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ECONOMICS

Poor man's statistics. How Russia combats poverty on paper as the nation grows poorer

Official statistics suggest that Russia's poverty rate has plunged below 10% for the first time in history: only 9.8% of its population is poor. According to Rosstat, the number of Russians living in poverty dropped by 1.7 million in 2022. However, this ‘success’ results from a primitive statistics trick: before 2021, the poverty line directly correlated with food prices, but the authorities invented a new approach to the poverty line, assessing relative values for each region. Under the earlier methodology, we would see an additional 2.3 million poor in Russia. Tampering with statistics, the Kremlin both reports progress in the combat against poverty and saves money on income supplements. The Insider's analysis reveals these indicators are lowered intentionally and living off the living wage remains impossible.

Content
  • How the government tweaks poverty statistics

  • Meanwhile in the real world

  • Bordering on malnutrition

  • Survival strategies

  • How poverty affects demographics

  • Single adults and senior citizens

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How the government tweaks poverty statistics

In 2020, Putin set the task to reduce poverty in Russia by half, driving the poverty rate down to 6.5% before 2030. Whenever the Kremlin sets targets in some area, one can always approach the coveted figure by tweaking the assessment methodology. So in 2021, government statisticians adopted a new approach to the living wage, defining poverty as the level of income below the regional median per capita income.

Later on, poverty rate formulas were further enhanced to include so-called “regional coefficients”. From then on, to decide whether one was economically disadvantaged (the legalese for “poor”), officials used the national median income times the coefficient invented by bureaucrats and included in the law. The Tambov and Tula regions hold the lowest regional coefficient – 0.83 (that is, the authorities believe living expenses in these regions are lower than elsewhere). In other words, with the national living wage set at ~$175 a month, residents of Tula and Tambov can only be considered poor if they make less than $145 a month. Those earning more cannot count on any income supplements from the state.

Each region will continue to adjust its living wage (the poverty threshold) according to its coefficient up until 2025, making poverty rates in Russia's regions somewhat arbitrary. This is why the number of poor Russians in the first year after the innovation dropped by 1.7 million compared to 2020, despite the rapid growth of prices for basic goods and services in 2021.

Late in 2021, the government invented another indicator: the “poverty line”. This approach to poverty statistics offers the opportunity to look beyond social welfare recipients and include all low-income Russians. The poverty line is drawn based on the cost of the minimal market basket in the fourth quarter of 2020 times the accumulated inflation, calculated annually for each region. Thanks to the new coefficients, the number of the poor in the 2022 report dropped by another 1.7 million.

We ventured to assess the poverty line in Russian regions using government methodology: by multiplying the living wage in Q4 2020 by the accumulated inflation as of today. As it turned out, the poverty line lies below the current living wage everywhere. That is, people who are officially considered poor are far less numerous than those eligible for income supplement programs. If statisticians were using the current living wage to determine the poverty rate, they would arrive at 20 million people with an income below the official living wage. This figure exceeds the value cited in the 2022 Rosstat report by 40% and shows a growth of 2.3 million compared to 2020. Essentially, it demonstrates Russia’s return to the poverty rate of 2015 – the first year of international sanctions imposed due to the annexation of Crimea.

Interestingly, while the government indexes the poverty line according to the general inflation rate, the poorest part of the population, who spend most of their income on food, are far more influenced by food inflation. If the latter was used to calculate the poverty line, we’d see more poor too.

To sum up, the government uses a personal income below the living wage as the definitive criterion of poverty. The rules for calculating the living wage are contained in the law, but every region is free to set its level until 2025, when the so-called “transition period” ends. As a result, while the poverty rate correlates with prices for basic commodities and services, government statisticians use tricky coefficients to obtain lower values each year.

The newly-adopted methodology is conceptually more progressive because it assesses economic inequality in society. For one, the EU also uses relative values tied to the median income. The World Bank sets the global person-per-day poverty line, which was updated to $2.15 in 2022. Few Russians live off such a low income, but life is more expensive there than in many Asian, African, Middle Eastern, and South American countries, so this amount would hardly cover one’s basic needs. Nevertheless, the Russian government used this indicator (despite the controversy it had sparked among experts and researchers) to inform the UN about the successful eradication of abject poverty in 2020.

Meanwhile in the real world

The Insider ventured to determine the real poverty line in several Russian regions. The poverty line represents costs you can't cut: food utility bills, basic pharmaceuticals we keep at home, basic hygiene products, and taxes.

We picked four types of households to assess the minimum annual income required for survival:

1. A single working adult living in a one-room apartment

2. Two working adults sharing a one-room apartment

3. A family of three in a two- or three-room apartment

4. A retired couple.

To assess the minimum food basket, we turned to the latest edition of the market basket law, limiting the food bundle to bread, milk, and cheap varieties of fish, meat, groats, fruit, and vegetables. We used the average 2022 prices as cited by Rosstat. On top of that, we added basic hygiene products such as soap, shampoo, toilet paper, and hygiene pads and several basic drugs – non-prescription painkillers, vitamins, cold medicines, and hypertension drugs for the elderly.

We assessed the utility bills based on the apartment size using average water and energy consumption values. By default, none of the apartments were newly built. Central heating bills were aligned with the climatic conditions of each region and based on standard national central heating rates, even though far from all Russians have access to central heating: many are forced to buy costly fuel or even burn waste to keep their houses warm. The Insider covered this inequality in its story “How Millions of Russians Survive Winters Without Gas” (in Russian).

We calculated minimum utility costs per annum because some cities only charge for central heating during the heating season, while in others, heating providers calculate the anticipated total and divide it into monthly payments to decrease the short-term financial burden on consumers. Moreover, we also assumed that an average Russian refills their stock of medicines once a year. Calculating annual values also enabled us to mitigate seasonal food price fluctuations.

We didn’t include possible utility bill reductions but overlooked transportation expenses, potentially higher medical costs for the majority of the population, mobile phone costs, Internet access, clothes, rent, and many more.

We then compared the approximate minimum expenses with the average income in each region. Rosstat presents a detailed income breakdown, assessing the share of the population in each income category, but the latest statistics available are from 2021. In 2022, Russians’ nominal income grew by 12%, with the poorest group accounting for most of the growth thanks to the 2022 government allowance programs. Another income growth factor is the salaries paid to “volunteers” (contract soldiers) and the lump-sum injury and death gratuities to soldiers’ families. However, the inflation rate exceeded the income growth almost everywhere, reaching 17% in the Kaluga Region and almost 19% in Ingushetia, among others. Consequently, we thought it possible to use old data in our comparison.

As we all know, the poorest part of Russia's population is families with children: the more children, the more depressing their parents’ financial affairs usually are. Thus, a 2020 Rosstat study (in the first year of the pandemic) revealed that four out of five poor households nationwide are families with at least one child. We found out how many Russian families are barely making ends meet, using the 2022 living wage (upped in June as a one-off measure) and the income distribution statistics. Rosstat only published this curve for the period until 2021. We discarded the nominal income growth registered in 2022 because it was nullified by inflation, causing the disposable (real) income to drop in most regions. By our estimates, over 15% of families with at least one child are on the brink of survival, which is almost 13.3 million people.

As it turned out, in Tuva and Ingushetia, over 50% of families even with one child live off an income below the living wage. Notably, the census suggests that both regions are characterized by a majority of families with two or more children, meaning that parents’ income is split across multiple family members, making households even poorer. At least 40% of families are poor in Karachay-Cherkessia, Kalmykia, Kabardino-Balkaria, and several other regions.

For instance, the 2022 monthly living wage for a family of three in the Irkutsk Region approached $550. Although the median income in the region spiked by almost 15% in a year, price growth bordered on 16%. Almost 22% of the region's population have a monthly income below $550 for a household of three and are therefore poor. As we estimated, the poverty rate reaches 15% in at least one-fourth of the Russian regions.

Bordering on malnutrition

Pyotr, 39, holds a degree in energy engineering, lives in a large city, and works as a taxi driver. He’s been struggling to find a job in his degree field that would sustain his family – a wife and a teenage son – for years, but the average salary would barely cover food, pharmaceuticals, and utility bills. His wife is a stay-at-home mom who homeschools their son because the couple is strongly dissatisfied with the quality of public schools. “Vacancies I’ve seen offer a gross salary of about $600, so there’s no point working in my degree field. Too much responsibility and too much stress. A senior position like Chief Energy Engineer comes with a paycheck twice as high but implies a higher responsibility and huge fines if something goes wrong,” shares Pyotr. According to him, his previous employer began withholding wages after the annexation of Crimea in 2014, forcing him to leave a couple of years later. Since then, he's been working as a taxi driver on a leased car, earning $350-950 a month depending on the season. “I drive a taxi from six a.m. to nine or ten p.m. I wake up at five and go to bed after eleven. I’m beyond exhausted. But I make my own schedule, so there’s no one to blame. And the money I make is all mine,” he says. With such working hours and the apartment his parents helped them buy, Pyotr’s family somehow makes ends meet: he is certain the real inflation rate is way higher than the values announced by Rosstat and the Bank of Russia. “Having to rent an apartment would put us on the brink of survival. With such prices, it’s hardly surprising that the purchasing power plunged by 12%. An ice cream that cost 56 rubles in 2021 cost 85-90 rubles in the summer of 2022 depending on the shop. So we had to switch to a cheaper brand with lower-quality ingredients. Discounts and promotions are a big help. Life forces you to be smart these days: we have all possible grocery delivery apps installed and a special app that tracks promotions in different chain stores. As for big purchases, we have to plan them well ahead to save enough money,” he says. Over the last few years, his family has also started to freeze seasonal fruit and vegetables for later. Pyotr and his wife hardly ever eat out or buy clothes: apart from basic foods and utility bills, their biggest expenses are related to their son. Unlike most of his peers, he can at least use the old family laptop. “Not so long ago, children were familiar with IT and devices, but today many don't know what to do if you put a laptop in front of them. Other parents can't afford to focus on their kids’ upbringing, so they stay at home unattended, doing nothing. Poverty affects everything, including your education and future. Your income stays the same, but your expenses grow, pushing you to work more and spend less time relaxing or with your family. The pressure never goes away,” Pyotr concludes.

This kind of lifestyle – survival at the expense of your health and best interests – is the daily reality of at least one in three Russians. According to an inFOM survey conducted for the Bank of Russia in March 2023, 24% of Russians had enough money only to buy food, and another 8% didn’t even have as much. One in four city residents in Russia switched to cheaper food brands at the end of winter to save money, and one in five had to give up their preferred foods, commodities, and services. One of the possible reasons is the growth of prices for staple foods. The chosen approach to the general inflation rate overlooks the significant growth of prices for basic food items in the past two years. Meanwhile, prices for frozen vegetables and bananas spiked by almost 40% in a year, prices for cheese, tea, and hard candy grew by 20-25%, and prices for milk, fish, pasta, and sausage, by 11-16%.

One in three Russians has enough money only for food, and one in ten doesn’t even have as much

In the latter half of 2022, the living wage according to Rosstat’s new methodology reached the national average of ~$155, ranging from ~$130 in the Lipetsk Region to ~$350 in Chukotka. The minimum food basket in the Lipetsk Region (estimated under Rosstat’s earlier methodology) costs ~$60; another ~$33-40 would cover utility bills, and ~$11 is enough for basic hygiene needs. The remaining $20 or so covers the personal income tax (because the minimum living wage is a gross amount), and the surplus could be spent on transportation, for instance. With such an income, one can hardly save money for rent and emergency expenses, like dentistry, let alone clothes, a phone, or a computer. This is the definition of a hand-to-mouth existence when you can only afford food and the bare necessities you can’t forgo.

Notably, the government has admitted more than once that the market basket used in such calculations over the last few years does not meet any healthy eating standards, with too much starchy food and sugar and not nearly enough fresh vegetables, fruit, or animal protein. Only 12% of Russians eat at least 400 grams of vegetables and fruit a day, which is the amount recommended by the WHO to prevent many health issues.

The situation in the Altai Republic, the Stavropol Territory, and the Ryazan Region is even grimmer than in Lipetsk. You cannot be considered poor (that is, eligible for financial assistance programs) if your income exceeds your food costs even by two or three dollars. If a working Russian adult has to support other people (a spouse, a child, an elderly or disabled relative), their income is divided among all of the dependents, but even then proving that you’re poor is hard, and the benefits you get are insignificant: without dependent children, disabled, or elderly, you cannot hope for an allowance. The same goes for full-time college students whose parents can't support them. In the eyes of the government, if you earn less than 40% of the regional median income and don't have children or a disability, nothing is keeping you from earning more, and therefore, you don't need any help.

Survival strategies

So how can low-income Russians with numerous dependents make ends meet? Primarily, by choosing the cheapest food brands. We used average food prices provided by Rosstat for our market basket estimates, but there are both cheaper and more expensive alternatives. Low-income families have to settle for the least expensive groceries. However, while cheap groats, flour, and even bread are not so different from their more expensive analogs, cheap dairy products are often counterfeit. Thus, in 2022, Roskachestvo (the national goods quality monitoring authority) warned about the subpar quality of several cheap milk brands, including the private labels of the Auchan, Magnit, and Pyaterochka chains. The anti-ratings of canned beef, crab sticks, and sausages are also dominated by the cheapest varieties. Cheap butter has a lower fat content than indicated and often contains vegetable fat.

Furthermore, even though the food basket does not provide a balanced set of nutrients, people often have to up the share of carbohydrates by cutting proteins (milk, fish, and meat), vegetables, and fruit, which are costly throughout most of the year in Russia. As Rosstat's studies confirm, poverty leads to increased consumption of carbohydrates and a lower intake of vitamins and minerals. An RANEPA survey suggests that Russians respond to food price growth by cutting the consumption of fish and meat, then dairy and fruit – that is, some of the healthiest foods with the highest protein content. In 2022, the list also included vegetables, sugar, and groats.

The World Health Organization treats a diet poor in vitamins and protein as a kind of malnutrition. Although Russia hardly ever ranks among starving countries, this mostly has to do with its government's reluctance to gather such statistics, let alone share them with international agencies. Moreover, Russia is often positioned on the border between developing and developed countries, with malnutrition hardly an issue in the latter category.

The Russian government is well aware of the vast numbers of Russians whose income falls short of the living wage, sometimes by half. Rosstat cites these numbers in its tables. The government offers income supplements to the poor, but the amount varies from region to region, with the poor families of Moscow and St. Petersburg getting the largest sums. Families with children are almost always eligible for financial aid. However, it takes more than having kids and being poor to get paid. A family needs an income (a wife on maternity leave and a jobless husband aren't eligible for an allowance) and can’t have any luxury items, such as a second car.

Apart from the salary, personal income includes old-age and disability pensions, benefits, rent, and interest on deposits. However, if someone saves money and later uses it as a means of subsistence, this is not reflected in the per capita income. This is the case of Timur, a 54-year-old engineer living in Central Russia. He has a wife and two kids. “Before the war, I had two jobs and lived quite comfortably. For our region, my income was comparable to the Moscow average. I designed, assembled, and commissioned modern control systems based on European equipment. These reliable, failsafe products are still widely used in our oil and gas industry,” says Timur. After Russia invaded Ukraine, he stopped getting orders from one of his employers, and the other one faced sanctions and had no more equipment to work with. Timur had to quit and is still jobless. Potential employers often reject him because he obtained his engineering degree in the early 1990s in Kyiv. The family isn’t eligible for an allowance because neither of the parents works, so they live off their savings. Timur’s wife isn't looking for a job because she is busy taking care of the kids and the house, and working for a monthly salary of $300 isn't rewarding anyway. The family of four spends ~$400-450 a month on food, which is 50-100% more than the minimum market basket. They used to be able to afford food of higher quality but had to change their habits. They need another $150 or so for telephony and utility bills. While there was work, Timur's family could afford outings to the regional capital and other Russian cities – but not anymore, and this loss saddens Timur the most. He and his wife try to raise their kids open-minded, to teach them foreign languages, but they have to do it themselves, and their short-term employment prospects remain grim.

The inFOM survey also suggests that 10-12% of Russians have been dipping into their savings monthly, ever since before the war. The war has caused one in three Russians to switch to cheaper food brands and stop using some commodities and services. One in ten Russians working for hire fears losing their job in the next two or three months. Meanwhile, only 20% of Russians have enough savings to last them for more than three months.

How poverty affects demographics

Financial problems are Russians’ main concern when it comes to starting a family or having a second or a third child, meaning that financial well-being has a direct impact on the demographic situation, which the Kremlin is so keen on improving. Maternity capital – a lump-sum benefit paid to families with a second or a third child – was once a tangible incentive for women who were considering having a second child, according to demographer Alexei Raksha. However, when families started getting the biggest bonus for their firstborn in 2020, and the benefits for a second child dropped to $1,700-2,200 depending on the regional supplement, the number of families choosing to have a second child plunged. “Financial hardship and housing problems remain the main obstacle to having two or more children. This is why the maternity capital was so efficient when it was issued for second and subsequent children: 90-95% of women used it to improve their living conditions,” Raksha explains. He also believes the drop in disposable income further contributes to decreasing Russia’s birth rate.

Irina found herself on the brink of survival twice – and both times during her maternity leave, which is much longer in Russia than in most Western countries. She had her first daughter in 2005. The father didn’t offer any money or help. “I lived off pasta until I felt I was chewing rubber, not food. Luckily, I was offered a job. I’m a journalist, so I started writing articles for a newspaper (it was back when they still existed),” Irina recalls. She had her second daughter ten years later, right after Russia annexed Crimea. Journalists outside the capital struggled to find work. “I didn't have a job or the energy to find one. I wanted to hang myself – quite literally. I realized I needed a partner but had nothing to give him, not even sex. Miraculously, I met someone – a true angel. He had two criminal records and a strong moral compass: he knew a woman with a small kid needed help. He brought me food and gave me money, not asking for anything in return. When my daughter was old enough to go to kindergarten, I found a job. Our relationship ended. But we survived,” Irina recalls.

Poverty is also a trigger for domestic abuse. Most of its victims are women, often because they have a lower-paying job or have to take care of a young child, like Irina, and don’t have an income. Elena Bolyubakh, the founder of a domestic violence shelter in St. Petersburg, has experience working with cases when husbands in low-income families take full control of their wives’ money. However, it’s crucial for a domestic abuse victim to have savings of her own. Even if such a woman has access to the family budget, putting money aside is often problematic because the overall income is very low. Elena’s center always advises women who refer to them to pack an “emergency suitcase”: a set of essentials so she can quickly leave and stay out of harm's way for a few days at least. “An emergency suitcase must include some cash, especially outside big cities, where there are no shelters. With some money, you can stay at a hostel. If a woman has enough to leave safely and stay a couple of nights away from home, it’s already a lot,” Elena Bolyubakh explains. She underlines that women who are financially dependent on their partners or don’t have savings of their own – like many young mothers – are the most vulnerable.

It’s crucial for a domestic abuse victim to have savings of her own

If a family’s income is comparable to the living wage, the woman is much more likely to have nowhere to go because she can't make any savings. Sometimes even a small amount of money can help escape home violence. “During the lockdown, we got a request from a girl with a baby who’d left her partner. We put her up in a partner hotel. In just six weeks, she completed a professional training course, found a job, and moved to an apartment she rent herself. The total amount wasn't high: we spent about $220 on her accommodation, and she got $110 from the state in COVID-19 payments. And yet this was enough to change her life,” says Elena Bolyubakh.

Single adults and senior citizens

Single working adults make up the lowest share of the poor but carry the biggest burden in terms of utility bills: they mostly depend on the size of the apartment, and single people have no one to share it with. Matvei pulls double shifts in a hospital in Central Russia. “Whenever I get a text notifying me about my salary, I feel like quitting. I work two jobs, only to make $440,” he complains. Matvei lives alone and spends all of his income on food, rent, and a car loan – but he already sold the car because he couldn’t afford to keep it. During the pandemic, he worked as a ward attendant at a COVID-19 hospital, earning much more because of the hazard pay. But once he contracted the coronavirus himself and went on sick leave, he was never hired again. “I can't put any money aside or buy anything nice for myself. I can’t upgrade my devices because local shops are too expensive and the choice is subpar. It also seems that I can buy less food with the same money than before,” Matvei confessed. He says many of his acquaintances and colleagues are in a similar situation. As The Insider estimated, around 7% of single Russians – almost 2 million people – live from paycheck to paycheck, unable to afford anything apart from living expenses.

Around 7% of single Russians – almost 2 million people – live from paycheck to paycheck, unable to afford anything apart from living expenses

Official statistics suggest there are fewer old-age pensioners among the poor than families with children. However, this has more to do with the state underestimating their expenses: the elderly are supposed to be buying less food and paying lower utility bills. And yet, while reduced utility rates are available to old-age pensioners in many regions, far from all are eligible. Furthermore, the older a person gets, the higher their medical expenses. In Russia, only the disabled are eligible for free drugs.

Russia rarely discloses detailed regional statistics on pensions, citing the national average instead. Thus, the 2022 average old-age pension in Russia amounted to $190, with men generally getting more because of a higher pre-retirement income. The latest regional statistics available are for 2021: with a national average of $175, Russian old-age pensioners got from $110 in Kabardino-Balkaria to almost $330 in Chukotka. In 2021, an elderly person’s living wage in Kabardino-Balkaria amounted to $110, allowing the government to claim this social group had been lifted from poverty. However, The Insider’s estimates of the regional utility rates and food prices for 2022 suggest that the average old-age pension in the republic is only just enough to pay the bills and buy the most essential foods and drugs. The same goes for every other region. As a result, many elderly Russians have to keep working: according to Rosstat, the average income among the elderly is twice as high as the old-age pension and includes a salary.

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