18% of all measures under the
programme focus on helping households with repairing farm facilities, accessing
medical treatment, etc.
Self-sufficiency Hard to Achieve
The effect of livelihood assistance programmes is often
measured by the proportion of active unemployed individuals who have found jobs
and the proportion of households which have increased their revenues or farm
outputs as a result of the programme. Overall, the effect of social contracts in
terms of encouraging self-sufficiency has been modest across Russia – just 15% of
the unemployed household members found jobs and 9% of the families increased
their revenues. Just in a few regions, including Ivanovo and Tula, Kamchatka,
Komi Republic and Yamalo-Nenets Area, almost a third of all beneficiaries have
found jobs or increased their earnings – partly due to the limited number of
contracts offered in these regions, with more resources available per contract.
Of all recipients of support for their household
farms, 35% were able to increase the farm's output; in a few regions, including
Tambov, Orenburg, Tomsk, Arkhangelsk and Yaroslavl, Altai Territory and Karelia,
more than half of the targeted household farms benefitted from assistance,
partly due to the overall policy focus on rural households in these regions.
For families with active yet unemployed members, social
contracts can be particularly effective because, in contrast to welfare
handouts, they encourage people to mobilise their internal resources to provide
a long-term effect, according to Prokofieva, Korchagina, Mironova and
Tarnovskaya. In fact, international experience with livelihood support
programmes reveals that even where families fail to break free of poverty at
their first attempt, they still become less dependent on welfare as a result of
Families Benefit from Different Types of Assistance
Admittedly, breaking free of poverty depends on
external circumstances as well as one's own efforts.
The actual causes of poverty can differ. Thus, older
people can be poor because their pensions are too small, while in families
whose members work or study, poverty can be the result of being underpaid or
having too many dependents. In more than half the poor households in Russia, at
least one family member is employed, but their pay is insufficient to allow the
family to make ends meet; these people may benefit from retraining
opportunities to help them find a better-paying job.
According to the study’s authors, 24% of all poor households
in the survey had active yet unemployed members, and such families could
benefit from a combination of welfare payments and assistance with employment.
Many poor families have young members in their 20s who
remain unemployed and dependent on their parents after finishing school or
college – they could benefit from help with finding a job.
However, unemployed adults in some families are not
actively seeking a job, because they care for children or elderly or sick relatives,
while their communities lack daycare facilities and similar services; such
carers could benefit from jobs with flexible schedules.
social contracts, while they clearly work for some people, cannot provide a
single solution to poverty and need to be supported by other measures.