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#13 - JRL 2006-118 - JRL Home
Russia Profile
May 25, 2006
The Business of Demographics
Putins plans for improving Russias birthrate get support from the business community

By Dmitry Babich

The president is promoting the love for money, wrote a commentator in the opposition weekly Novaya Gazeta, following President Vladimir Putins speech to the Federal Assembly in which he proposed new benefits for women and children. Putin suggested doubling the monthly allowance for families with one child and increasing the allowances for a second baby fourfold to 3000 rubles ($111). Women who give birth to a second child would also be entitled to a mothers capital fund. This fund of 250,000 rubles ($9260) would be saved in a special bank account and could only be accessed when the second child reaches the age of 3. The money is intended not for immediate needs, but for mortgage payments, education, or saving for retirement.

Although the presidents plan was greeted with a healthy dose of skepticism, many observers were encouraged by the fact that the authorities not only recognized Russias demographic problem, but also took some steps toward resolving it, with some help from the Russian business community.

On May 24, the task force on solving Russias demographic problem made public its National Program of Demographic Development for Russia. Founded by Delovaya Rossiya (Business Russia), the task force is headed by Yevgeny Yuriev, president of Aton investment fund. This ambitious plan hopes to stabilize the Russian population at 142 million by the year 2015, and suggests that the plan will need 560 billion rubles ($20 billion) annually to succeed. Right now Russia has a population of 143.6 million, but the number has been shrinking by about 800,000 people a year.

Until recently, I did not even hope that the government would seriously tackle the countrys demographic problems, said Valery Yelizarov, the head of the Center for Population Studies at Moscow State University who led the research branch of the task force. It was more common to hear the theory that low birth rates are typical for urbanized modern societies, so Russia should not do anything about it. That is completely wrong. The presidents address instills hope that the negative trend can be reversed right at the moment when we are reaching the point of no return.

The point of no return, in Yelizarovs view, will come when the generation born in the early 1990s reaches adulthood. During the difficult market reforms of the 1990s, Russia suffered a steep decline in fertility because the economic situation of many families became unstable. There was no job security, and those who had jobs werent always paid on time, while the escalating inflation destroyed savings.

Right now the children of the last Soviet baby boom of 1981-1987 are coming of age. At the time the birth rate was about 2 children per woman, the so-called simple substitution level, Yelizarov said. If we fail to use their child-bearing potential, we are doomed. There is no reason to believe that the few people who were born in 1991-1999 will want to have families with 4 children each. So, the only realistic scenario is to help young families now.

The decline of fertility in Russia reached its peak in 1999, after the collapse of the Russian financial system in 1998. In 1999, only 1.2 million children were born in Russia. By 2004, the number of births per year climbed to 1.5 million and has since remained at that level, hardly enough to compensate for the approximately 2.3 million deaths each year.

Putins strategy seems to focus on encouraging families to have a second child, thus gradually bringing fertility back to the level of 2 children per woman. But even this modest proposal involves reversing some entrenched psychological stereotypes.

The last period when a typical Russian family had two children was in the 1980s, said Alexander Sinelnikov, a sociologist who is the head of the family and demography center of Moscow State University. Since then, families with two children have become very rare. The public perception today is that having one child is necessary, having two children is desirable but difficult and having three children is a disaster to be avoided.

Because the generation born in the 1980s grew up in families with 2 or 3 kids, a family with two children is still the norm for them, added Vladimir Arkhangelsky, a senior research fellow at the Center for Population Studies. Encouraging the next generation to have more kids will be a lot harder.

Delovaya Rossiyas plan envisions using the funds from the federal and regional budgets on housing to raise monthly allowances for children and to improve pre-natal care for pregnant women. Right now the amount of expenses for these purposes is just 0.3 percent of the countrys GDP.

Shortly after Delovaya Rossiyas proposal was made public, a Ministry of Finance official was quoted as saying that this amount of money could only come from tapping the reserves of the Stabilization Fund, which could potentially lead to galloping inflation, thereby affecting poor families much more than rich singles.

Despite his enthusiasm for the proposal, Yuriev did not support the use of the Stabilization Fund to finance the plan. The next step for Yuriev and Boris Titov, the chairman of Delovaya Rossiya, is to present their National Program of Demographic Development to the federal government.

This can become one of the few positive examples of the business communitys influence on the government, Yelizarov said. After all, sometimes it has a wider vision of the countrys goals than Duma deputies limited by short-term legislative concerns. Businesses will always need children and parents as consumers.