Moscow’s Center for Strategic Research: Russia says farewell to poverty

Today’s gazeta.ru published a review of the study performed by the Moscow’s Center for Strategic Research (CSR), a non-governmental and non-commercial organization, which concludes that Russia defeated poverty and turned into a consumer society. Judging by the comments, the public met the report with scepticism, pointing to inadequate methodology and superficial approach to the subject matter.

CSR and the Social Policy Center of the Russian Presidential Academy of National Economy and Public Administration jointly investigated the effects of the economic growth in Russia on the attitudes of the poorest layer of the Russian society. The study titled “Farewell, poverty” was based on a sample consisting of 74 target groups in Moscow, Yekaterinburg, Vladimir, Kaliningrad, Yaroslavl, Astrakhan, Tolyatti and other cities, as well as on data from the Russian Statistical Bureau and the World Bank.

CSR borrowed the methodology applied in the United States when analyzing developing countries and set the poverty threshold at USD 2 per day. In 2001, the percentage of Russian population that lived on less than USD 2 a day was 6 percent; in 2009, it was 0.05 percent. Although it is not clear whether the study adjusted the figures for inflation, CSR concluded that the “U.S.” methodology for determining the poverty threshold in Russia makes no sense.

The study found that the average real income in Russia increased by a factor of 2.5 in the last decade. It also estimated that the middle class represents no less than 25 percent of the population, or around 40 percent of the total working population. However, using the Russian Statistical Bureau’s methodology, as many as 18 million people in Russia, or 12.8 percent of the population, had income below the subsistence wage (USD 6.5 per day). Monthly income of USD 1000 or more, required for an individual to be considered a member of the middle class in Russia, was a privilege of less than 20 percent of the working population. Regardless of these discrepancies in methodology and results, the CSR study concluded that Russia can be characterized as a consumer society, as the share of trade in Russia’s GDP is currently higher than in most developed countries. For some reason, the study included such criteria as average household spending on cat food and related accessories – which, extrapolated from a single sample in St. Petersburg, was found to be USD 1.4 per day. The number of mobile subscribers per 100 inhabitants in Russia, perhaps a somewhat more reliable figure for determining the wealth of a nation, was found to be 1.5 times higher than in France, USA and Japan. The study also found that the number or Russian tourists increased from 13.1 million in 2004 to 25.5 million in 2010. CSR concluded that the rise in income levels motivated Russian citizens to shift their focus from bare survival to the quality of life, government efficiency and necessary political changes. The study found that utilities, education, healthcare and efficient judicial system are among the priorities.

Many analysts disagree with the study, not only because of the methodology and inherent inconsistencies, but because it simply does not reflect reality. Mr. Evsei Gurvich, Head of the consulting firm Economic Expert Group , said that “…even Gaidar (Yegor Gaidar, Prime Minister at the beginning of Yeltsin’s presidency, author of the economic “shock therapy” in the early 90’s) believed that the increase in income levels will lead to increased demand for quality government institutions. He said so ten years ago, but the demand is not here yet.” Mrs. Lilia Ovcharova, Director of the Independent Institute for Social Policy, added a similar criticism of the study, as she believes that poverty is not defined solely by the level of income, but by other non-monetary aspects as well, such as the absence of care for elderly people.

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