Transcript Protecting the Poor During Crises: Russia Daria

Protecting the Poor During
Crises: Russia
Daria Popova
Black Sea Conference on
Regional Integration and Inclusive Growth
February 23-24, 2009
140
135
Poverty and GDP dynamics
130
125
33,5
31,5
28,3 29,0 27,5
24,7
22,4
22,0
120
GDP, % to
previous year
115
110
24,6
23,3
20,7
105
100
20,3
Real GDP,
% to 1991
17,6 17,7
15,2
13,4 13,2
95
90
85
80
75
5,9
70
5,3
3,8
3,3
3,1
3,5
2,8
5,0
4,8
4,5
3,7
2,6
2,1
2,1
1,6
1,3
65
07
08
*
20
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
19
92
60
Poverty headcount, per cent of the population
Poverty gap, per cent of the total income of the population
Poverty reduced by half in 2000-2007
following economic growth
Dynamics of income and its components (1991 = 100%)
120,0
Real money incomes
Real wages
Real wages, including hidden wages
Real pension
100,0
300
280
80,0
Dynamics of real wages, 2000=100%
260
on average
240
60,0
220
200
40,0
180
160
20,0
sectors with high
share of budgetary
organisations
other sectors of
economy
140
120
0,0
100
2000 2001 2002 2003 2004 2005 2006 2007
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Data for December of each year
140,0
Factors of poverty reduction: restoration of
incomes and wages to pre-reform level (in
contrast to pensions). Higher growth rates in
the budgetary sector.
24
22
Income inequality
20
Gini coefficient (right scale)
18
16
14
12
10
8
Funds ratio, times (left scale)
6
4
2
Growth of real income by income
quintiles, 1991=100%
5th quintile
(with the highest
income)
on average
1st quintile
(with the lowest income)
0%
19
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
08
19
9
19 1
9
19 4
9
19 5
9
19 6
9
19 7
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
08
0
56
54
52
50
48
46
44 200%
42
40
38
36
34
32
30 150%
28
26
24
22
20
18
16 100%
14
12
10
8
6
4
50%
2
0
Average values hide growing income
disparity: the economic growth was
not pro-poor
Poverty by population subgroups
Structure of the households of the
1st income decile
All non-working persons are pensioners
Poverty
profile, %
Poverty risk,
%
59,6
40,4
10,8
20,0
21,4
65,2
13,3
17,2
13,0
10,6
Economically active population,
including:
Employed, including
working pensioners
Unemployed
Economically inactive population,
including:
not working pensioners
61,1
59,4
4,1
1,7
38,9
15,1
11,8
11,7
6,1
22,6
16,5
14,4
Total
100
13,3
By type of settlement
Urban
Rural
By age group
Children under 16 years
People of active working age
People of pension age
All ablebodied persons work
At least one ablebodied person neither works, nor studies and is not a
pensioner
At least one ablebodied person does not work, but studies or is a
pensioner
45%
By status of economic activity
(people aged 15 years and more)
22%
4%
29%
Rural population, children and unemployed
have the highest poverty risks. The extreme
poverty is caused by the exit from the
labour market.
Monetary social transfers
1992
All monetary social transfers
share in GDP, % 5,3
share in income, % 14,3
share in social transfers, %:
Pensions 85,3
Benefits 8,4
1998
2000
2001
2002
2003
2004
2005
2006
2007
8,7
13,4
7,5
13,8
9,0
15,2
9,6
15,2
9,5
14,1
8,3
12,8
8,1
12,7
7,7
12,0
7,5
11,6
75,3
17,2
65,9
14,5
65,8
11,8
69,1
10,5
70,2
11,3
75,8
10,1
72,5
18,1
69,2
22,5
67,4
25,8
Unified monthly payment
(former priviledges)
Share of the benefit in the
total amount of benefits, 2006: Targeted social assistance (housing
subsidies + monthly benefit for children
under 16(18) years)
64,0
15,5
The growth in the amount of benefits
was due to non-means-tested benefits
(monetized privileges), which
compensate the flaws in the pension
system.

Stagflation: recession (official forecast of GDP growth is 02%) and high inflation (official forecast is 13,5%, but the
actual figure for January was 2,9%).

Decrease in real incomes of the population (in December
2008 they have dropped by 3,3% compared to December
2007).

Growing unemployment (in December 2008 the number of
unemployed has increased by 1,2 million people compared
to December 2007).

Poverty rate forecast given the 0% GDP growth, 10% drop
in real incomes compared to 2008 and stable inequality is
14,5%.
What to expect in 2009?

The problem of inflation is beyond the attention of the
government, which has focused on the employment
protection measures: new law to protect employees in
case of voluntary dismissal; increase in the maximum
size of the unemployment benefit since January 2009
(up to 107% of the poverty line); allocation of additional
funding for active employment policy measures.

There were no attempts to limit the violation of
employee’s rights in the area of labour remuneration
(e.g. wage arrears).

Government has pledged to increase the retirement
pension up to 130% of poverty line in 2009 in three
stages. The fourth indexation has been promised in case
of higher inflation rates.
The government response
to the crisis





The economic growth in the 2000s was more pro-rich than pro-pro poor.
The poverty has decreased by more than half between 2000 and 2007,
but the poverty reduction potential has been practically worked out by
2008 given the existing system of social transfers. The latter is mainly
used to compensate for the flaws in other institutions (the pension
system) and does not provide adequate level of support to the poor.
The future poverty reduction will be possible only due to the development
of the programs of targeted social assistance, based on a combination of
measures aimed at stimulating self-sufficiency and money benefits. The
design of these programs should be tied to family life cycles.
Given the government policy response to the crisis, we are likely to see
the repetition of the 1990s scenario (drop in real wages, hidden
unemployment, wage arrears, etc.). The working population, in particular
those employed in the budgetary sector, which have left the numbers of
the poor in 2000s are likely to return to these numbers again. The
unemployed are at the highest risk of extreme poverty due to inadequate
minimum size of the unemployment benefit.
This creates the ground for a prolonged socio-economic crisis and the loss
of the achievements in the area of poverty reduction in the 2000s, as well
as destroys the ground for formation of the middle class.
Conclusions