______________________
1 See https://tradingeconomics.com/russia/government-debt-to-gdp. The American debt to GDP ratio is 105.4.
2The absolute numbers of employed people was 73.2 million in September 2018. World Bank, Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty — How? December 4, 2018: 40th issue of the Russia Economic Report; www.worldbank.org/en/country/russia/publication/rer; http://pubdocs.worldbank.org/en/673631543924406524/RER-40-English.pdf.
3 Most of the unemployment is still long term: 30% of the unemployed had been looking for a job for over a year. The number of part-time employees increased slightly in the first half of 2018 but remained far below the levels of the 2009 crisis period. Ibid. https://tradingeconomics.com/russia/unemployment-rate.
4 See https://tradingeconomics.com/russia/inflation-cpi.
5 See https://tradingeconomics.com/russia/gdp-growth-annual.
6 World Bank, Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty — How? December 4, 2018: 40th issue of the Russia Economic Report; http://www.worldbank.org/en/country/russia/publication/rer; pubdocs.worldbank.org/en/673631543924406524/RER-40-English.pdf.
7 See https://www.cia.gov/library/PUBLICATIONS/the-world-factbook/geos/rs.html. Russia’s per capita GDP computed in purchasing power parity dollars in 2017 was $27,900. The counterpart American figure was $59,000.
8 CIA World Factbook. www.cia.gov/library/PUBLICATIONS/the-world-factbook/geos/rs.html.
9 Ibid. Other Russian sources indicated a higher figure. The Russian Presidential Academy of the National Economy and Public Administration says 22% of Russians fall into the “poverty zone”, meaning they are unable to buy anything beyond basic staples needed for subsistence. See “One-Fifth of Russians Live in Poverty, 36 Percent in ‘Risk Zone,’ Study Finds”, Radio Free Europe, November 21, 2018. https://www.rferl.org/a/study-22-percent-of-russians-live-in-poverty-36-percent-in-risk-zone-/29613059.html.
10 World Bank, Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty — How? December 4, 2018: 40th issue of the Russia Economic Report, pp. 35–36. http://pubdocs.worldbank.org/en/673631543924406524/RER-40-English.pdf.
11 Ibid., pp. 36–40.
12 Ibid., pp. 43–44.
13 In the 5 years since 2014, the share of those in Russia who consider themselves middle class has shrunk from 60% to 47%. This is according to a study commissioned by the investment arm of Sberbank, Russia’s largest bank, on the “Ivanov index”, a measure of consumer confidence. “Ivanov”, a common Russian last name, is used to represent a typical middle-class person in Russia.
If only education and professional status are considered, Russia would have a large middle class of “European” proportions, between 60% and 70% of the population. But to qualify as middle class according to the Institute of Sociology, one must meet all four criteria. And when all four measures are considered, Russia’s middle class made up 42% of the population in 2014, the last year for which data are available.
But the decline in incomes and the shrinking middle-income groups are not the whole story. Even members of the Organisation for Economic Cooperation and Development, the group of developed market economies, are experiencing a shrinking middle class, though the decline is less dramatic and slower than that in Russia. The share of the middle class in OECD countries declined from 64% in the 1980s to 61% currently, a recent OECD study found.
In Russia, all income groups, and particularly those associated with the middle class, have become critically dependent on the public sector. Pensions, public transfers and public sector wages account for about half of total incomes in Russia. According to data from the International Labour Organization, public sector employees account for 40% of the total employment in Russia, compared to 13% in Germany, 15% in the United States, 25% in Finland and 31% in Saudi Arabia. It is worth noting that the IMF’s estimate of the Russian state’s share in formal employment is 50%, higher than the ILO’s 40%.
This income dependency has been true for relatively worse-off citizens for a long time. What has changed is that relatively better-off groups of the population have become increasingly dependent on the government budget, World Bank studies show (see especially Figure 39 in that report). The share of income from public wages and pensions for better-off groups has grown, while the share of income coming from entrepreneurial activity or property has declined.
Another important breakdown underlying the political and economic divisions in today’s Russia concerns inputs to versus benefits drawn from the system. Those in the bottom 60% of the income distribution are net beneficiaries of Russia’s current system if in-kind health and education services are included, the World Bank’s Russia Economic Report says. “The top four deciles are net payers to the system, with their tax contributions being greater than the benefits they receive”, World Bank economists conclude.
One has to be careful in directly linking Russian society’s heavy dependence on public wages and pensions with its political sympathies. It is not that people automatically support those who pay them, though the Kremlin may think so. It is what it is, a dependency. It certainly helps Russia’s political managers mobilise support when they need it. But the sincerity of such a support will always remain questionable.
Chapter 2
Russia’s Macroeconomy — A Closer Look at Growth, Investment and Uncertainty
Torbjörn Becker
Introduction
Russia is in many ways a special country, which may lead us to believe that regular political and economic analyses are not applicable. This may certainly be true in some regards, but there are still many dimensions that are as relevant in Russia as they are in most other countries. One such dimension is that generating growth and prosperity in a stable macroeconomic environment is something both the leadership and population at large
