Window on Eurasia: Real Incomes of 40 Percent of Russians have Fallen Since 1991, Studies Find

Paul Goble

Staunton, April 13 – The real incomes of the two least-well-off quintiles of the Russian population have fallen since 1991 while those of that two best-off have risen significantly, dramatically increasing income differentiation and potentially exacerbating class-based tensions, according to two studies by the Higher School of Economics.

“If one considers the overall figures concerning how Russia lived in 1990 and 2009,” Andrey Polunin of “Svobodnaya pressa” says in reporting on these studies, “it turns out that citizens have only won as a result of reforms. Thus, consumption has gone up overall 1.45 times. But this is like an average temperature in a hospital” (svpressa.ru/politic/article/41896/).

That is the trend Moscow and its supporters normally report, but if one unpacks the figures as the Higher School of Economics experts do in two reports (“The Level and Way of Life of the Population in 1989-2009” and “A Comparative Analysis of Consumption and Expenditures”), Polunin says, the picture is far more complicated and less positive.

The bottom 40 percent of the population has fallen behind over this period, he reports. The level of real incomes for the lowest 20 percent has fallen 1.45 times and the next lowest quintile by 1.2 times. At the other end, the top 20 percent have seen their incomes double, and the next highest quintile had their incomes go up a quarter.

This change in the distribution of real incomes has hit the least-well-off groups especially hard because of the decline in state support for housing, education and especially medicine, with the lower quintiles forced to spend a higher proportion of their incomes for all these things or do without them, the studies found.

The situation in medicine is particularly striking, Polunin observes. In the European Union, for example, individuals directly bear 24 percent of the cost of medical treatment while in Russia that figure is now 40 to 50 percent, a dramatically higher fraction than only twenty years ago.

And this increase is hitting Russians, especially those least well off, because the average rate of illness among Russians rose 43 percent per 100,000 population over the period 1990 to 2008 and because many of the illnesses involved, such as cancer and heart disease, are particularly expensive to treat.

But the most striking findings of the report concern income differentiation, Polunin suggests. “In Soviet times, the earnings of a worker (120 rubles a month), an engineer (180 rubles a month), and a colonel in the KGB (350 rubles a month) of course were different, but not by ten times as much as is the case today.”

The Soviet system’s commitment to wage equality “froze the development of the economy,” the report says, “but still more abnormal has been the gigantic growth in inequality which the establishment of the market economy has involved.” In Russia, it has been especially severe, eight times more rapid than in Hungary and five times more than in the Czech Republic.

The reports of the Higher Economic School nonetheless generally stress the positive aspects of the changes, something that is not surprising given the liberal views of most of those working there. But they do acknowledge that for many of the poorest in Russia today, the Soviet past does not look altogether bleak.

The reports note, for example, that “Soviet people strictly speaking did not suffer impoverishment. In the USSR [at least at the end of the Soviet period] there was no hunger, the population was guaranteed state services for health and education, often not of bad quality, and practically free housing. Besides, in the USSR there was no unemployment.”

“On the other hand,” the reports say, “there were shortages of practically all consumer goods and those available were not of high quality as a result of the absence of competition.” These conclusions prompted the “Svobodnaya pressa” journalist to ask three people whether people lived better “in the same of the USSR or now.”

Yevgeny Yasin, a former Russian economics minister and one of the senior scholars at the institution which prepared the reports said that “it is incomparable better to live now,” but he acknowledged that was true only for those near the top of the income pyramid and said that if he were had the bottom, he “would certainly have a totally different impression.”

He added that the government should address the consequences of income inequality not only as a matter of justice, something the reports did not address but to ensure propitious macro-economic conditions. Just raising pay will not be enough; productivity must be increased as well, Yasin said.

Aleksey Mukhin, general director of the Moscow Center of Political Information, in contrast, said that “of course, it was easier to live in the middle 1980s. Life was predictable,” although he acknowledged that after 1991, there appeared “greater possibilities for the realization of creative potential.”

But not surprisingly, Oleg Kulikov, a KPRF Duma deputy, argued that “of course, people lived better in Soviet times. Today, life expectancy compared with the Soviet past has fallen by more than ten years,” as has the birthrate, which reflects the fact that people have children only when they have “confidence in the future.”

Kulikov adds, “it is possible to say that now the people are voting for the USSR by their premature departure from life and their decisions not to have children. Moreover, Soviet times lacked many of the features of today: inter-ethnic conflicts, poverty, and bums on the streets,” all developments that make the past look better.

Moreover, he says, “we were certain that the difficulties which did exist were temporary and that the situation would improve. There was hope that this great country could deal with them.” Now, ordinary people do not have that experience or that feeling, he said, and they are understandably upset.