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Higher Education Halves the Risk of Poverty

Higher education cuts the risk of poverty by more than half, according to Alina Pishnyak and Daria Popova, leading researchers at the HSE Centre for Studies of Income and Living Standards. Their findings reveal that the household incomes of families where all adults are university-educated stand at 20% above the average, and conversely, in families where none of the adults hold a degree, living standards tend to be below average by a quarter.

Income is most commonly used as a measure of living standards and well-being, yet the concepts of 'living standards', 'well-being' and 'income' should not be confused. A growing number of researchers share the view that estimated household income or per capita GDP alone cannot serve as reliable indicators of well-being.

In addition to this, in Russia, a fairly large informal sector of the economy makes official income statistics inaccurate, further emphasizing the value of an approach based on multiple criteria, since official monetary income can only serve as an indirect and not necessarily accurate measure of household well-being.

In their paper ‘Households` Standard of Living and Quality of Life in Moscow: Objective and Subjective Indicators’, Pishnyak and Popova present the findings of a study using a combination of indicators, including social well-being as well as income and consumption, namely:

  • income levels and inequality in the distribution of cash income;
  • poverty by income;
  • poverty by consumer deprivation;
  • subjective assessment of poverty;
  • subjective assessment of personal status;
  • concern about the socio-economic situation and assessment of the social environment.

Pishnyak and Popova studied the living standards of Moscow residents using the data from the 'Moscow and Muscovites' longitudinal study, which annually surveys at least 3,000 people aged 18 and above currently living in the Russian capital. The survey includes questions about the respondents and other members of their households and covers various characteristics of living in the city, including financial and social well-being.

The Rich Getting Richer

According to 'Moscow and Muscovites', nominal incomes in Moscow increased by 4.4% in 2014, i.e. to 104.4% of the 2013 levels; however, due to rising prices, real incomes dropped in 2014 to 97.9% of the 2013 levels and to 98.2% of the 2012 levels, affecting mainly the middle class, whereas the 20% of the lowest-income population experienced virtually no change, and the third income quintile saw their revenues increase by 9.2%.

Factors affecting per capita household income include family demographics and the number of family members with higher education and jobs; for example, the average income of families with children in Russia is 1.6 times below that of childless households, and the likelihood of falling into poverty for families with children is twice that of childless households in Moscow and 2.6 more in the entire country.

Conversely, having at least one family member with higher education reduces the risk of poverty by 2.3 times, and the income of families where all adults are university-educated stands at 20% above the Moscow average, while in families where none of the adults hold a degree, living standards are below average by a quarter.

However, even higher education does not guarantee protection from poverty—according to 'Moscow and Muscovites', 8% of the 'educated' households end up below the poverty line when their members are employed in the public sector.

No Holiday, No Meat

It is common for European studies to measure poverty by relative deprivation, i.e. by what a household can and cannot afford.

In 2014, Muscovites most often could not afford expensive health care (63% of households) and major purchases (58.8%),

while about a quarter of households could not afford new furniture and appliances, and about the same number could not afford a week's holiday away from home.

While common, these were not the most severe cases of deprivation; nearly 16% of the surveyed households could not afford even inexpensive vocational training, and 12.2% could not afford to have friends and family over for a celebration.

A significant 9.7% of families struggle with basic necessities, such as having enough fruit and vegetables, paying for medicines and health care, buying new clothes and footwear, and eating meat, chicken or fish at least every other day.

A subjective perception of poverty can be used in addition to absolute and relative poverty assessment. According to 'Moscow and Muscovites', consumption standards vary depending on the income level, demographics, education and employment of household members. Families with higher incomes tend to have bigger needs. Thus, in 2014, households with incomes below the subsistence minimum estimated a subjectively perceived poverty line at 17,850 rubles per person per month, while households with incomes of four subsistence minimums and more indicated that they needed at least 24,630 rubles per person per month to survive.

Families with at least one university-educated adult estimate a subsistence minimum at 1.2 of the same estimate given by families where no member has higher education.

Concern for Safety and Health

When asked to rate their status in society, most respondents define it as average, choosing 4 to 6 on a scale from 1 to 9. Pishnyak and Popova note, however, that "knowing how much people are concerned about various problems is critical for measuring their social well-being."

Most Muscovites are concerned about crime and terrorism, personal security and access to health care. The youngest age group are more concerned about education and freedom of speech, while adults aged 25 to 34 are worried about being able to afford better housing and resent the recently imposed tighter limits on duty-free purchases from foreign online stores.

Muscovites aged between 35 and 44 are more concerned about unemployment, inflation and foreign currency exchange rates, as well as bad roads and traffic jams.

Those aged 45 and older are more worried about the social environment and personal safety, including problems such as corruption, a growing number of immigrants, drug use, and others.

Members of the oldest age group are more concerned than other groups about access to health care, environmental pollution and civil unrest, the city being clean and well-maintained, and the functioning of utility services.

The poorest respondents are more likely to be worried about access to health care, implications of the pension reform, and the city being clean.

The richest are concerned about availability of high-quality housing, restrictions on duty-free imports, and issues of emigration and freedom of speech. Muscovites with higher education are more likely to be concerned about road quality and traffic congestion, exchange rate fluctuations and inflation, and restrictions on duty-free imports of goods from foreign online stores. People with the lowest levels of education (including younger respondents who have not yet completed their education and training) are concerned about access to education, unemployment, freedom of speech, and the possibility of emigration.

Subjective assessment of the urban environment adds yet another facet to the picture of social well-being. Most respondents believe that Moscow streets are safe at night. Back in 2013, more than 40% of Muscovites reported feeling unsafe at night even in central Moscow, but just 31.2% report the same feelings in 2014, while the proportion of those feeling unsafe in Moscow's residential suburbs dropped by 8.5% (from 55.8% to 47.3%) between 2013 and 2014.

And finally, fewer people report feeling unsafe going out at night in their own neighbourhoods—from almost 49% in 2013 to less than 38% in 2014.


Author: Гринкевич Владислав Владимирович, July 29, 2015