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Regular version of the site

Inequality in Russia. 
Part One

Wealth and income distribution in Russia compared to other countries

© ISTOCK

Russia is one of the world's top countries in terms of wealth concentration in the hands of the richest few: more than 70% of the country's financial and non-financial assets are owned by 5% of its citizens. At the HSE's 20th April International Conference in Moscow,  Svetlana Mareeva and Ekaterina Slobodenyuk presented their findings from a study of inequalities in Russia in the global context. Their paper is based on data available from the UN, the World Bank, Credit Suisse, the European Bank for Reconstruction and Development (EBRD), the World Inequality Lab, and Rosstat.

Income

Russia comes close to the upper third of countries where income distribution is strongly biased towards the wealthier segments of the population.

According to World Bank estimates (Poverty and Shared Prosperity: Taking on Inequality 2016), 29.7% of the country's total income in 2015 was held by ten percent of the wealthiest Russians (the top decile), placing Russia 22nd in the global inequality scale, alongside the Philippines, Uruguay, the Gambia and Lithuania, below Zambia, Brazil, Colombia, Panama and Chile, where more than 38% of the total income was owned by the top decile, but higher than Slovakia, Slovenia, Kosovo and Ukraine, where the top decile held less than 22% of the total income in each country.

Russia's income inequality ranking has been fairly stable: in 2004, the top decile held 30.5% of the country's income (placing Russia 26th out of 70 countries). Income distribution for the poorest decile in Russia has been even more stable, ranging from 2.3% to 2.8% over 16 years (2000-2016) and placing Russia in the middle of the global ranking according to this parameter, next to Croatia, the Philippines, the U.K., and Austria.

Measured by the Gini index, income inequality in Russia stands at the 38%-40% threshold, indicating a high level which is detrimental for economic growth.

The Gini index (or coefficient) measures the extent to which the distribution of income within an economy deviates from a perfectly equal distribution. According to World Bank estimates, Russia's Gini index stands at 37.7% (2015), placing Russia in the middle of the global ranking, noticeably higher than the countries in continental Europe but lower than many developing countries.

Income inequality in Russia is somewhat offset by outpacing growth of consumption among 40% of the least wealthy Russians.

In terms of income distribution, the latter group benefited more than the general population from the 2008-2013 economic boom, placing Russia at the time among countries which were making substantial progress towards 'universal prosperity'.

The incomes of the poorest 40% increased in 60 of the 83 countries studied by the World Bank, but in Russia the growth rates were higher, on average by 5.8% annually (compared to 2% worldwide). This process slowed down in Russia by 2015 due to the economic crisis, but the general trend towards bridging the inequality gap continues.

However, if income disparity is measured by wealth concentration among the richest, data indicate a growing inequality in Russia.

It follows from the World Inequality Database  that the dynamics of income inequality in Russia have been significantly underestimated since the 1990s. After the fall of the USSR, the share of the highest-earning 1% of the population increased from less than 6% across all incomes in 1989 to 22% after 2010, and the share of the top 10% increased from less than 25% (1990-1991) to more than 46% (1996). Currently, their share remains at 46% in Russia, compared to 41% in China, 37% in Europe, and 47% in the U.S. and Canada.

Wealth

Russia is one of the world's top two countries in terms of wealth concentration.

Excessive inequality in Russian society is reflected in the total wealth (i.e. the market value of financial and non-financial assets) owned by 1%, 5% and 10% of the most affluent Russians.

According to the Credit Suisse Research Institute's  Global Wealth Databook 2017, 10% of the richest Russians own 77% of the country's total wealth, placing the country third after Thailand (79%) and Sweden (78%). In terms of wealth concentration among the richest 5% and 1% (71% and 56%, respectively), Russia comes second after Thailand with a small difference not exceeding the statistical error.

While the numbers presented in the World Inequality Database are somewhat different, the overall picture is similar. Inequalities increased significantly as Russia transitioned to a market economy. The share of the top 1% in the total wealth of households changed from 22% in 1995 to 43% in 2015, which is higher than in the U.S., China, France, and the U.K.

In terms of inequality of wealth distribution, Russia leaves behind almost all developed countries except the U.S.

In terms of the wealth Gini index, Credit Suisse ranks Russia 20th out of 171 countries. In 2017, Russia's Gini was almost 83%, slightly behind the Bahamas, the U.S., Bahrain, and the U.A.E.

Extreme concentration of wealth in Russia is emphasised by the  number of billionaires in the country.

Russian citizens with fortunes of $1 billion and higher included in global rankings are quite numerous by international standards: 106 on the Forbes 2018 list.

The combined wealth of Russian billionaires, according to Forbes, soared in the 2000s and then stabilised between 2000 and 2015 at 25%-40% of the national wealth, which is much higher than in countries such as the U.S., Germany and France with their billionaires' total wealth ranging between 5% and 15% in 2005-2015, while the average wealth and incomes of their populations far exceeded those of Russia.

Problems and Causes

The accuracy of commonly used measurements of monetary inequality remains controversial. Depending on the methods, bases and approaches used (e.g. whether they measure differences in incomes or wealth or the gap between the richest and all others or inequalities among the general public, etc.), they can produce inconsistent results.

According to the HSE researchers, none of the relevant international efforts has yet been able to overcome certain data imperfections; therefore, their findings have been questioned in Russia but accepted as a valuable starting point for assessing domestic inequalities in the global context.

Foreign experts often explain Russia's excessive inequalities by income differences in the labour market and the country's tempestuous transition to a market economy which involved 'shock therapy' and privatisation benefitting 'small groups of individuals'. '...[C]hoice assets in resource-rich companies went to the chosen few, and subsequent developments in a nation notorious for weak institutions have reinforced the importance of political connections at the expense of managerial and entrepreneurial talent' (Credit Suisse, Global Wealth Report, 2012).
IQ

Study authors:
Svetlana Mareeva, Director, HSE Centre for Stratification Studies
Ekaterina Slobodenyuk, Assistant Professor, HSE Faculty of Economic Sciences; Research Fellow, HSE Centre for Stratification Studies
Author: Svetlana Saltanova, May 28