Below the average

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This week there were many discussions about poverty – this was discussed at the April conference of the HSE and Sberbank, and Oleg Deripaska drew attention to the problem by first publishing and then deleting a post on Telegram.

The concern about this issue in our country is understandable: a huge number of people have lost income over the past year. At the same time, Rosstat publishes data that the poverty rate has declined. It’s hard to believe, but the truth is on the side of the statistics service: the point is that impoverishment and poverty are not the same thing. Subjectively, you may feel yourself poor, because you have lost income, but Rosstat assesses poverty by objective indicators: how many people received an average monthly income during the year below the subsistence level.

According to these calculations, the poverty level in 2020 compared to 2019 decreased by 0.2%, amounting to 17.8 million people. This is 12.1% of the country’s population. It should be recalled that in the IV quarter of 2020, the average living wage for the population was 11.3 thousand rubles per month. And in 2021 – 11.6 thousand rubles.

There is no doubt about this figure, we at the HSE also made similar calculations, and they are correct. But I would focus on two circumstances.

First, at what cost it was actually possible to keep the poverty indicator at the level of 2019 (two tenths of a percent is still a very small figure to speak of a reduction). The price was over 1 trillion rubles – so much money was spent on new social benefits. I emphasize that it is the new ones, in addition to the old ones. Particularly important from the point of view of helping the poor were co-payments for children from three to seven years in the amount of half the subsistence level, 4.7 million children received them.

Another important indicator is the income deficit: the amount that people lack to get out of poverty. According to our estimates, in 2020 the income deficit of all the poor in our country amounted to about 765 billion rubles. Please note: the new payments covered this amount, but poverty actually remained at the same level. Why is that? Because if these new payments were not there, the figure would have risen to 19%.

The composition of the poor has also changed. Among those who in 2020 belonged to this category, only 60% were so in 2019. The transition to a higher income group occurred due to social payments: people who lacked, say, 1 thousand to the subsistence level, received 7-8 thousand rubles in the form of additional payments. At the same time, the category of the poor was joined by those who should not have been there at all – the middle class.

Usually, when there are economic shocks like the ones we faced in a pandemic, part of the middle class moves into a lower income group – it becomes a pro-middle class. This was the case in 2008 and in 2015. But it was not only this transition that happened to the pandemic: a significant group of representatives of the middle class jumped immediately through two income levels (proto-middle and proto-poor), falling into the category of the poor.

In August 2020, in the report “Russia in a New Era of Choosing Priorities and National Development Goals,” we cited specific figures. According to our estimates, the middle class in Russia is about 30% of the population, and during the pandemic 6% of this class, or about 2% of the total population of the country, became poor. These are active citizens with education and skills, they are noticeable, and it is the decrease in their incomes that creates among the representatives of the wealthier strata the feeling that the country is falling into poverty.

Basically, these people were employed in small and medium-sized businesses, which got up in a pandemic, and they were burdened with mortgages and loans for business development.

The shrinking middle class is a huge challenge for our sustainable development. The point is that high-tech growth can only be ensured by the middle class. If the institutional environment is such that it collapses like this and does not recover, we should be afraid that we will not be able to count on such a development driver as high-tech growth. And then you will still have to rely only on raw materials for growth, which, given the current situation on the world market, is unlikely.

A large segment of low-paid employment is an additional factor for these fears, it is another obstacle to development. Only a decrease in the segment of low-paid employment and an increase in the middle class together can provide us with high-tech growth.

And there are risks that poverty will still increase in 2021 – although after the President announced new social payments in his message to the Federal Assembly, they have somewhat decreased. Payments similar to last year’s payments for 10 thousand families with children, benefits for low-income families with children aged 7 and older are effective measures. But their concrete results will need to be considered later.

The author is Vice-Rector, Director of the Institute for Social Policy of the National Research University Higher School of Economics, Ph.D. in Economics

The editorial position may not coincide with the opinion of the author