Russian Federation

D. Popova

Daria Popova - PhD in Social Policy, Leading Research Fellow at the Independent Institute for Social Policy (IISP), Leading Research Fellow at the Centre for Analysis of Income and Living Standards of the National Research University Higher School of Economics, 101000, 20, Myasnitskaya, Russian Federation; E-mail: dpopova@hse.ru

Abstract

The article discuses development trends, factors and forms of inequality in Russia. The author concludes with recommendations on reducing inequality.

At the beginning of the transition period in the 1990s Russia experienced an abrupt increase in income inequality. In the 2000s the Russian government attempted to take income disparities under control using redistributive policies such as: an accelerated increase in earnings of the public sector workers; a sharp increase in the minimum wage; a series of increases in the average and minimum pensions; and an increase in spending on safety nets for vulnerable groups of the population. Income inequality has stopped growing only recently as a result of the new economic crisis which had a more adverse effect on income of the well-off strata, while incomes of the poor were supported by increases in the minimum wage and several indexations of pensions. However, inequality in Russia, particularly regional, remains high. At the macro-level inequality is caused by the weakness of the tax related redistributive mechanisms, including a flat income tax rate, regressive social security contributions and low property taxes. For example, the total personal income tax and social security contributions in 2010 on average amounted to 43% of net earnings.

At the micro-level, income inequality is a result of disparities in incomes of households with different demographic and socio-economic characteristics. For example, earnings tend to grow with age due to the accumulation of experience and/or improving the match between employees’ skills and employers’ requirements. The family composition has an impact on household incomes; the latter are usually reduced due to the presence of children. Since employment is the main source of livelihood for most households, household incomes are largely determined by the labour market status of the household members. One of the most negative features of the Russian labour market is the high incidence of low-paid employment.

To tackle inequality it is recommended to improve social protection of the most vulnerable social groups, to enhance redistributive capacities of the tax system, to improve citizens’ access to education and health. The package of policies to reduce regional disparities should include policies promoting labor migration, investment in social infrastructure of the depressed territories and subsidies to firms creating new jobs, instead of subsidies to the budgets of those territories.

Reference

Differenciacija jekonomicheskogo blagosostojanija i vozmozhnye puti ee snizhenija (itogovyj doklad) [Differentiation of Economic Well-Being and Possible Ways to Reduce It (the Final Report)] (2003). Programma fundamental'nyh issledovanij Otdelenija obshhestvennyh nauk RAN «Rossija v globalizirujushhemsja mire». Moscow: ISEPN.

Firebaugh G. (2003) The New Geography of Global Income Inequality. Cambridge: Harvard University Press.

Gimpelson V., Kapeliushnikov R. (2011) Labour Market Adjustment in Russia Different? IZA Discussion Paper No. 5588. Bonn: The Institute of Study of Labour.

Growing Unequal? Income Distribution and Poverty in OECD Countries (2008). Paris: OECD Publishing.

National Human Development Report for the Russian Federation 2011 (2011). Modernization and Human Development. Moscow: UNDP.

Ovcharova L.N. (2005) Dohody i social'nye uslugi: neravenstvo, ujazvimost', bednost' [Income and Social Services: Inequality, Vulnerability, Poverty]. Moscow: HSE.

Ovcharova L., Tesliuk E. (2006) Poverty and Inequality in Russia: Sensitivity of Poverty and Inequality Statistics to Alternative Definitions of Households Welfare. Illustration Using the NOBUS Survey. Moscow: World Bank.

Popova D. (2012) Constructing the Tax-Benefit Microsimulation Model for Russia. RUSMOD. EUROMOD Working Paper No. EM7/12.

Shevjakov A. Ju., Kiruta A.Ja. (2001) Jekonomicheskoe neravenstvo, uroven' zhizni i bednost' naselenija Rossii i ee regionov v processe reform: metody izmerenija i analiz prichinnyh zavisimostej [Economic Inequality, PovertyandLiving Standardsof the Populationof Russia and Its Regionsduring the Reform Process: Methods of Measurementand Analysis of Causal Relationships]. Moscow: RPEI.

Shevjakov A.Ju., Kiruta A.Ja. (2002) Izmerenie jekonomicheskogo neravenstva [Measurement of Economic Inequality]. Moscow: Leto.

Shorrocks A.F. (1980) The Class of Additively Decomposable Inequality Measures. Econometrica. 48 (3).

Shorrocks A.F. (1984) Inequality Decomposition by Population Subgroups. 52 (6).

The Situation Analysis of Children in the Russian Federation: on the Way to the Equal Opportunity Society (2011). Moscow: UNICEF.

Solt F. (2009) Standardizing the World Income Inequality Database // Social Science Quarterly. 90 (2).

Suvorov A.V. (2011) Dohody i potreblenie naselenija: makrojekonomicheskij analiz i prognozirovanie [Income and Household Consumption: Macroeconomic Analysis and Forecasting]. Moscow: MAKS Press.

Theil H. (1967) Economics and Information Theory. Chicago: Rand McNally and Company.

Velikanova T., Kolmakov I., Frolova I. (1996) Sovershenstvovanie metodiki i modelej raspredelenija naselenija po srednedushevomu dohodu [Improving Methods and Models for the Distributionof Population by Per Capita Income]. Voprosy statistiki.

Weigand C., Grosh M. (2008) Levels and Patterns of Safety Net Spending in Developing and Transition Countries. Social Protection Discussion Paper. No. 0817. Washington D.C.: World Bank.

Zubarevich N.V. (2010) Regiony Rossii: neravenstvo, krizis, modernizacija [Regions of Russia: Inequality, Crisis, Modernization]. Moscow: Nezavisimyj institut social'noj politiki.

Contacts

D. Popova

Russian Federation