Buggered

rossiya This bankrupt agribusiness was called Rossiya (“Russia”). Photo courtesy of Maxim Kemmerling/Kommersant and Republic

“The Data Leaves Us at a Loss”: A Few Figures That Might Surprise the Kremlin
Yevgeny Karasyuk
Republic
April 4, 2019

“Why on shoes? Why a third? Where did they get these figures?”

Dmitry Peskov, President Putin’s press secretary, responded with questions to journalists who questioned him yesterday about Rosstat’s depressing report for 2018.

According to Rosstat’s study, in which sixty thousand Russian households were surveyed, every fifth Russian skimps on fruits and vegetables. Every other Russian family cannot afford to travel anywhere when they have a week’s vacation, while every fourth family does not have enough money to invite people over to celebrate birthdays and the New Year’s holiday.

And, indeed, the report does conclude that 35% of Russians are unable to purchase each family member two pairs of seasonally appropriate footwear.

“I would be grateful to Rosstat if they clarified these figures. The data leaves us at a loss,” Peskov added.

Meanwhile, there are other figures—lots of figures—that would probably also bedevil the Kremlin if they were aired in public. Let us recall a few of them.

Nutrition
Consumer watchdog Rospotrebnadzor concluded that 63% of deaths in Russia were associated with bad food and poor nutrition. According to official figures, Russians spend approximately 35% of their household budgets on food, while independent researchers put that figure at over fifty percent. However, the average Russian household skimps on all purchases and tries to do without everything it can, claim the researchers behind Romir’s Coffee with Milk Index, which charts the quantities of chocolate, coffee, milk, and bottled water purchased by Russians. Researchers at RANEPA recently described the diets of Russians as unhealthy, unbalanced, and lacking in energy.

Health
According to a report by RANEPA’s Institute for Social Analysis and Forecasting, 22% of Russians who live in straitened circumstances face the stark choice of whether to buy the bare minimum of the cheapest produce or the cheapest drugs, drugs they need to survive. It is typical of Russians, not only those below the poverty line, to postpone going to the doctor, if it involves costs, noted researchers at the Institute for Health Economics at the Higher School of Economics.

Education
According to the pollsters at VTsIOM, fifty percent of Russian parents experience serious financial difficulties when getting their children ready for the first day of the school year. Over the past five years, the average sum of money Russians claim to spend getting children ready for school has increased by sixty percent, rising from 13,600 rubles to 21,100 rubles.

Housing
According to the Construction Ministry, the Russian populace’s debts for utilities and housing maintenance bills have grown by five and a half times since 2015. The ministry reported that, as of the end of last year, the total amount of this debt was 1.2 trillion rubles [approx. 16.34 billion euros]. The rates for water, electricity, gas, and other utilities and services increase rhythmically year after year, and yet the real incomes of Russians have continued to fall five years in a row.

Transportation
Forty percent of Russian car owners “try not to use their own vehicles, taking public transport instead.” Another 22% of car owners follow their lead, but do it less frequently. VTsIOM has explained the outcome of its January opinion poll by citing the concern of Russians for the environment while failing to note that the price of petrol has skyrocketed in recent years. Last year, a liter of AI-95 rose in price three times faster than inflation. The government has resorted to artificial, decidedly non-market measures to depress prices, and yet petrol in Russia is now twice as expensive as it was when the decade kicked off.

Only twelve percent of Russians believe that, when it describes the economy and the social sector, the Russian regime always or mostly tells the truth. The Levada Center has done polls on the same subject since 2010. Russian society’s confidence in what the country’s leaders and senior officials say has never been as low as it is now.

By voicing surprise at Russia’s poverty, at least on paper, the Kremlin is, apparently, determined to convince people it inhabits a parallel reality in which Russia makes one breakthrough after another, and the rank and file enjoy “stability” by way of spiting the country’s numerous enemies. Peskov seemed genuinely puzzled by Rosstat’s claim that Russian families have trouble buying shoes, but he probably had not yet read the government’s report on the increase in mortality rates in every third region of Russia. Clearly, something is wrong with the figures. In short, we expect a reaction.

Translated by the Russian Reader

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Eat Y’Self Fitter

zeitfur“Time for the girlfriend.”

More bad news from Russia’s Northern Capital:

Количество фитнес–клубов в Петербурге превышает спрос. По данным “ДП” их услугами по–прежнему пользуется небольшая часть населения Северной столицы. В настоящее время в Петербурге спортом в фитнес–клубах регулярно занимаются не более 4,8% населения, в то время как в Лондоне их посещают 20% жителей, в Барселоне — 35%, а в Берлине — почти 60%.

“The number of fitness clubs in St. Petersburg exceeds demand. According to Delovoi Petersburg newspaper their services are, as before, enjoyed by a small segment of the Northern Capital’s populace. Currently, no more than 4.8% of Petersburgers work out in fitness clubs, as opposed to 20% of Londoners, 35% of Barcelonians, and nearly 60% of Berliners.”

ATTENTION! Why do you think this is the case? The first person to send me the correct answer in the comments, below, will get a special prize, dispatched via the mails from Berlin, where I am among the 40% of losers who do not work out in fitness clubs.

Please don’t use Google or other artificial intelligences to answer the question. Instead, use the brains the good Lord gave you.

Photo by the Russian Reader 

Oleg Volin: How Capitalism Kills in Nizhny Tagil

уралвагонFront entrance of the famous Uralvagonzavod Factory in Nizhny Tagil. Courtesy of Vasily Shaposhnikov and Kommersant

Oleg Volin
Facebook
February 20, 2019

Capitalism kills. Overwork, wage cuts, nasty managers, and the lack of a clear future drive workers to kill themselves.

On the morning of February 19, 2019, in Nizhny Tagil, Sergei Chernykh, a young worker, left his boss’s office, put a noose around his neck, and jumped off a raised area, damaging his spine and suffocating in mere seconds. Arriving on the scene, an ambulance crew (who, to top it all off, were not immediately let into the factory) were powerless to save his life.

The situation in Nizhny Tagil is not merely rough but bloody. Chernykh’s suicide was the fifth suicide in the past year by a worker at the Uralvagonzavod plant.

There have been several dozen similar incidents, but Chernykh’s death stands out from them in that he committed suicide at his workplace.

Chernykh could not bear life’s hardships and so he parted with it right on the spot. Whether he meant it or not, he thus focused the public’s attention on the outrageous working conditions endured by Uralvagonzavod workers.

The plant’s press service has not yet commented on the case, but it is obvious the increasing incidents of suicide have been caused by deterioration of socio-economic conditions and the lack of prospects.

Over the last twenty-eight years, Nizhny Tagil’s population has steadily declined, dropping from 440,000 residents to 350,000 residents. It would be strange not to see this as a telltale sign of what has been happening in the city.

Chernykh’s friends and acquaintances mainly say he was “driven” to kill himself. Many residents of Nizhny Tagil could find themselves in similar circumstances, especially if they work at Uralvagonzavod.

A female worker in Forging Shop No. 170, where Chernykh was employed, said the 27-year-old man’s suicide occurred after he attended a meeting of plant managers that he was not supposed to have attended. The employee asked she not be named since, she claimed, everyone in the shop was afraid, everyone needed a job, and she did not want any extra problems.

“Sergei was a rank-and-file worker, a cutter, but since our section foreman and section manager were on sick leave, Sergei was temporarily appointed foreman. And since there was no manager in our section, Sergei was sent to that meeting,” the woman claims. “It’s at these morning meetings that the shop foreman tells everyone what section has to do what and how much they have to do during a shift.”

“There are emergencies, and the shop foreman forces people to hurry up. He could not care less whether are enough workers to do the job or not, whether they have the tools they need or not. All that matters is that the work be done quickly. If you don’t have any workers, you go do the job yourself,” she says.

Marina Pogrebnykh, a distant relative of Chernykh’s, does not know the particulars of his death, but she likewise has no doubt plant management was to blame.

“I’m certain management are to blame for it. I don’t believe he would just take his own life like that, especially since this was not the first such incident,” says Pogrebnykh.

The anonymous female worker at Uralvagonzavod confirmed Chernykh was the third plant employee to have killed himself in the past three months. On the social networks, there has been talk there may have been more such incidents.

“We are under extreme pressure at work. You can make good wages, but you have to live on the shop floor to make the good money.

“Our section foreman killed himself. Yes, of course, it was a personal situation, but I can say that if he hadn’t drunk he would be alive. But when he was foreman in another shop he never drank, although the workload was huge. So, it’s a little hard to believe in coincidences.

“Our current section foreman, a woman, quite often comes back from meetings with management completely stressed out. She’s already getting up there in terms of age, but they yell at her like they yell at everyone else,” says the late Chernykh’s female coworker.

Two weeks ago, twenty-five Uralvagonzavod workers filed suit against their employer over new rules for calculating wages. According to the workers, the new rules have cut their pay in half while their workload has increased. Although these rules came into force in 2018, the workers have only now decided to file suit.

“Management tells us the the plant has been modernized. Due to this modernization, our workload has decreased, allegedly, meaning we should produce more. It’s on paper that things look good to them. On the contrary, we haven’t noticed any changes,” say the workers by way of explaining why they have sued olant management.

“On the contrary, we now have additional functions, but our wages have been halved.  This happened despite the fact that previously we had one of the highest pay grades at the plant due to occupational hazards and the heavy physical workload,” they say.

Nizhny Tagil’s Dzerzhinsky District Court has not yet made a ruling in the case.

Founded in 1936, Uralvagonzavod manufactures military equipment, railroad cars, and road construction equipment. In 2016, the company was merged with the Russian state corporation Rostec.

Poverty and overwork have led workers to hang themselves. It is all quite sad. Workers must realize they need to fight together to improve their condition. They must organize themselves, go on strike, and take other actions.

The nooses should be reserved for other heads.

This text is based on media reports.

Thanks to Tom Rowley for the heads-up. Translated by the Russian Reader

Why Most Russians Will Stay Home for New Year’s

Why Most Russians Will Stay Home for New Year’s
As Incomes Crumble, Even Celebrating with Friends Is Too Expensive for Them
Vladimir Ruvinsky
Vedomosti
December 27, 2018

New Year’s, apparently, has become a truly stay-at-home holiday. The number of Russians who plan to spend the long New Year’s holiday at home has jumped from 41% in late 2015 to 70% in late 2018, according to a survey by Romir, a Russian research company. The main reason is the rapid return to the conservative tradition of growing poverty and uncertainty in the future, combined with the desire to maintain previous levels of consumption of the most vital goods and services, which no longer include a winter holiday away from home.

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“How do you plan to spend the upcoming New Year’s holidays?” Overall: at home, 70%; at dacha, visiting relatives, 19%; traveling in Russia, 2%; working, 6%; traveling abroad, 2%; other, 1%. Average monthly income per family member of 10,000 rubles: at home, 73%; at dacha, visiting relatives, 18%; traveling in Russia, 2%; working, 6%. Average monthly income per family member of 10,000 rubles–25,000 rubles: at home, 74%; at dacha, visiting relatives, 17%; traveling in Russia, 1%; working, 5%; traveling abroad, 1%; other, 1%. Average monthly income per family member of 25,000 rubles or greater: at home, 56%; at dacha, visiting relatives, 25%; traveling in Russia, 4%; working, 8%; traveling abroad, 5%; other, 2%. Source: Romir, December 2018. Courtesy of Vedomosti

Surveys of the same representative selection of respondents have shown a drop-off in all other ways of spending the New Year’s holidays, which have basically become yet another period of time off work for Russians. The number of Russians planning to spend the holidays at the dacha or visiting friends or relatives has decreased from 34% to 19% in three years. Trips within Russia have dropped from 8% to 2%, while trips abroad have fallen from 4% to 2%.  Nearly everyone has been scrimping, including Russians with above-median incomes. Fifty-six percent of Russian with monthly incomes of 25,000 rubles [approx. $364] per family memberwill stay home, as will 74% of Russians with monthly incomes between 10,000 rubles and 25,000 rubles per family member. As Tatyana Maleva, an economist from RANEPA, notes, the Russian urban middle class, which has grown accustomed to traveling, cannot afford it.

The picture emerging from the survey reflects the mood of many Russians. Since 2014, real incomes have fallen four years in a row, and all indications are they will be shown to have fallen in 2018 as well. According to Rosstat, the monthly modal income in in 2017 was 13,274 rubles [approx. $233], while the monthly median income was 23,500 rubles [approx. $412]. Given these circumstances, the ruble’s devaluation, which has made trips abroad more expensive, is not such an important factor. In December 2015, one dollar cost as much as it does currently, 67 rubles, and its value was rising.

Holidays at home are not cheap, either. In November 2018, the percentage of Russians who had noticed a rise in prices had grown in comparison with October 2018, according to the Russian Central Bank. Forty percent of Russians noticed upticks in prices for meat and poultry; 32%, rises in the price of petrol; 28%, rising prices for cheese and sausage; while 26% had noticed that milk and dairy products were more expensive. All of these goods are part of the home holiday menu.

In comparison with 2014, consumption levels have fallen. They have not returned to their previous levels. Attempting to wriggle their way out of poverty or maintain their previous income levels, Russians have taken out an ever-growing number of consumer loans, which have proven difficult to pay back. Every fourth Russian who had outstanding loans in 2015–2017 spent 30% of their incomes paying them off, note Olga Kuzina and Nikita Krupensky, economists at the Higher School of Economics, in an article entitled “The High Debt of Russians: Myth or Reality?” published in the November 2018 issue of the journal Voprosy ekonomiki.

Generally, the Russian populace has transitioned to a minimalist model of consumerism, notes Maleva. Scrimping begins literally with the New Year. As Romir’s survey indicates, this transition has become a trend that will, apparently, shape the strategies and tactics of Russian consumers in the future, too. The only thing that has not changed over the years is the president’s televised New Year’s greeting: it costs nothing.

Translated by the Russian Reader

Migrant Worker Blues

OLYMPUS DIGITAL CAMERACentral Asian migrant workers queuing outside the Russian Interior Ministry’s work permit application center on Red Textile Worker Street in St. Petersburg. Photo by the Russian Reader

Should Everyone Disappear into the Shadows? What the Fee Increase for Migrant Worker Permits Entails
Yekaterina Ivashchenko
Fergana News
November 29, 2018

The license [in Russian, patent] system for foreign nationals seeking permission to work in Russia was introduced in 2015. The cost of a work permit has varied from one region to the next. In Moscow, for example, it initially cost 4,000 rubles a month. In 2016, the price rose by 5% to 4,200 rubles, and in 2018, it rose by 7% to 4,500 rubles.

It is absolutely necessary to have a work permit. Without it, a migrant worker faces up to 7,000 rubles in fines, expulsion from Russia, and a ban on entering the country for a period of three to ten years. Employers who hire employees without work permits are punishable by fines, and their operations can be suspended for up to ninety days.

Something important happened on November 21, 2018. The Moscow City Duma approved a law bill increasing the cost of a work permit in Moscow. In 2019, it will rise by 500 rubles (11%) and cost 5,000 rubles a month (approx. $75).

The next day, November 22, Moscow Mayor Sergei Sobyanin said the city’s revenues from legal migrant workers had been growing and would exceed 16 billion rubles ($241 million) by year’s end.

“By paying such a high price for permits, migrant workers have come to occupy a fair position vis-à-vis Russian nationals [rossiyane] working in Moscow, because in the past they paid nothing at all, and, of course, it was profitable to employ them, but the situation has changed today,” said the mayor.

On January 1, 2019, the cost of a license for migrant workers seeking employment in Moscow Region will increase by 450 rubles. The Moscow Region work permit, which cost 4,300 rubles ($64.60) in 2018, will cost 4,750 rubles ($71.50) per month in 2019.

Taras Yefimov, chair of the Moscow Regional Duma’s budget, finance and tax committee, said the measure would enrich the region’s coffers by around one billion rubles [approx. $15 million]. In 2018, Moscow Region made six billion rubles [approx. $90.5 million] on migrant work permits.

St. Petersburg has decided to raise the price of the work permit from 3,500 to 3,800 rubles a month. City officials noted the decision was made because foreign nationals had begun earning considerably more money.

Filling out the forms for extending a work permit. Photo courtesy of Fmskam.ru and Fergana News

Wages Are Not Growing
Svetlana Salamova, director of Migranto.ru, a website for migrant workers looking for jobs and employers seeking to hire migrant workers, has not seen the real growth in the wages of migrant workers that officials have cited.

“The wages of foreign nationals who are employed on the basis of work permits has remained at the level of 29,000 rubles to 35,000 rubles [$435–$525] a month. Maybe the Moscow authorities are focused on high-profile specialists who make 168,000 rubles a month officially?” Salamova sarcastically wondered.

Salamova has noticed wage increases only among Kyrgyz nationals. After Kyrgyzstan joined the EAEU (Eurasian Economic Union), employers offered them 40,000 to 45,000 rubles a month.

“But they work without permits. (EAEU nationals can work in Russia without permits as long as they have an employment contract — Fergana News.) Besides, many Kyrgyzstanis agree to low wages of 19,000 to 20,000 rubles a month. They work part time in several places at once, and so ultimately they make a decent amount of money,” explained Salamova.

Salamova did not discount the possibility that fees for work permits have been raised in light of the fact that employers must index wages for inflation as of the new year. Perhaps the authorities decided to increase the cost of permits for foreign national because they took into account this indexation of wages on the Moscow job market.

Immigration center in Moscow. Photo courtesy of Mos.ru and Fergana News

But what do migrant workers themselves have to say about it?

“Since 2015, the fee for the work permit has increased three times, but I have not even once received a raise. We spend little as it is: 4,500 rubles for the permit, plus the fee for residence registration; 6,000 rubles on rent, 5,000 on groceries, 2,000 on transportation. I sometimes buy clothes and medicines, and there are unforeseen expenses, like when my phone stops working. So, I have only 10,000 rubles left over from my monthly salary of 35,000 rubles. The latest 500-ruble increase will definitely affect my expenses. 6,000 rubles a year is a lot of money: an average family in Tajikistan could live for a month on that amount. It means my relatives back home will have to get by one month of the year without receiving a remittance from me,” said Magomed, who comes from Khujand, Tajikistan’s second-largest city.

Pushed into the Gray Economy
In June 2017, Mayor Sobyanin said the problem of illegal migrant workers in Moscow had been solved and had ceased to be a source of concern for Muscovites. Most migrant workers were employed legally and duly paid their taxes.

Experts believe the increase in the price of the work permit could lead to a rise in the number of foreign workers who decide not to pay taxes.

“The cost of the work permit will increase by 11%. An extra 6,000 rubles a year might not seem like a huge amount of money. But for migrant workers, who earn this money literally with their blood, living far from their families, and undergoing numerous hardships and risks, this is not a small amount at all: the overall cost of a permit for a year will be 60,000 rubles or $900. Some migrant workers will thus decide to go off the books. Consequently, Moscow’s budget is unlikely to get a huge boost, but the city will be supporting a policy of pushing migrant workers into the gray economy with all the attendant social consequences,” says Professor Sergey Abashin.

“It is odd that Moscow MPs say we will start earning more. Every migrant worker pays around 12,000 rubles to get a work permit in the first place. Then every month he pays for the work permit and his residence registration, he pays the rent, and he buys groceries. He even has to pay bribes to the police. People are taking money from us at every turn. What will we have left to send home?” said Muhammad, who is originally from Samarkand.

Batyrzhon Shermuhammad, a lawyer and founder of the website Migrant, also sees no signs of a wage increase.

“If you look at the want ads, you will see that the wages of migrant workers who are employed on the basis of work permits range from 25,000 rubles to 35,000 rubles a month. We monitor the job market, and no one mentions anything about a salary of 40,000 rubles a month. On the contrary, the economic crisis in Russia has been deepening. There is inflation, and the dollar/ruble exchange rate has been rising, which affects the remittances sent by migrant workers,” Shermuhammad said.

The latest increase in the cost of the work permit will force migrant workers to retreat into the shadows, he argues.

“One could understand the increase if the economic situation had improved, but the trends are negative: the prices in shops have increased, and the dollar has become more expensive vis-à-vis the ruble. People have no money, and so they have been having problems with residence registrations. Also, by law you cannot be late paying for your work permit even by a day. If a migrant worker is paid his wages late, he cannot pay the fee for his work permit, and he has no way of shelling out approximately 12,000 rubles to have a new work permit drawn up. While introduction of the work permit system brought migrant workers out of the shadows, the subsequent tightening of immigration laws and the increase in their expenses has been leaving migrant workers with fewer chances to stay legal, even if they would want to,” Shermuhammad said.

Migrant workers from Kyrgyzstan. Photo courtesy of Kloop.kg and Fergana News

“Even though I make good money, a 6,000-ruble increase in the price of the work permit is a serious expense, and I have huge expenses aside from the permit. My mother, sister, and I pay 33,000 rubles a month for a place to live. That is 11,000 rubles per person, plus utilities. In addition, I have to pay the fees for my studies twice a year: that is another 100,000 rubles each time. We don’t spend a lot on food, no more than 10,000 rubles per person a month. I also spend money on transportation, clothes, and gifts, and I spend 5,000 to 7,000 rubles a month for English lessons. Lately, we have not been sending a lot of money home, $200 to $300 per month at most. Mom and I used to be able to save money, but in the last six months our expenses have skyrocketed, and after the new year they will increase even more due to the work permit. Basically, the increase in the work permit fee means I won’t be able to pay for English lessons for a month,” said Ilkhom, who hails from Tashkent.

“For migrant workers, 500 rubles is a mobile phone connection for a month,” said human rights active Karimjon Yorov. “It is the cost of a week’s worth of subway trips. It is two lunches, finally. For families with children, it means being able to buy school supplies or pay for school lunches. In short, 500 rubles is a lot of money.”

Yorov argues that raising the cost of the work permit will make migrant workers not want to pay for it, meaning that revenues to Moscow’s coffers will actually decrease.

“Migrant workers will prefer to work without a permit and cross the border every three months. Currently, a trip to the border and back (i.e., exit and re-entry) costs 8,000 rubles in total, while the cost of a work permit for three months is 13,500 rubles, meaning they save 5,500 rubles by exiting Russia and re-entering it. This comes to 22,000 rubles, plus 12,000 rubles for the initial paperwork. The total is 34,000 rubles, which is the same as the cost of round-trip plane ticket to Uzbekistan. When you do the maths, it makes more financial sense for migrant workers to be off the books. The authorities themselves are forcing migrant workers underground, especially now that the laws on immigration registration have been tightened. Whether you get a work permit or not, if you do not live at the address where you are registered, you will be deported. Migrant workers will emerge from the underground only when the law on immigration registration has been abolished,” Yorov concluded.

Thanks to Sergey Abashin for the heads-up. Translated by the Russian Reader

Raising Russia’s Minimum Wage: A Band-Aid for the Poor

624869d68f57b0f0b20b1b6c8e808f58“Why did you open up your MROT?”

Who Will Win and Lose from the Rise in the Minimum Monthly Wage?
Ivan Ovsyannikov
Proved.rf
February 20, 2018

The minimum monthly wage in Russia [often referred to by its abbreviation, MROT] has been pegged to the subsistence minimum. This gift to employees will come into effect on May 1, 2018, when the minimum monthly wage will grow from the current ₽9,489 to ₽11,163 [approx. €160 at current exchange rates]. Regional minimum wages might be higher. For example, in Moscow, it will be set at ₽18,700 a month, while in Petersburg it will rise to ₽17,000. According to former federal deputy labor minister Pavel Kudyukin, the lowest paid category of workers will benefit from the rise in the minimum wage, but there will more losers.

••••••••••

Pavel Kudyukin, Russia Federal Deputy Labor Minister, 1991–1993; currently, council member, Confederation of Labor of Russia (KTR):

The principle that the minimum monthly wage cannot be lower than the subsistence minimum was incorporated into the Russian Labor Code way back in 2001, with the proviso, however, it would be implemented gradually.

The fact this decision has been made amidst less than propitious economic circumstances is undoubtedly an election campaign gambit. Theoretically, it is a measure that had to be taken. Having a minimum monthly wage lower than the subsistence minimum, especially Russia’s subsistence minimum, is simply shameful. Some people will stand to gain from the decision, but fairly broad segments of the populace will also suffer serious losses. But the propagandists, of course, will talk about the gains, especially as we are in an election campaign.

Minimum Minimorum
The general opinion of nearly all social policy experts is that Russia’s subsistence minimum is equivalent to the poverty level. It will keep a person from starving to death, but it would be a great exaggeration to call it a means to a full-fledged, dignified life.

International standards are also quite modest, of course: the subsistence minimum is defined for the poorest countries. Naturally, the developed countries have their own notions of the subsistence minimum. It is an essential tool of social policy. Various welfare payments are pegged to it, and it determines the level at which households are seen to need additional assistance. It is measured in different ways. Measuring the subsistence minimum in terms of the consumer goods basket, as is done in Russia, is deemed quite an archaic method, although the US uses the same method to calculate it.

The question, of course, is how the contents of the consumer goods basket are decided. Russia does not fully take into account the needs of the modern individual. It bases its calculations on the assumption people have no need of such an important social benefit as housing. The costs of utilities are at least included in the basket, but the possibility of improving one’s living conditions are not. Cultural needs are very poorly represented. Most of the so-called non-product needs are calculated through an adjustment, as a percentage of the consumer basket given over to products. It is no wonder the subsistence minimum, as it is imagined in Russia, satisfies neither the experts nor ordinary people.

The subsistence minimum has also been reduced from time to time with reference to drops in prices. This has also provoked a slew of questions. How are prices determined? Inflation affects different income brackets in very different ways. The poorer people are, the greater their personal level of inflation. If the price for a Mercedes suddenly drops, it does not mean the price of sunflower seed oil will not go up.

There is an important brake on seriously expanding the subsistence minimum in Russia. When the number of poor people is between fifteen and twenty percent, you can provide them with supplemental financial assistance and benefits. If the percentage of poor people is fifty percent or greater, it is quite tricky for the state to do anything for them. When half of the populace is receiving poverty assistance payments, either the payments are utterly paltry and spread thin or the state simply cannot make them.

The Winners
For people who earn the least of all, pegging the mininum monthly wage to the subsistence minimum does constitute an increase in wages. It is a quite decent increase in some cases, especially if you consider the fact there are people in Russia—Deputy Prime Minister Olga Golodets has estimated there are nearly five million such people—who received a salary lower than the previous minimum monthly wage.

The workers who really have a chance to improve their lot are mainly those employed in the public sector in various auxiliary positions: maintenance personnel, cleaners, and so on. They will earn more.

The Losers
Formally, there will be winners, but there will be more losers. The rise in the minimum monthly wage will cause serious problems in the regions, since poor public sectorsworkers are usually paid from regional and municpal budgets. The new expenditures they incure will be only partly covered by transfers from the federal budget. Regional officials will once again have to optimize some things and lay off people. This is a quite significant aspect of the headache generated every time the parliament passes laws or the president signs decrees increasing payments to people who do not get them from the federal budget.

The rise in the monthly minimum wage will be a considerable problem for a number of businesses, especially small businesses. There is a risk it will expand the gray sector of the employment market. This is also an unpleasant consequence for workers, for when they are employed in the gray sector, payments to the Pension Fund are not deducted from their wages, and they lose pension payments they would have received in the future.  People in Russia usually disregard this, because, one, they do not actually believe they will live until pension age, and two, they really do not believe the state will not think up more mischief by the time their pensions come due.

Another important question: what is included in the minimum monthly wage? Currently, there are several court rulings that the minimum monthly wage should not include any sort of compensatory pay, such as the northern hardship bonus. This pay must be disbursed over and above the minimum wage. These are sound rulings, but the problem is Russia does not have a precedents-based judicial system, and one court’s ruling is anything but obligatory for other courts. Every individual whose minimum monthly wage includes compensatory or incentive pay must file suit in court to have his or her wages individually recalculated. So, the problem is not only the amount of the minimum monthly wage and how it correlates with the subsistence minimum but also what is included in the minimum monthly wage.

A Band-Aid for the Poor
Increasing the minimum monthly wage cannot be implemented in isolation. It should be complemented by serious reforms in other areas. We must radically change our entire social and economic policy, including, as an obligatory part of such reforms, our taxation policy. It has not always been understood in Russia that there is no such thing as a welfare state* without progressive taxation. The introduction of progressive taxation, of course, will be an unpopular measure amongst a large number of people. Plus, given the inefficiency of the Russian state and the social irresponsibility of the rich, such an attempt would push the growth of the gray economy.

Poverty is not only a problem of social policy. It is not eliminated by paying people social benefits. We need a completely different economic policy that would give people the opportunity to work in well-paid jobs and thus make decent pension contributions. The problem of poverty is not solved merely by redistributing resources, although it is also necessary. Treating poverty with social benefits means treating the symptoms. Treating poverty with economic growth means treating the causes.

* According to Article 7 of the Russian Federal Constitution, the Russian Federation “is a social State whose policy is aimed at creating conditions for a worthy life and a free development of man [and where] the labour and health of people shall be protected, a guaranteed minimum wages and salaries shall be established, state support ensured to the family, maternity, paternity and childhood, to disabled persons and the elderly, the system of social services developed, state pensions, allowances and other social security guarantees shall be established.” For more on the practical implications of this constitutional guarantee in a quasi-populist kleptocratic tyranny, see Ilya Matveev, “The ‘Welfare’ State Doesn’t Get Any Better Than This,” Chtodelat News, October 12, 2012.

Cartoon by Alexei Merinov. Courtesy of Moskovsky Komsomolets. Translation by the Russian Reader

Mort à crédit

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Voronezh Region Residents Took Out Nearly 55 Billion Rubles in Loans over Six Months
Ilya Makar
Kommersant
September 28, 2017

From January to July 2017, Voronezh Region residents borrowed 54.7 billion rubles [approx. 800 million euros] from banks, reports the Central Bank’s Central Federal District regional office. Of this total, 43 billion rubles [approx. 630 million euros] were loaned for consumer needs, a figure almost 30% higher than for the same period last year. As of August 1, 2017, residents of the region owed banks 138.4 billion rubles [approx. two billion euros] in loans.

Thanks to Nikolay Mitrokhin for the heads-up. Translation and photo by the Russian Reader