Poverty in Russia

The poor in Russia are primarily families with children, the unemployed, the disabled, the single elderly living alone, and women. The homeless and previously institutionalized population as well as some refugees form a small but critical group of the poor. The working poor are the largest group--66 of the poor live in households where at least one adult is employed. The largest sub-group of the working poor are families with children (approximately 60 percent of poor households have one or more children), and single-parent and young families are particularly at risk. Generally, the younger and more numerous the children there are in the household, the more likely that the household is poor. Family size and composition is a strong predictor of a household's poverty status, and poor and very poor families are larger on average than non poor families.

Unemployment is strongly linked with poverty, and an estimated 63 percent of households headed by an unemployed person were poor in 1993. Approximately 60 percent of unemployment benefit recipients are limited to the minimum benefit, and nearly 20 percent of the registered unemployed are involved in informal sector activities. Although the average duration of unemployment in Russia to date has been short (six months), it has increased, suggesting a rising number of long-term unemployed. Job losses have been disproportionately borne by women and early retirees.

Households with a disabled head are more likely to be poor, and the presence of a handicapped family member also increases significantly the chances that the household is poor (35 percent of households with disabled member(s) are poor).

Average pensions have been better protected in real terms, and the position of pensioners actually improved relative to wage-earners during the transition. However, the minimum pension was allowed to erode significantly in real terms, meaning that those pensioners who live alone and are restricted to receiving only the minimum pension (typically widows) faced real hardship. The poverty rate for elderly women (aged 55 and over) was 44 percent higher than that for elderly males. However, there are relatively few pensioners in that situation (about 25 percent of pensioners live alone), as more than 20 percent of pensioners continue to work and receive wage income in addition to their pensions. Pensioners have the lowest rates of measured poverty in Russia, and there is a very strong inverse correlation between poverty status and age, meaning that older heads of household are significantly less likely to be poor and more likely to be a donor of private transfers rather than a recipient.

While poverty during the transition has broadened in scope, it has also become more dynamic in nature. Headcounts for poor families (expenditures below the official poverty line) in Russia were 25.2 percent in July-September 1992, 31.9 percent in June-September 1993, and 26.8 percent in October 1993-February 1994. Very poor families (those with expenditures less than 50 percent of the official poverty line) comprised 8.4, 1 2, and 10.4 percent of households respectively. During the 1980 s, approximately 10 percent of the Russian population had a per capita income below the minimum consumption basket," based on overly generous consumption allowances for food and non-food items.

In addition, poverty during the transition, while wider, is also more dynamic than poverty under the old system. During the survey periods, a significant percentage of households rose out of poverty, while new households fell below the poverty line. In fact, nearly half of the very poor households in 1992 were not poor one year later, and only 7.3 percent of all households were consistently poor (1.0 percent of the very poor) between 1992 and 1994. Layoffs, involuntary leave without pay, and wage arrears are temporary shocks that cause households to be poor, while successful marketing of home production, profitable entrepreneurial ventures, and finding a well-paying job contribute to households rising out of poverty.

Finally, regional disparities in living standards have sharply widened during the transition, as price liberalization has resulted in sharply differing the costs of living and the average wages of the oblasts (regions) of Russia. The prevalence of one-company towns has meant that restructuring has been disproportionately concentrated in certain regions (such reductions in light industry in the textile-producing oblasts of central Russia). Other regions, that were traditionally poor under the old system (Dagestan, north Caucasus, and some areas in the Far East) have not yet benefited from the new economic opportunities in European Russia.