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Working Class More Vulnerable to Poverty

Poverty in Russia is particularly difficult to overcome since it is very heterogeneous. The Russian poor include groups as diverse as villagers who do not seem to fit into the post-industrial environment, low-skilled workers, university professors, and parents of young children. Each category of the poor requires a separate approach and a different type of state support, according to HSE Professor Nataliya Tikhonova and Associate Professor at the Faculty of Economics, Vasiliy Anikin

It is commonly believed that poverty is widespread in Russia, but one should understand that poverty is relative and its estimated prevalence depends on how we define and measure it.

In their article 'Framing Contemporary Russian Poverty in the Context of Different Nations' published in the Universe of Russia (Mir Rossii) journal, Nataliya Tikhonova and Vasiliy Anikin describe the profile of poverty in Russia, its unique characteristics, and potential solutions at the federal, regional, and municipal levels.

Russia Not a Poor Country

According to the authors, Russia generally cannot be described as a poor country; by all key socio-economic indicators relevant to living standards, Russia stands somewhere between West European countries, such as the U.K. and Germany, and the BRIC countries, being closer to the developed rather than developing world.

Thus, the proportion of urban population in Russia (74%) is almost the same as in Germany (74.1%) and in the U.K. (84.9%) and much higher than in China (52.6%) and India (31.6%).

Similarly, Russia stands much closer to the developed countries (differences ranging from 1.6 to 1.8-fold) than to the BRIC countries (1.9 to 6-fold) by indicators such as per capita GDP and informal employment. Informal employment in Russia stands at 8.9%, which is higher than in Germany (1.6%), yet lower than in the U.K. (9.6%). In contrast, informal employment in China stands at 32.6%, in Brazil at 42.2%, and in India at 83.6%.

The authors did not attempt to estimate the number of poor people in Russia or to compare it to any other country, as definitions of poverty differ across countries; while the developing world defines poverty as income below subsistence level, developed countries tend to define it as living below the standards enjoyed by most other citizens. Russia's poor include both categories.

Dying Rural Communities Breed Poverty

The Russian poor are a diverse group, with poverty types of different nature—and even from different historical epochs—found across regions and communities.

Thus, Russia’s villages are affected by what is known as pre-industrial poverty, characterized by widespread subsistence farming and low productivity, as well as vulnerability to adverse weather conditions, low and unpredictable incomes, high infant mortality etc.

The same kind of poverty can be found in small urban communities with migrants from rural areas who are struggling to adapt to city life. "The main reason for their poverty is that recent migrants from villages to cities lack marketable skills and thus earn extremely low wages," the authors explain.

Many villagers sink into poverty as their villages are dying. They gradually abandon farming, and having no other skills, become marginalised. This type of poverty is frequently observed in Russia's Non-Black Soil Zone and in the country’s northwest where most villagers do not own any land or cattle.

Work Undervalued

Industrial poverty, characteristic of all industrially developed countries, is also widespread in Russia. Its main cause is an oversupply of low-skilled and medium-skilled workforce in both menial and non-menial (e.g. retail) jobs paid very low wages.

These are predominantly working poor, with very few unemployed people, forced to accept the rules of the game imposed by employers in the  absence of labour unions. Industrial poverty is prevalent in almost all developing countries.

45% of the working poor in Russia are low-skilled and medium-skilled menial workers, and almost 20% are low and medium-skilled non-menial workers. In contrast, these two categories combined only contribute about a third to the non-poor in Russia.

Notably, for unskilled non-menial workers the likelihood of being poor is 30%, i.e. considerably higher than in the general population, yet lower than for unskilled menial workers who are poor in almost 60% of cases. The authors note that most of Russia's working poor today work in positions associated with early industrial and industrial stages of economic development

The authors also note that in Russia, the excess supply of unskilled workers is driven by migration from former Soviet republics and some Asian counties, in contrast to other BRIC countries where it is driven mainly by migration from villages to cities, similar to earlier historical periods in Europe.

Government Makes Professionals Poor

Russia also has post-industrial poverty, which is widespread in developed countries and very rare in the developing world. This type of poverty occurs when certain occupations are no longer in demand due to economic development and globalisation. For example, when companies shift production from Europe to Asia, some highly skilled professionals lose their jobs and, in refusing to switch to lower-skilled positions, such as shop assistant, remain unemployed.

According to the authors, the situation with post-industrial poverty is somewhat different in Russia, where the government is the biggest employer of highly skilled professionals, but pays them far less than private companies. Given the regional differences in the cost of living and income levels, a significant proportion of employed Russians with university degrees are poor and even chronically poor.

Forced into Poverty

The fourth type of poverty, quite common in Russia, is caused by circumstances such as Illness, being divorced with young children, or the death of the breadwinner.

According to Anikin and Tikhonova, "low pay and inadequate family support policies place many families at risk of poverty just by having young children, and even more so if a crisis occurs, such as the serious illness of a family member." Poor health triples the risk of low-income poverty and increases fivefold the risk of chronic poverty; having young children in the family more than doubles the risk of poverty—with both trends getting worse over time.

A Targeted Approach

According to the authors, the heterogeneity of poverty in Russia makes it a tough challenge. Anti-poverty solutions that work in Moscow may be totally ineffective in Ingushetia, and vice versa.

Each category of poverty requires a separate set of support measures—for example, people held in poverty by adverse family circumstances may benefit from appropriate insurance plans and everyone regardless of age stands to gain from access to education and retraining for new occupations.

The authors also suggest that pre-industrial poverty can be addressed by providing rural youth with vocational training for relevant occupations and helping those who wish to move to cities.

 

November 21, 2014